MOHIT GOEL (PGDM-FINANCE)

What is Inflation?

Definitions :

“Inflation is an increase in the quantity of purchasing power.”–Gregory

Inflation is the stage of too much money chasing too few goods.”--Coulbourn

Meaning :

Inflation is a global phenomenon. It takes place because of rapidly rising prices of goods and services, resulting in the decline of the value of money.

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.

TYPES OF INFLATION & EFFECTS

Effects of Inflation

Effect depends on the speed of inflation and the nature of the economy.

Rising prices of imports

Lowers national saving

Redistribution of Income & Wealth

Collapse of Monetary system

Adverse impact socially and politically

Discourages Investment & savings

Higher Interest / Income tax rates

Control Measures

Monetary Policy:Monetary Policy essentially implies the policy followed by financial institutions.

High interest rates and slow growth of the money supply are the traditional ways through which central banks fight or prevent inflation.

Fiscal Measures

Reduction in unnecessary expenditure.

Increase in Taxes.

Increase in savings

Adopt Surplus Budget(collecting more revenue and spending less).

Stop Repayment of Public Debt until inflationary pressures are controlled.

Other Measures

To increase Production

Rational Wage Policy

Price Control

Present Scenario

The inflation rate in India was recorded at 6.16 % in December-2013.

From 1969 until 2013,

India Inflation Rate averaged 7.7%

Highest 34.7%September -1974

Lowest-11.3 % in May -1976

The average inflation of India in 2013: 11.04 %

COUNTRY CATEGORY DATES ACTUAL HIGHEST LOWEST UNIT FREQUENCY

INDIAINFLATION RATE

1969 –2013

6.46 34.68 -11.31 PERCENT MONTHLY