Inflation-in-India-Docile-or-Defiant

In: People

Submitted By mmvbhu
Words 2563
Pages 11
Inflation in India: Docile or Defiant?

Executive Summary

ASSOCHAM study finds that inflation was structural in nature rather than being episodic. Farm prices are less responsive to the RBI’s monetary policy whereas manufactured goods prices were found to be more responsive to the policy. Manufactured goods prices are showing new dynamics: a) Highest price rise in primary and upstream products b) A moderate rise in intermediate goods prices c) Least hikes in prices of finished and consumer products In the light of these features and trends in inflation, ASSOCHAM suggests four pronged anti-inflationary package. These includes  Structural Correction for Structural Inflation: This calls for a comprehensive action plan for the farm sector, involving among other measures, a programme for a “Horticultural revolution” for increasing productivity of fruits and

vegetables, fish and poultry.  Controlling form inflation is a joint responsibility of the union Government and RBI. Only monetary policy adjustment will not correct such trend price rises.

2

 Hence, RBI need not raise policy rates every time form prices are rising, as analysis shows farm price are not responding to monetary policy changes.  Manufactured good inflation is showing for greater responsiveness to monetary policy changes. RBI should concentrate more on controlling these prices  Going into the disaggregated and Sectoral price behavior of manufacturing goods, we find the dynamics of change is more in upstream industries because of shortages.  We suggest that upstream and intermediate goods prices rise should be contained by raising their production within the country. This will also have major implications for the current account.

 Hence, a Low-interest regime encouraging first investment for capacity creation in industrial sector could be the most effective way of containing spikes in…...

Similar Documents

Inflation in India - Structural or Monetary

...Is Inflation in India Structural or Monetary? Inflationary Situation: It’s a situation in the economy where ‘too much money is chasing too few goods’. So when the products & services available are less as compared to the money supply in the money market, the economy witnesses an uptrend in their prices in order to adjust for the larger quantum of money chasing them. Structural Policy: A Structural policy is a term used for the whole of the politico-economic measures for the organization of the structure of the national economy of a state. A Structural policy is further categorized as * Regional structural policy, which supports the settlement of industries in assisted areas by measures of the investment assistance * Sparkling wine-oral structural policy, those by subsidies and tax preferences Monetary Policy: It refers to the process by which a country’s central bank controls money supply, often through the manipulation of interest rates, with the aim of promoting economic growth and stability while maintaining relatively stable prices and low unemployment. Monetary policy is either expansionary (mainly by lowering interest rates to combat a recession or a recessionary situation) or contractionary (raising interest rates to control inflation). Comment: Inflation in India is primarily structural and less monetary in outlook. Some data points supporting this point of view are as below: * Food Inflation – As it has been seen historically, the dietary......

Words: 573 - Pages: 3

Inflation

...Inflation means the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. But going by the recent trends, it is no more the case. May be it is true for the general public of India but it is not exactly the same for a particular society of India. For them, as the inflation rises so does their income through various means viz. Coal, CWG, FDI in retail etc.etc. Ask this section of people and its policy makers about the daily price rise in our everyday consumable products and you will hear a monotonous reply that these are reforms and a must for the healthy economy of India. Every other anti people policy has resulted in a rise in stock index and that is being greeted unequivocally by a section of rich and corporates. For them, these are the economic reforms which must go on without even bothering about the affordability of the same for the poor, middle class and general public of India. The hands that promised us a cozy life are no more even able to feed us twice in a day. Thanks largely to those hands which had promised to stand by us; the Mango people. The inflationary pressure is being felt by the general people on their back as it is getting bent with every reformist policy. Needless to say that “Hamein to loot liya mil ke reformist walon ne, gori gori chamri ne ghane ghane balon ne”. Recently one of the most prominent person from a prominent family has called India a banana republic and its people mango......

