Inflation in india

 Inflation is nothing more than a sharp upward

INFLATION

rise in price level. Too much money chasing, too few goods. Inflation is a state in which the value of money is falling i.e. price are rising.

KINDS OF INFLATION
On the basis of rate of inflation
On the basis of degree of control On the basis of causes

Others

CAUSES OF INFLATION
Demand pull inflation
Cost push inflation

HOW TO CONTROL INFLATION

Monetary Measures
Fiscal Measures Other Measures

Monetary Measures
Credit Control
Demonetization of Currency Issue of New Currency

Fiscal Measures
Reduction in Unnecessary Expenditure
Increase in Taxes Increase in Savings Surplus Budgets Public Debt

OTHER MEASURES
To Increase Production
Rational Wage Policy Price Control

How is it Measured?
Consumer Price Index
Wholesale Price Index

Consumer Price Index

CPI is a measure estimating the average price of

consumer goods and services purchased by households. CPI measures a price change for a constant market basket of goods and services from one period to the next within the same area (city, region, or nation). It is a price index determined by measuring the price of a standard group of goods meant to represent the typical market basket of a typical urban consumer. The percent change in the CPI is a measure estimating inflation.
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Wholesale Price Index

WPI was published in 1902,and was one of the

economic indicators available to policy makers until it was replaced by most developed countries by the CPI market. index in the 1970. WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market. Some countries (like India and The Philippines) use WPI changes as a central measure of inflation. However, India and the United States now report a producer price index instead.
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Problems with WPI

In present day service sector plays a key role in Indian

economy. Consumers are spending loads of money on services like education and health. And these services are not incorpated in calculation of WPI. WPI measures general level of price changes either at level of wholesaler or at the producer and does not take into account the retail margins. Therefore we see here that WPI does give the true picture of inflation.

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Problems with WPI

WPI is supposed to measure impact of prices on business.

But we use it to measure the impact on consumers. Many commodities not consumed by consumers get calculated in the index.

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Inflation rate
PI for a certain year - PI for a comparative year PI for a comparative year X 100

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INFLATION RATES
2010 Inflation 8.33 2011 11.69

Food inflation

12.6

15.57

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EFFECTS OF INFLATION
They add inefficiencies in the market, and make it

difficult for companies to budget or plan long-term. Uncertainty about the future purchasing power of money discourages investment and saving.

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EFFECTS OF INFLATION
There can also be negative impacts to trade from an

increased instability in currency exchange prices caused by unpredictable inflation. Higher income tax rates. Inflation rate in the economy is higher than rates in other countries; this will increase imports and reduce exports, leading to a deficit in the balance of trade.

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EXAMPLE
Increase in the price of wheat
Increase in the price of world oil Increase in the price of rice Increase in the price of CNG

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Current Inflation
The current inflation rates across the world, as of April 2009, were low due to the global recession that peaked in September 2008. The recessionary pressures felt across the globe resulted in a massive decline in the supply of money. This, in turn, affected commodity prices, resulted in low inflation rates. Current inflation is measured by the International Monetary Fund.

Current Inflation Trends in the World

According to an IMF report, headline inflation in the developed nations is expected to decline from 3.5% in 2008 to a record low of 0.25% in 2009. It is expected to recover to 0.75% in 2010. In the emerging economies, inflation is expected to fall to 5.75% in 2009 and 5% in 2010, from 9.5% in 2008. For the quarter ended March 31, 2009, the current inflation rates of major nations are listed in the table given below:

Calculation of Current Inflation Rates

Current inflation rates are calculated for different timeframes - from as short a period as a week to as long as a year. Short-term inflation rates facilitate the analysis of the sudden effects of economic, political and social changes on current inflation. Long-term rates are a better measure, as they reflect the economic situation in a more comprehensive way by rounding off the effects of sudden price movements. The current inflation rates released by the IMF and various national governmental bodies are calculated on an annual basis. The weekly and monthly figures announced by these organizations are annualized figures. Current Inflation and Unemployment According to an ILO report, the world unemployment rate is projected to reach 7.1% in 2009 if the sluggish economic performance continues. This is estimated to increase worldwide unemployment by 50 million. According to the Bureau of Labor Statistics, 651,000 jobs were lost in February 2009 in the US alone. The IMF has projected world economic growth at 0.5% for 2009, a record low since World War II. However, given the constant efforts to ease credit strains by implementing expansionary fiscal and monetary policies, the world economy is expected to recover by 2010.

