inflation in india


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how to control inflation in india

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inflation in india

  1. 1. introduction • .INFLATION“ Inflation is nothing more than a sharp upward 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. • 3. 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.
  2. 2. MARKETING PLAN • About IdeaLeading mobile operator in IndiaAdityaBirla group is the sole promoter3rd Largest GSM company in IndiaCovernearly 70 % of India’stelephonypotential • SEGMENTATIONTARGET MARKETPOSITIONING • SegmentationGeographicRegions and cities -Idea GSM services are licensed in 13 circles of India and used in metro cities & small villages DemographicAge, Family size, Income, Occupation, Education • Target MarketAny one from 16 to 60 years old from rural,urban & semi-urban area.60% target market is from rural area.
  3. 3. Inflation and unemployment
  4. 4. Inflation and unemployment  Inflation & Phillips curve: The inflation rate is the percentage change in the price level. The Phillips Curve shows the relationship between the inflation rate and the unemployment rate.  Causes of Inflation: Demand-pull inflation is inflation initiated by an increase in aggregate demand. Cost-push, or supply-side, inflation is inflation caused by an increase in costs  Stagflation: Stagflation occurs when output is falling at the same time that prices are rising. One possible cause of stagflation is an increase in costs.  7% becomes the natural rate in this case. Whenever unemployment rate is pushed below natural rate , wages increase, pushing up costs. This leads to a lower level of output which pushes unemployment back to the natural rate  CYCLICAL UNEMPLOYMENT this type of unemployment may be widespread across a range of industries and sectors Keynes
  5. 5. HOW TO CONTROL INFLATION    Monetary Measures Fiscal Measures Other Measures MonetaryMeasures • Credit Control • Demonetization of Currency
  6. 6. FISCAL MEASURES • • • • • • • • • • Reduction in Unnecessary Expenditure Increase in Taxes Increase in Savings Surplus Budgets Public Debt To Increase Production Rational Wage Policy Price Control Consumer Price Index WholesalePriceIndex OTHER MEASURES • To Increase Production • Rational Wage Policy • Price Control
  7. 7. 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 with in the same area(city, region, ornation) • 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.
  8. 8.  WHOLESALE PRICE INDEX • WPI was published in1902, 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 the1970. • 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 ThePhilippines) use WPI changes as a central measure of inflation. However, India and the United States now report a producer price index instead.
  9. 9. EFFECTS OF INFLATION  They add in efficiencies 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  There can also be negative impacts to trade from an increased in stability incurrency 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
  10. 10. EXAMPLES  Increase  Increase oil  Increase  Increase in the price of wheat in the price of world in the price of rice in the price of CNG
  11. 11. STAGFLATION  A condition of slow economic growth and relatively high unemployment accompanied by inflation.  This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries.
  12. 12. PHILLIPS CURVE  In1958,a New Zealand economist, A.W.H. Phillips proposed that there was a trade-off between inflation and unemployment.  The lower the unemployment rate, the higher was the rate of inflation.  Governments simply had to choose the right balance between the two evils.  Economies did seem to work like this in the 1950s and 1960s, but then the relationship broke down.
  13. 13. The Phillips curve
  14. 14. THE PHILLIPS CURVE o 1958 – Professor A.W.Phillips o Expressed a statistical relationship between the rate of growth of money wages and unemployment from 1861–1957. o Rate of growth of money wages linked to inflationary pressure o Led to a theory expressing a trade – off between inflation and unemployment
  15. 15. Wage growth % (inflation) 2.5% 1.5% The Phillips Curve shows an inverse relationship between inflation and unemployment. It suggested that If governments wanted to reduce unemployment it had to accept higher inflation as a trade-off Money illusion–wage rates rising but individuals not factoring in inflation on real Wage rate
  16. 16. The phillips curve  Problems:  1970s – Inflation and unemployment rising at the same time – stagflation  Phillips Curve redundant?  was it moving? Or
  17. 17. The phillips curve  Where the long run Phillips Curve cuts the horizontal axis would be the rate of unemployment at which inflation was constant – the so – called Non –Accelerating Inflation Rate of Unemployment (NAIRU)  To reduced unemployment To below the natural rate would necessitate 1 Influencing expectations–persuading Individuals that inflation was going to fall 2 Boosting the supply side of the economy-increase capacity(pushing the PC curve out wards)
  18. 18. END THANK YOU