Presented by S.

Sheik Asarudeen DEPARTMENT OF MANAGEMENT STUDIES Srinivasan college of arts and science,perambalur

WHAT IS INFLATION ?

Inflation Is a long term rise in the prices of goods and services caused by the devaluation of currency. Is a consistent rise in the general price level over and the above normal price.

Cont..
In 1980 in the United States just over 30 years ago a new home in this country cost an average of $76,000, and the median income was $17,710 per year. Compare that to 2011, when even after the recent recession, the median home price stood at $139,000, and median household income was $50,233 per year according to the US Census Bureau..

India Inflation rate

The inflation rate in India was recorded at 6.87 percent in July of 2012. Historically, from 1969 until 2012, India Inflation Rate averaged 8.0 Percent reaching an all time high of 34.7 Percent in September of 1974 and a record low of -11.3 Percent in May of 1976. Inflation rate refers to a general rise in prices measured against a standard level of purchasing power. The most well known measures of Inflation are the CPI which measures consumer prices, and the GDP deflator, which measures inflation in the whole of the domestic economy.

Table - 2012 inflation India (CPI)

Inflation (monthly basis) jan 2012 - dec 2011 feb 2012 - jan 2012 mar 2012 feb 2012 apr 2012 - mar 2012 may 2012 - apr 2012 inflation 0.51 % 0.51 % 1.00 % 1.99 % 0.49 % Inflation (yearly basis) Jan 2012 - jan2011 feb 2012 - feb 2011 mar 2012 - mar 2011 apr 2012 - apr 2011 may 2012 - may 2011 june 2012 - june 2011 inflation 5.32 % 7.57 % 8.65 % 10.22 % 10.16 % 10.05 %

june 2012 - may 2012 0.97 %

july 2012 - june 2012

aug 2012 - july 2012

july 2012 - july 2011

aug 2012 - aug 2011

The average inflation of India in 2012: 8.66 %

CAUSES OF INFLATION IN INDIA

We have two main causes affecting the inflation of India..

1.Demand Pull 2.Cost Push

DEMAND PULL..
Population pressure Mounting government-government expenditure increase in supply of money in economy. Growing money supply credit policy of the RBI to the central & state government. Black money - when income tax payers deliberately misrepresent their income statement to the tax authorities it loads to creation of black money.

 Slow growth rate of agricultural production so supply of raw material reduces for agro based industries.. so price of raw materials increase.... Increase in wages and bonus Producers compelled to raise the wages and give bonus to workers.. this leads to increased cost of production.. Oil hike price Increase in tax ratesincrease in indirect tax rates lead to increase in prices.... other factors like increase in procurement of food grains and creation of artificial crisis.. Exchange rate , The National Debt

CASH PUSH..

DO U AGREE

INFLATION IN GOOD ASPECT

GOOD ASPECTS OF INFLATION..

A healthy rate of inflation is considered to be approximately 2-3% per year.
The goals is for inflation (which is measured by the consumer price index or (PI) to out space the growth underlying economy (Measured by GDP) by a small amount per year. Positive because in increasing and corporate profitability and keep capital flowing in a presumably growing economy as long as things are moving in relative collusion inflation will not be detrimental. Another way of looking at small amount of inflation is that it encourage consumption for ex: ( It you wanted to by a specific item and new that the price of it would rise by 2-3% in a year. You would be encouraged to buying. It creates more jobs.

Cont.. If u planned to retired in 2050, the rate of inflation approximately 3% per year will result in 1 crore having purchasing power of 3,25,000 of today rate if current cost of living is around 50,000 per year possible for 6years

8 Strategies to combat inflations Effects on your Retirement..

1) Spend money on long term investments. 2) Invest in commodities (like oil have worth that is resilient to inflation). 3) Invest in gold & precious metals. 4) Real state. 5) Consider TIPS(Treasury Inflation Protected Securities)
o Guaranteed to return your original investment along with what ever inflation was during the lifetime of the TIPS. It do not offer the opportunity for significant capital appreciation and therefore should only make up a portion of your personal investment portfolio allocation

Cont..
6) Stick with equities o Although investing in bond may feel safer, bond have
failed to outpace inflation and have at time been crushed during hyper-inflationary periods.
o Equity have historically beat bonds because of the ability of corporation to pass price increase along to their consumers , resulting in higher income and returns for both the company and its investors.

7) Consider dividend paying stocks.

8) Save more money.

India G D P

The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and output for a given country's economy. The GDP in India was worth 1848 billion US $ in 2011,according to a report published by the world bank.

The GDP value of India is roughly equivalent to 2.79% of the world economy.
Historically, from 1960 until 2010, India GDP averaged 339.8 billion US$ reaching an all time high of 1729.0 billion US$ in December of 2010 and a record low of 36.6 billion US$ in December of 1960.

How we define G DP?

GDP can be defined in 3 ways..

First, it is equal to the total expenditures for all final goods and services produced within the country in a stipulated period of time (usually a 365-day year). Second, it is equal to the sum of the value added at every stage of production (the intermediate stages) by all the industries within a country, plus taxes less subsidies on products, in the period. Third, it is equal to the sum of the income generated by production in the country in the periodthat is, compensation of employees, taxes on production and imports less subsidies, and gross operating surplus (or profits).

Indias struggling GDP growth story

Indias GDP growth rate declined by a disappointing 5.3 per cent in the quarter ended March 2012, the lowest since 3.6 percent in the January-March quarter of 2003, according to data from Thomson Reuters. Growth below expectation Weakest fiscal performance in 9 years Why did Sensex, Nifty fall Agriculture growth falters Manufacturing and services struggle Exports hurt Expect fewer jobs No scope for economic stimulus RBI cannot stimulate the economy either No option but to reform

Different between

GDP & GNP

GDP (or Gross Domestic Product) and GNP (Gross National Product) represent the size and strength of the economy. While both concepts are similar, their definition, calculation and applications are different from each other

GDP
Stands for:
Gross Domestic Product

GNP
Gross National Product

Definition:

An estimated value of the total worth of a countrys production and services, on its land, by its nationals and foreigners, calculated over the course on one year

An estimated value of the total worth of production and services, by citizens of a country, on its land or on foreign land, calculated over the course on one year

GDP = consumption + investment + (government Formula for Calculation: spending) + (exports imports)
Uses: Application (Context in which these terms are used):
Business, Economic Forecasting To see the strength of a countrys local economy

GNP = GDP + NR (Net income inflow from assets abroad or Net Income Receipts) - NP (Net payment outflow to foreign assets)
Business, Economic Forecasting To see how the nationals of a country are doing economically

Layman Usage:

Total value of products & Services produced within the territorial boundary of a country

Total value of Goods and Services produced by all nationals of a country (whether within or outside the ountry)

Thank you

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