final inflation
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INFLATION
By
Group-9
By
Group-9
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CONCEPTS
INFLATION
DEFINATION GENERAL PRICE LEVELS
INCREASES
VALUE OF MONEY (PURCHASINGPOWER OF MONEY ) FALLS
MONEY CIRCULATION >PRODUCTION
PROBLEMS
PRICE RISE IS FASTER THAN INCOME
STANDARD OF LIVING DECLINES
MAJOR SOCIAL TENSIONS
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Inflationary Spikes
Hyper inflation
Stagflation
Disinflation
Deflation
Reflation
Term Related to Inflation
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Inflation data of past 5 year
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FIVE YEAR INFLATION TREND
Data source: www.rbi.gov.in
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METHODS OF CALCULATION
WPI CPIMeasure the temporal price change ofwholesale transactions of allcommodities in the country.
Measures the average price ofconsumer goods and servicespurchased by households.
The weights of items have beenassigned in proportion to their share inthe total value of transaction (output)in the economy
Weights are assigned in proportion totheir share in the consumptionexpenditure of the family of industrialworkers in the selected centers
Measures inflation at each stage ofproduction
Measures inflation only at final stage ofproduction.
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India, is amongst fewcountries of the world,which selected WPI as itsofficial scale to measure
the inflation in theeconomy.
Most of the majoreconomies like US, UK,Japan, France, Singaporeand even our arch rival
China have selected CPI asits official barometer toweigh its inflation
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Demand-pull inflationrefers to the idea that theeconomy actual demands more goods and services thanavailable. This shortage of supply enables sellers to raiseprices until an equilibrium is put in place between supplyand demand.
Thecost-push theory, also known as "supply shockinflation", suggests that shortages or shocks to the
available supply of a certain good or product will cause aripple effect through the economy by raising pricesthrough the supply chain from the producer to theconsumer. You can readily see this in oil markets. WhenOPEC reduces oil supply, prices are artificially driven up
and result in higher prices at the pump.
CAUSE OF INFLATION IN INDIA
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Contd..
Money supplyplays a large role in inflationarypressure as well. Low interest rates correspond with ahigh levels of money supply and allow for more
investment in big business and new ideas whicheventually leads to unsustainable levels of inflation ascheap money is available.
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EFFECTS OF INFLATION
Income Distribution
# wages earner
# producers#fixed income class
#borrowers and lenders
Employment
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CRUDE OIL PRICES AND INFLATION
Crude oil inflation
205
210
215
220
225
230
235
240
245
Jan Feb Mar Apr May Jun Jul Aug
Series2
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REMEDIES
1. Cash Reserve Ratio increased.
2. Control over Price of Petrol and Diesel.
3. Decreased import tariff.4. Tax increase
5. Cement price control.
6. Import duty on non-agricultural productswas brought down to 10% from 12.5%
7. Allowed appreciating the Rupee.
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CURRENT SCENARIO
. The inflation rate in India was recorded at 7.25
percent in June of 2012
Indias retail inflation, measured by the
Consumer Price Index, dropped marginally to
10.02% in June compared to 10.36% in theprevious month of May
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Thank you
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