ABOUT CONTROL MEASURES OF INFLATION

1. CONTROL MEASURES OF INFLATION
KARE RAMAKRISHNA
(18382022)
PONDICHERRY UNIVERSITY

2. WHAT IS INFLATION….???
In economics, inflation is a rise in the general
level of prices of goods
and services in an economy
over a period of time.
The term inflation in other
words, refers to the
devaluation of the
currency

3. DEFINITION
 Inflation can be defined as a continuous increase
in the general price level of goods and services
in the economy. Since inflation refers to a
continuous increase in the general price level,
although the price of every product and service
need not increase.
 For example, if inflation rate is 4%, it does not
mean that all the prices are increasing by 4%. It
is only the average increase.

4. VARIOUS DEGREES OF INFLATION
 Creeping inflation - a sustained rise in prices, i.e. by
about 2% per year.
 Walking inflation - a sustained rise in price by about
3% to 10% per year.
 Galloping inflation – rises to 10% or more per year.
 Hyperinflation – occurs when monthly prices rise by
50% to 60% or more.
 Germany encountered hyperinflation in 1923, Hungary
in 1947, China in 1949 and present in Venezuela.

5. MEASURES OF INFLATION
 Inflation rate =
𝐶𝑃𝐼 𝑡ℎ𝑖𝑠 𝑦𝑒𝑎𝑟 −𝐶𝑃𝐼 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟
𝐶𝑃𝐼 𝑝𝑟𝑒𝑣𝑖𝑜𝑢𝑠 𝑦𝑒𝑎𝑟
∗ 100
 **CPI : CONSUMER PRICE INDEX

6. INFLATION RATES IN INDIA

7. MEASURES TOCONTROLINFLATION
1. MONETARY POLICY :
controlling the supply of money by the central
bank.
 open market operations (selling of s/t bonds &
securities
 Raising the reserves requirement
 Raising the discount rate / bank rate
 Raising the interest rate
 Selective credit control policy

8. 2. FISCAL POLICY :
A decrease in govt. spending and an increase in the
governments total tax revenue will produce a surplus
budget.
 Increase in taxes
 Decrease in government expenditure

9. 3. DIRECT CONTROL MEASURES
Besides monetary and fiscal policies, some direct
measures are taken to control inflation.
 Price control and rationing
 Anti-hoarding campaign
 Compulsory savings

10. MEASURES TAKEN BY THE GOVERNMENT
 Advisories to state governments to take strict action against
hoarding & black marketing and effectively enforce the
essential commodities ACT, 1955.
 Regular review meeting on price with various hierarchies in
government.
 Higher Minimum Support Price(MSP) has been announced.
 Usage of Price Stabilization Fund(PSF).
 Enhancement in buffer stock of pulses to enable effective
market intervention for moderation of retail prices.

11.  The government has imposed stock holding limits on
stockiest/ dealers of sugar till April, 2018.
 The government imposed 20% duty on export of sugar for
promoting availability and moderating price rise.
 Permitted import of 5 lakh tones of raw sugar at zero duty;
subsequently import of additional 3 lakh tones was allowed at
25% duty.
 Goods to be exported only on letter of credit subject to a
minimum export price.

12. IMPORTANT TERMINOLOGIES AND ITS RATES
Rates(%)
Repo Rate 6.25
Reverse Repo Rate 6
Cash Reserve Ratio (CRR) 4
Statutory Liquidity Ratio (SLR) 19.5
Bank Rate 6.75
Marginal Standing Facility (MSF) 6.75