Words: 631 - Pages: 3

Co-Relation of Growth and Inflation in India & China

...(Roll – 232) | GROUP ASSIGNMENT CORRELATION BETWEEN GROWTH AND INFLATION WITH SPECIAL REFERENCE TO INDIA & CHINA One of the most fundamental and central macroeconomic policy objectives of the governments, central bankers and economists has been to sustain high growth rate with low inflation. The influences of other macroeconomic variables like aggregate demand, unemployment and investment and that of factors like human and natural capital and technology on economic growth are well-established. But when it comes to the inter-relationship between inflation and economic growth, there are divergences in opinion, more so because of lack of any linearity in the two variables. Introduction Theoretically, it is argued that when growth is caused by rising aggregate demand at low level of unemployment, it would lead to inflationary tendencies. This is because when demand aggregate outstrips the available supply, the disequilibrium would push the prices up. Low and declining unemployment level means wages would also rise and thus price rise caused by demand pull will also bring in the cost push factors to sustain the inflationary conditions. Inflationary tendencies can be thwarted when the aggregate demand pulls are matched by increased productivity and investment. But in the times of inflationary expectations, the investment slackens as the future prospects of earnings deteriorate and thus the inflation continues to spiral. Short- run Philips Curve do give a fair......

Words: 3147 - Pages: 13

Inflation

...“Inflation: Everyone's illusion of wealth” The Indian Scenario A talk of inflation is inevitable. The term Inflation is no longer stranger to India and its people. Till the early nineties, Indians even used to two digit inflation rates. But, since the mid nineties, controlling inflation has become the priority for the policy makers. The current scenario of inflation in India is even worse. The current inflation rate for October 2011 is 9.39% and the average inflation rate for the year 2011 is 9.06%.The concern continues to remain clearly focused on inflation that is just not going away, despite the repeated rate increases. While inflation has been declining in primary products, there has been a small upward movement in recent months, and manufactured product’s WPI (Wholesale Price Index) as well as CPI(Consumer Price Index) shows consistent inflation persistence. R I A N T % E S Fig : Monthly inflation rate in 2011 Now what does an inflation mean? What are the causes of the inflation? And how does it affect the common man and the economy as a whole? In basic terms, Inflation is the sustained increase in the general price level of the goods and services in an economy. It basically decreases the value of the money and the purchasing power of the customers. It is usually measured by the Consumer Price Index (CPI).In India; however, it is measured using the wholesale price index (WPI). A condition when the......

Words: 912 - Pages: 4

Inflation

...RESEARCH PROPOSAL TOPIC: Rising inflation in Pakistan: Causes and Remedies SUBMITTED BY: NAILA ERUM NATIONAL DEFENCE UNIVERSITY, ISLAMABAD Rising inflation in Pakistan: Causes and Remedies Introduction Pakistan is currently facing unprecedented high Inflation. High inflation is contributing to increase in vulnerability and fall in real income of lower, middle and fixed income segments of the society. It is increasing uncertainty about future scenario of the business environment and instability of the financial system, erosion of business and investors’ confidence, slowing down of real economic activities, investment, economic growth and employment. Inflation is known as a rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Consequently, there is a decline in the real value of money and purchasing power. Inflation is an indicator of a country’s macro economic stability and provides important insight on the state of the economy and the sound macroeconomic policies that govern it. A stable inflation not only gives a nurturing environment for economic growth, but also uplifts the poor and fixed income citizens who are the most vulnerable in society. A numerous supply side and demand side factors could be responsible for this surge in inflation. Inflation can be a result of shocks to the supply of certain food items and to......