Inflation and Economy 2011

India food inflation rose at 15.57 percent on January 27, 2011

NEW DELHI January 27, 2011 (Reuters): India's food price index rose 15.57 percent and the fuel price index climbed 10.87 percent in the year to Jan. 15, government data on Thursday showed. In the prior week, annual food and fuel inflation stood at 15.52 percent and 11.53 percen India's food inflation rate eases to 15.52% on January 20, 2011 New Delhi, January 20, 2011: Food inflation has dropped to 15.52 per cent for the week ended January 8 from 16.91 per cent recorded in the previous week on the back of high vegetable prices. Onions, in particular, continue to burn a hole in the pockets of common people. Unlike previous occasions, the inflation is not driven by prices of food grains or global prices. The sharp rise in prices of essential commodities such as fruits, vegetables, milk, eggs, meat and fish, which have 10 per cent weightage on the WPI (wholesale price index), is pushing the inflation beyond control. India's food inflation rate eases to 16.91% on January 13, 2011 New Delhi, January 13, 2011: India's food inflation rate eased to 16.91 per cent for the week ended.January 1, 2011 from 18.32 per cent in the previous week, an official statement said here today, quoting provisional data. The statement shoed that the inflation rate for fuel also declined slightly to 11.53 per cent from the previous week's level of 11.63 per cent.

Food inflation rise to 12.13 pct on December 23, 2010 Food inflation eases to 10.15 pct on November 25, 2010

India Inflation Rate: The inflation rate in India was last reported at 8.33 percent
in November of 2010. From 1969 until 2010, the average inflation rate in India was 7.99 percent reaching an historical high of 34.68 percent in September of 1974 and a record low of -11.31 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. This page includes: India Inflation Rate chart, historical data and news.
Country India Interest Rate 5.50% Growth Rate 8.90% Inflation Rate 8.33% Jobless Rate 8.00% Current Account Exchange Rate -14 45.7600

Year 2010 2009 2008

Jun 13.73 9.29 7.69

Jul 11.25 11.89 8.33

Aug 9.88 11.72 9.02

Sep 9.82 11.64 9.77

Oct 9.70 11.49 10.45

Nov 8.33 13.51 10.45

Dec . 14.97 9.70

InflationData.com Current Annual Inflation Rate Year Aug Sep Oct Nov Dec 2010 1.15% 1.14% 1.17% 1.14% 1.50% 2009 -1.48% -1.29% -0.18% 1.84% 2.72% 2008 5.37% 4.94% 3.66% 1.07% 0.09% 2007 1.97% 2.76% 3.54% 4.31% 4.08% 2006 3.82% 2.06% 1.31% 1.97% 2.54% 2005 3.64% 4.69% 4.35% 3.46% 3.42% 2004 2.65% 2.54% 3.19% 3.52% 3.26% 2003 2.16% 2.32% 2.04% 1.77% 1.88% 2002 1.80% 1.51% 2.03% 2.20% 2.38% 2001 2.72% 2.65% 2.13% 1.90% 1.55% 2000 3.41% 3.45% 3.45% 3.45% 3.39% Note: Red indicates Deflation, NA indicates data not yet released. Ave 1.64% -0.34% 3.85% 2.85% 3.24% 3.39% 2.68% 2.27% 1.59% 2.83% 3.38%

The Inflation table below is updated monthly and provides the current US Inflation Rate plus Monthly Inflation Rate data back to January 2000. The Inflation rate is calculated using the Current Consumer Price Index (CPI-U) published monthly by the Bureau of Labor Statistics. CPI Index Release Dates

Markets next week: Inflation, crude oil price cause for concern

Crude oil price movement

The price of crude oil moved up further during last week and touched a high of USD 96 per barrel. The main drivers of the crude oil price remained improved economic sentiment in Europe and better macroeconomic data from the US markets. A sharp rise in the crude oil price is a negative development for some of the emerging economies which depend on imports for their fuel requirements. The emerging markets are already struggling to contain their domestic inflation rates and a rising crude oil price in the international markets puts further upward pressures on the inflation rates.

Credit policy review

The Reserve Bank of India (RBI) implemented further monetary tightening measures in its quarterly credit policy review meeting held on January 25. The RBI raised the repo and reverse repo rates by 25 basis points (quarter percentage points) in line with market expectations. The RBI has also extended liquidity support to scheduled commercial banks under the liquidity adjustment facility to upto one percent of the net demand and time liabilities. The stocks in the banking sector had a knee jerk reaction as the rising interest rates are expected to increase the costs of funds, and also moderate demand for credit. The RBI expressed concern over the inflation rate and raised the inflation target to seven percent for the current fiscal. Analysts believe the gloomy signal from the RBI on inflation is a cause of concern and further rate hikes are quite likely. Although the current rate hikes will not have an immediate impact on the deposit and lending rates in the retail segment, the rates are expected to harden further eventually -over the next few weeks.

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