Group members

Komal Hazara Kartiki Rane Vrushali Bor Mrunali Vaidande

Inflation
Inflation means a persistent rise in the price levels of commodities and services, leading to a fall in the currencys purchasing power.

India Inflation Rate Chart (in %)

Present rate of inflation :

Feb Mar Apr May June July Aug Sept Oct Nov Dec

Year Jan

2011 9.35 9.54 9.68 9.70 9.56 9.44 9.22

9.78

2010 16.22 14.86 14.86 13.33 13.91 13.73 11.25 9.88 9.82 9.70 8.33 9.47

The inflation rate in India was last reported to be 9.78 % in August of 2011. Since the year of 1969 till the year of 2010, the average inflation rate in India was 7.99 percent

The prices of pulses, fruits, and the proteinbased items remained very costly. The price of potato is rising by 8.39% The price of the onions also increased by 6.23 % fruits rose by 24.67 % The price of the eggs, meat and fish rose by 15.34 %

The following factors can lead to inflation:

Printing too much money.

Tax rises.

Declines in exchange rates.

Decreases in the availability of limited resources such as food or oil.

War or other events causing instability.

A rise in production and labor costs

 Supply and demand goes out of control

Housing prices increases

Affecting low income household Reduce savings and thereby consumption

Increase in price of product. Forcing business to shut down. No invest in new equipment and new technology. Withdrawal of saving & investment

The important segments, which are hampered /effected in India include: Investment Interest rates Exchange rates Unemployment Stocks Various monetary policies Various fiscal policies

There are broadly two ways of controlling inflation in an economy Monetary measures and fiscal measures

1). Monetary measures :(i) Bank rate policy

(ii) Cash reserve ratio and (iii) Open market operations.

2. Fiscal measures:(1) Taxation (2) Public Expenditure (3)Over Valuation of Money

Inflation has never done good to the economy. However, whenever there is expected inflation, governments around the world take appropriate steps to minimize the ill effects of inflation to a certain extent. Inflation and economic growth are parallel lines and can never meet. Inflation reduces the value of money and makes it difficult for the common people. Inflation and economic growth are incompatible because the former affects all sectors as indicated by: CPI or Consumer Price Index GDP or Gross Domestic Product

In reality, low inflation rate and an upward economic growth is never possible. Nevertheless, low inflation rate means slow economic growth. Whenever, money is in excess, there is bidding by the consumers due to which the cost of goods escalate.