Words: 2805 - Pages: 12

Inflation

...Inflation may be defined as a situation in an economy when money supply exceeds available goods and services in an economy. It is attributed to budget defict financing. A temporary rise in price in 'NOT' inflation,but a sustained increase in price level for a certain period of time is. Inflation may be good explained by an example as follows:- Inflation shows economic growth, or at least it reflects some economic activity. The major positive aspect is that it helps smaller firms grow to larger firms. Assuming that both firms A and B sells similar goods. A is a large cooperation with economies of scales and B a smaller firm without economies of scale. Therefore the prices of goods A would be less than good B. Assuming that the inflation rate is 10%. The price of good A is $9 and inflation causes it to increase to $9.90. And for good B, since the cost of production is higher, it costs $10(increased cost of production because it is a small firm and does not have economies of scale). And with inflation pushing it up to $11. The proportion of increase is similar(i.e 10% for both), but the real price increase is different, firm A $0.90 and firm B $1. Thus firm B having a $0.10 increased revenue more than firm A. This is how it benefits. And talking about disadvantages of inflation, there are many. (effect on production and economics growth) Talking in realation with value of money,we mean,purchasing power. The amount of goods that one unit of money can buy is called......

Words: 437 - Pages: 2

Inflation

...Macro economics Project on INFLATION -SUBMITTED BY CHIKKAM.SAI ALEKHYA DANNY VARGHESE DEEPAK SAKTHIVEL DEEPTHI MOHAN GIRISH GANGADHARAN TABLE OF CONTENTS * Inflation * Measures of inflation * Measures of inflation in India * CPI Types * WPI * Calculation of WPI * New series of CPI * CPI Urban/Rural * How Inflation is related with GDP? * Relationship between broad money supply and WPI/CPI * Announcement of hike in DA for government employees cause inflation? * Impact of elections on inflation * Hypothesis testing for elections and inflation * References INFLATION An increase in the average level of prices of goods and services. Primarily, two types of price indices used are – Wholesale Price Index (WPI) and Consumer Price Index (CPI). Inflation measured through wholesale price index is called wholesale price inflation or headline inflation and inflation measured through consumer price index is called consumer price inflation. CONSUMER PRICE INDEX (CPI): It is more relevant to the consumer, since it measures changes in retail prices. The Consumer Price Index represents the basket of essential commodities purchased by the average consumer – food, fuel, lighting, housing, clothing, articles etc. Inflation measured by using CPI is called consumer price inflation. There are three measures of CPI, which track the cost of living of three different categories of consumers— Industrial workers (IW) Agricultural...

Words: 2096 - Pages: 9

Inflation

... | |2 |Introduction | | | |3 |Effects of inflation | | | |4 |Causes of inflation | | | |5 |Controlling inflation | | | |6 |Current situation of inflation in India | | | |7 |Extracts of the Reserve Bank of India’s document released on | | | | |July 28, 2008 | | | |8 |Measures to control inflation | | | |9 |Future inflation | | | |10 |10 nations with highest inflation | | | |11 |Media reports | | ...

Words: 13670 - Pages: 55

Inflation Targeting Policy India [

...The inflation targeting policy is mainly decided by RBI and Government targeted at “Inflation target” by mainly controlling the interest rates. A control over the Interest rates helps curbing the inflation in the long run. Inflation acts as a deflator in GDP thus it needs to be kept under a certain range. To spur up the GDP to the targeted levels we need to lower the interest rates so as to increase the economic activity and boosting the health of the economy. But doing that at the same time would lead to increase in consumer spending thus increasing the inflation. Thus there arises a seeming tradeoff between growth and inflation. In the current scenario of our country there are various factors that would suggest that this policy must be adopted. Inflation has been one of the major reason for the decline in the GDP Growth of our country since 2011. And inflation rate in India has been floating around 12-14% till 2012 which is significantly high as compared to the healthy rate of 2-5%. Looking at the current reforms in the country, the lowering of the crude oil prices and boom in the world economy indicates that economic growth is already on the rise. The same is indicated by the BSE and BSE Sensex markers. Various sectors such as infrastructure are already being supported by the government and recent policies to attract more FDI will help in reaching the targeted GDP growth rates. This would also mean that there will be a rise in overall employment and per capita......

