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 Economic output slows
 Unemployment on rise
 Wage rate inflation trade off becomes exploitative.
 Industrial sector s...
Major Variables Recovery Recession
1. Industrial
production
Gradual
increase
Decline
2. Commodity prices -do- Decline
3. C...
6. Employment Gradual increase Starts
falling
7. Wage rate Improvement Starts
falling
8. Bank credit Liberal loans and
sat...
Country GDP growth rate
2006 2007 2008 2009
(forecast)
United states 2.8 2.0 1.4 -0.7
Germany 3.0 2.5 1.7 -0.8
United king...
Countries Current Inflation (%)
New Zealand 3
UK 2.9
Australia 2.5
EU 0.6
Japan -0.3
US -0.4
 Industrial growth
◦ 11.8 per cent in 2006
◦ 9.2 per cent Nov 2007
 Index of industrial production (IIP) (released by GO...
0
10
20
30
40
50
60
70
1983 1993 - 94 1999 - 00 2004 - 05
Agriculture
Manufacturing
Construction
Trade, hotel
Services ( f...
 Business cycle and inflation are showing pro – cyclic
nature
 Unemployment is counter cyclic
 Mounting govt
expenditure – 3,08550
crores in Xth Plan)
 Increase in money
supply along with black
money.
 Population ...
Year WPI
( percentage change)
CPI-IW (industrial Works)
( percentage change)
2000 – 01 7.1 3.8
01 – 02 3.7 4.3
02 – 03 3.4...
Figure 1: Depicting the trend comparision of WPI and CPI
0
2
4
6
8
10
12
2000
– 01
01 –
02
02 –
03
03 –
04
04 –
05
05 –
06...
Fiscal yearArticles Weighted
% 2006 -07 2007 –
08
2008 -
09
2009 –
2010
(CMIE
Projected)
Primary articles 22.03 7.8 7.7 10...
 The current economic scenario calls for public private
partnership, wherein both preventive and corrective
measures need...
 The fluctuations in crude oil prices globally need to
be carefully handled as the entire burden of rising
import bill (3...
 Need to emphasize on food grain production and
strictly work on strategy boosting agriculture sector
like Visesh Krishi ...
Thank You
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Impact of Inflation during crisis of recession: An Indian Scenario

