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Inflation final
 

Inflation final

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    Inflation final Inflation final Presentation Transcript

    • INDIA STRUGGLES TO TAME INFLATION GROUP 7PRESENTED TO SANTOSH GHILDIYALPROF. ABHIJIT ROY DHEERAJ KUMAR NITISH GOEL LAISHRAM ARNOLD ANKIT PHARTIYAL 02/13/13 GBE PRESENTATION ( GROUP 7 ) 1
    • What is inflation??? Inflation is the state when the value of money is falling and there is an upward rise in price level. Inflation occurs when the amount of buying power is higher than the output of goods and services. For example, if the inflation rate is 5% for a particular item, it means that the demand is 5% more than the total supply of that particular item. 02/13/13 GBE PRESENTATION ( GROUP 7 ) 2
    • Types of inflation Demand pull inflationWhen demand grows faster than supply it pushes general prices up. This canbe described as “too much money chasing too few goods”.India being a growing economy has experienced this type of Inflation for years.Almost all industries in India face demand pull inflation especially when it comes tothe technology driven industry like Automobile, Consumer Electronics.Cost push inflation1) Cost-push inflation is a type of inflation caused by substantial increases in the cost of Important goods or services where no suitable alternative is available.2) A situation that has been often cited of this was the oil crisis of the 1970s, which some economists see as a major cause of the inflation experienced in the western world in that decade. 02/13/13 GBE PRESENTATION ( GROUP 7 ) 3
    • FACTORS AFFECTING INFLATION IN INDIA Rise in food prices. Increased in money supply. Black money. Rise in crude oil prices. Increasing population. Deficit Financing. Less aggregate supply of goods and services.02/13/13 GBE PRESENTATION ( GROUP 7 ) 4
    • EFFECTS OF INFLATION Business Community: Inflation is welcomed by entrepreneurs and businessmen because they stand to profit by rising prices. Farmers usually gain during inflation, because they can get better prices for their harvest during inflation Decreased in the real value of money and other monetary items. High inflation leads to shortage of goods. Uncertainty over inflation discourages savings and investment.02/13/13 GBE PRESENTATION ( GROUP 7 ) 5
    • 02/13/13 GBE PRESENTATION ( GROUP 7 ) 6
    • Measures Taken to Control Inflation1. Monetary control :- Classical economists are of the view that inflation can be checked by controlling the supply of money. Some of the important monetary measures to check the inflation are as under. Control over money- It is suggest that to check inflation government should put strict restrictions on the issue of money by the central bank. Credit control- Central bank should pursue credit control policy. In order to control the credit it should increase the bank rate, raise minimum cash reserve ratio etc. It can also issue notice to other banks in order to control credit.
    • 2. Fiscal Measures:- Measures taken by the government to control inflation.  Decrease in public expenditure- One of the main reasons of inflation is excess public expenditure like building of roads, bridges etc. Government should drastically scale down its non essential expenditure.  Increase in taxes- Government should levy some new direct taxes and raise rate of old taxes.02/13/13 GBE PRESENTATION ( GROUP 7 ) 8
    • Other measures:- Increase in the production- One of the major causes of inflation is the excess of demand over supply, so those goods should be produced more whose prices are likely to rise rapidly. Proper commercial policy- Those goods which are in scarcity should be imported as much as possible from other countries and their exports should be discouraged. Proper investment policy- Investment in those industries should be increased wherein more production of goods can be generated over a short period of time.02/13/13 GBE PRESENTATION ( GROUP 7 ) 9
    • Why India is not able to tame Inflation?RBI got into the mode of interest rate hikes by raising repo rates, reverse repo rates. leads to :• Lower investments•Control the demand side inflation (high demand of commodity whose supply is still at the same. E.g. Housing Sector)•But building up Supply side inflation. With no new investment in infrastructure, which constrained the logistics in not working efficiently.• Increase in the interest rate has done little to contain food inflation but costlier loan has hampered the growth rates of Gross Domestic Product and industrial output . 02/13/13 GBE PRESENTATION ( GROUP 7 ) 10
    • In order to Control Supply Side Inflation:• More investment is infused in certain sectors like Infrastructure, agriculture sector.• Need to provide easy capital to companies building roads, generating power.• Need to invest on companies which are working on alternative energies, as the oil bill is going to be a single big reason.• Need to invest on irrigation companies, logistics and transportation.• To control inflation which will hurt the industry & the only way to control is to tighten the money flow & to invest the money wisely 02/13/13 GBE PRESENTATION ( GROUP 7 ) 11
    • Indias economic growth rate slipped to 6.9 per cent in 2011-12 from 8.4 % in the preceding two years. The government is aiming a growth rate of 7.6 % in the current financial year.Current Repo rate is 8.00% (w.e.f.17/04/2012) & Reverse repo rate 7.00% (w.e.f.17/04/2012).Currently there’s an Issue of Inflation Vs Growth is going on between RBI & Govt. of India. RBI says that India should have to sacrifice on growth in order to control inflation. But on the other hand government is saying to make a balance between Inflation & Growth. 02/13/13 GBE PRESENTATION ( GROUP 7 ) 12
    • BIBILOGRAPHY•http://www.livemint.com/Politics/740DXvCtbVwZMTRZZBZS5N/Rate- hike-may-not-help-tame-inflation-India-Inc.html•http://businesstoday.intoday.in/story/rbi-rate-hike-will-not-help-tame- inflation-industry/1/18744.html•http://www.dnaindia.com/analysis/column_why-indias-monetary-policy-is-a-failure_1602744 •http://www.site.lalitbhatt.com/content/why-india-not-able-tame-inflation•http://www.rediff.com/money/report/interview-kalpana-kochhar-chief-economist- south-asia-world-bank-on-taming-inflation/20110916.html 02/13/13 GBE PRESENTATION ( GROUP 7 ) 13
    • THANK YOU02/13/13 GBE PRESENTATION ( GROUP 7 ) 14