Words: 614 - Pages: 3

Inflation

...The annualised inflation rate in India is 6.46% as of September 2014, as per the Indian Ministry of Statistics and Programme Implementation. This represents a modest reduction from the previous annual figure of 9.6% for June 2011. Inflation rates in India are usually quoted as changes in the Wholesale Price Index, for all commodities. Many developing countries use changes in the Consumer Price Index (CPI) as their central measure of inflation. India used WPI as the measure for inflation but new CPI(combined) is declared as the new standard for measuring inflation ( April 2014) [[1]] CPI numbers are typically measured monthly, and with a significant lag, making them unsuitable for policy use. Instead, India uses changes in the Wholesale Price Index (WPI) to measure its rate of inflation. Provisional annual inflation rate based on all India general CPI (Combined) for November 2013 on point to point basis (November 2013 over November 2012) is 11.24% as compared to 10.17% (final) for the previous month of October 2013. The corresponding provisional inflation rates for rural and urban areas for November 2013 are 11.74% and 10.53% respectively. Inflation rates (final) for rural and urban areas for October 2013 are 10.19% and 10.20% respectively.[2] The WPI measures the price of a representative basket of wholesale goods. In India, this basket is composed of three groups: Primary Articles (20.1% of total weight), Fuel and Power (14.9%) and Manufactured Products (65%). Food......

Words: 325 - Pages: 2

Inflation in India

...Inflation refers to the rise in the price of goods and fall in the value of money. Inflation refers to the problem of rising prices. The problem has been with us for a long time now. The trend of rising prices in India has, in time, aroused dismay, consternation and anger. It has been witnessed that with the passage of time, the rich have become richer and the poor still poorer. In spite of a bad agricultural year, it is not scarcity that is troubling people so much as the continuing erosion of their purchasing power. Hence, we are nowhere near the goal of an egalitarian society which we had set out to achieve. Essay on Inflation in India (Problem of rising prices) On March 18, 2015 By Ajit Sen Category: National Issues of India This article discusses the inflation, the current situation, the causes and the means to control inflation in India. Inflation in India Inflation refers to the rise in the price of goods and fall in the value of money. Inflation refers to the problem of rising prices. The problem has been with us for a long time now. The trend of rising prices in India has, in time, aroused dismay, consternation and anger. It has been witnessed that with the passage of time, the rich have become richer and the poor still poorer. In spite of a bad agricultural year, it is not scarcity that is troubling people so much as the continuing erosion of their purchasing power. Hence, we are nowhere near the goal of an egalitarian society which we......

Words: 362 - Pages: 2

India Inflation

...INDIA INFLATION SLOWS TO LOWEST LEVEL IN MORE THAN 2 YEARS Yearly prices of food decreased 0.52% in January from a 0.74% rise in December, it happen because helped by supplies of vegetables increased. Nevertheless, price of protein-rich food items stood high. Due to the food prices fallen, central bank have to cut rates in order to prevent economic slowdown. The slow inflation growth had become good news as according to Indian policymakers where they had been struggled for high prices in the past two years. In fact, the India’s economic suffer the slowest growth for the past three years. As it was expected from the Reserve Bank of India (RBI), the economy had been stimulated in which RBI begins to cut the interest rate on the first quarter of April 1st. Furthermore, in year 2012, the economists forecast that RBI would cuts the policy rate from 100 basis points up to 50 basis points for the next quarter April to June. There was a decreased in the India’s federal bond yield from 8.79 percent to 8.18 percent for the 2012 bond yield. Besides, the prices of the food had decreased up to 0.52 percent from 0.74 percent. It happens because of the increased in the supplies of vegetables. On the other hand, the prices of the protein food like fish, meat, milk, and eggs still expensive in which it was argued to become the problems. The other area like petrol prices remains constant due to the political considerations that government......