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Expert Lecture Series

  1. 1.  Economic output slows  Unemployment on rise  Wage rate inflation trade off becomes exploitative.  Industrial sector slows  Inflationary pressure ( Negative and Positive)
  2. 2. Major Variables Recovery Recession 1. Industrial production Gradual increase Decline 2. Commodity prices -do- Decline 3. Cost of production Gradual increase Gradual decline 4. Profits Satisfactory level Gradual decline 5. Investment Replacement of existing capital equipment Falls slowly
  3. 3. 6. Employment Gradual increase Starts falling 7. Wage rate Improvement Starts falling 8. Bank credit Liberal loans and satisfactory demand for advances improvement Starts falling 9. Bank Reserves Improvement Suffer a setback
  4. 4. Country GDP growth rate 2006 2007 2008 2009 (forecast) United states 2.8 2.0 1.4 -0.7 Germany 3.0 2.5 1.7 -0.8 United kingdom 2.8 3.0 0.8 -1.3 Japan 2.4 2.1 0.5 -0.2 India 9.7 8.7 7.8 6.3/ 5.8 * Source: IMF and ES 2007 – 08, * - World bank
  5. 5. Countries Current Inflation (%) New Zealand 3 UK 2.9 Australia 2.5 EU 0.6 Japan -0.3 US -0.4
  6. 6.  Industrial growth ◦ 11.8 per cent in 2006 ◦ 9.2 per cent Nov 2007  Index of industrial production (IIP) (released by GOI, on 12th Dec 08) ◦ Factory output falling at a rate .4 per cent change in IIP ◦ Capital goods output growth was only 3.1 percent year on year basis from 18.6 per cent in Sept 08. ◦ IIP for textile fabrics increased by 7.6 percent in 06 – 07 and has slowed to 3.4 per cent ◦ Export sector declined 2.1 per cent in one month from Oct 08 to Nov 08.
  7. 7. 0 10 20 30 40 50 60 70 1983 1993 - 94 1999 - 00 2004 - 05 Agriculture Manufacturing Construction Trade, hotel Services ( financial, real, insurance Transport , storage and communication
  8. 8.  Business cycle and inflation are showing pro – cyclic nature  Unemployment is counter cyclic
  9. 9.  Mounting govt expenditure – 3,08550 crores in Xth Plan)  Increase in money supply along with black money.  Population growth  Fluctuation in out and supply  Administered prices  Hike in oil prices  Global inflation leading to imported inflation
  10. 10. Year WPI ( percentage change) CPI-IW (industrial Works) ( percentage change) 2000 – 01 7.1 3.8 01 – 02 3.7 4.3 02 – 03 3.4 4.0 03 – 04 5.4 3.9 04 – 05 6.4 3.8 05 – 06 4.4 4.4 06 – 07 5.4 6.7 07 – 08 4.7 6.2 08 – 09 8.3 9.1 09 – 10* 1.6 9.9
  11. 11. Figure 1: Depicting the trend comparision of WPI and CPI 0 2 4 6 8 10 12 2000 – 01 01 – 02 02 – 03 03 – 04 04 – 05 05 – 06 06 – 07 07 – 08 08 – 09 09 – 10* Year Percentchangeinpriceindex WPI CPI Linear (CPI) Linear (WPI)
  12. 12. Fiscal yearArticles Weighted % 2006 -07 2007 – 08 2008 - 09 2009 – 2010 (CMIE Projected) Primary articles 22.03 7.8 7.7 10.0 7.3 Fuel, power, light and lubricant 14.23 5.6 1.0 7.4 -3.9 Manufactured products 63.75 4.4 5.0 8.0 1.4 Food products 11.54 3.2 4.3 9.7 15.0 Beverages tobacco and tobacco product 1.34 7.4 10.3 9.5 4.5 Textiles 9.80 2.2 -1.1 6.1 3.2 Wood and wood products 0.17 6.1 4.6 8.8 1.6 Paper and paper products 2.04 6.9 1.8 4.4 1.2 Leather and leather products 1.02 -4.4 4.2 1.1 -1.0 Rubber and plastic products 2.39 6.6 7.3 4.6 2.7 Chemicals and chemical products 11.39 3.0 5.6 7.1 3.7 Non-metallic products 2.52 12.9 8.9 3.7 3.4 Basic metals alloys and metal products 8.34 6.7 7.1 14.3 -10.2 Machinery and machine tools 8.36 5.6 7.1 4.7 -1.4 Transport equipment and parts. 4.29 1.6 2.8 5.2 0.1 All Commodities 100.0 5.4 4.7 8.3 1.6
  13. 13.  The current economic scenario calls for public private partnership, wherein both preventive and corrective measures need to be taken up at various levels. This is so advocated to prevent the society at large from devastating effects of current WPI and CPI trends. Rising energy, commodity prices have boosted inflationary pressure  Need to adapt to shift in purchasing power from commodity users to entrepreneurs that can generate employment as the people are the consumer as well as the producers.
  14. 14.  The fluctuations in crude oil prices globally need to be carefully handled as the entire burden of rising import bill (3,20,641 crores; 33 percent of total imports in 07 – 08)) is rising and with recovery the disposable income also rises compounding the rising demand.  RBI should focus on CPI control as compared to WPI and simultaneously promote growth, employment and price stability.
  15. 15.  Need to emphasize on food grain production and strictly work on strategy boosting agriculture sector like Visesh Krishi Upaj Yonjana.  The present sharp rise in prices in CPI is due to sharp increase in prices of wheat, rice pulses etc. this rise is leading to social problems like worsening the economic condition of weaker sections, increased corruption and pilferages in PDS ( Public Distribution System).
  16. 16. Thank You

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