Words: 1186 - Pages: 5

Inflation

...Inflation: Various measures initiated by RBI for controlling inflation and their impact on Economy. Our dear friend is making our life more dearer, ‘Inflation’. In economic term, inflation is rise in general prices of goods and services in an economy which leads to erosion in the purchasing power of money i.e. each unit of currency buys fewer goods and services. Its effects on the economy are both positive and negative. The task of keeping inflation low or stable is usually given to monetary authorities. Generally these monetary authorities are central banks. ____________ The primary tool used by RBI to control inflation is monetary policy There are broadly two ways of controlling inflation in an economy 1 Fiscal measuresand 2 Monetary measures In economic term, inflation is rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. It leads to erosion in the purchasing power of money. Its effects on the economy are various and can be simultaneously positive and negative. Negative effects of inflation include decrease in the real value of money and other monetary items over time, uncertainty over future inflation which may discourage investments and savings and inflation is rapid enough, shortage of goods as consumers begin hoarding out concern that prices will increase in the future. Positive effects include ensuring central banks......

Words: 1006 - Pages: 5

Inflation

...PRICE INFLATION IN BANGLADESH PRICE INFLATION IN BANGLADESH Course : Economics Prepared for: Dr. Samir Kumar Sheel Assistant Professor Department of Marketing, FACULTY OF BUSINESS STUDIES Prepared by: A.T.M. Golam Kibria Khan EMBA, 19TH BATCH, ROLL: 41119055 Department of Marketing FACULTY OF BUSINESS STUDIES UNIVERSITY OF DHAKA DATE OF SUBMISSION : August 02, 2011 Letter of Transmittal August 02, 2011 Assistant Professor, Dr. Samir Kumar Sheel Course Teacher: Economics Department of Marketing Faculty of Business Studies University of Dhaka Dear Sir, With great pleasure we are submitting our Term Paper on “Price Inflation in Bangladesh”. We have found this report as of informative, beneficial as well as insightful. We have tried our level best to prepare an effective & creditable report. The report contains detail description upon Inflation and the Price inflation in Bangladesh. Here we have gathered information through different sources. I honestly hope that this analytical assessment will identify the causes and impacts of price inflation of Bangladesh. Therefore we hope you will find this report worth all the effort we have put in it. Sincerely Yours, A.T.M. Golam Kibria Khan Executive Summary The current wave of inflation has been eroding purchasing power of the low and middle income people in Bangladesh, as they need to pay much higher bills for food grain and other commodities. The Exchequer of Bangladesh, which absorbs the petroleum price......

Words: 12375 - Pages: 50

Inflation

...2). Inflation in Bangladesh and Policy Responses a). Present State and comparison with some developing countries b).Problems for entrepreneurs and consumers c). Policy prescriptions d). Some specific programs e).Concluding remarks Last date of submission:1st August, 2012 a). Present State and comparison (country wise Scenario) with some developing countries: According to the Bangladesh Bureau of Statistics (BBS), the national inflation in Bangladesh is 8.56% on point-to-point basis in June 2012; whereas the food-inflation hit 7.08% and the non-food inflation hit 11.72% in the same period. The rural inflation is 7.88% on point-to-point basis in June 2012; whereas rural food and non-food inflation knockout to 6.02% and 11.88% consecutively in the same period. The urban inflation is 10.29% on point-to-point basis in June 2012 as well as successive food and non-food inflation for the same period knockout to 9.57% and 11.28%. By observing above data it can say that national inflation is highly influenced by urban inflation and non-food inflation. Table 1: Inflation Rate (Pint To Pint) FY2011-12 (1995-96=100) | | Jul, 11 | Aug, 11 | Sep, 11 | Oct, 11 | Nov, 11 | Dec, 11 | Jan, 12 | Feb, 12 | Mar, 12 | Apr, 12 | May, 12 | Jun, 12 | National | General | 10.96 | 11.29 | 11.97 | 11.42 | 11.58 | 10.63 | 11.59 | 10.43 | 10.1 | 9.93 | 9.15 | 8.56 | | Food | 13.4 | 12.7 | 13.75 | 12.82 | 12.47 | 10.4 | 10.9 | 8.92 | 8.28 | 8.12 | 7.46 | 7.08 | |...

Words: 2195 - Pages: 9

Find Deals | Gary and His Demons - Season 1 | BlacKkKlansman.2018.HDRip.XviD.AC3-EVO