The document discusses inflation in India. It defines inflation as a sharp rise in price levels caused by too much money chasing too few goods. It also discusses variations like deflation, hyperinflation, and stagflation. The causes of inflation include demand-pull inflation from economic growth and cost-push inflation from rising costs. Methods to control inflation involve monetary measures from the central bank, fiscal measures from the government, and increasing production. Inflation is measured using indices like the Consumer Price Index and Wholesale Price Index.

1. INFLATION
IN
INDIA

2. 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.”
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3. VARIATIONS ON INFLATION:
 Deflation is when the general level of prices is falling.
This is the opposite of inflation.
 Hyper inflation is unusually rapid inflation. In extreme
cases, this can lead to the breakdown of a nation's
monetary system.
 Stagflation is the combination of high unemployment
and economic stagnation with inflation..
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4. KINDS OF INFLATION
 On the basis of rate of inflation
 On the basis of degree of control
 On the basis of causes
 Others
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5. CAUSES OF INFLATION
 Demand-Pull Inflation
This theory can be summarized as "too much money
chasing too few goods". This usually occurs in growing
economies.
 Cost-Push Inflation
When companies' costs go up, they need to increase
prices to maintain their profit margins.
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8. HOW TO CONTROL INFLATION
 Monetary Measures
 Fiscal Measures
 Other Measures
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9. Monetary Measures
 Credit Control
 Demonetization of Currency
 Issue of New Currency
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10. Fiscal Measures
 Reduction in Unnecessary Expenditure
 Increase in Taxes
 Increase in Savings
 Surplus Budgets
 Public Debt
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11. OTHER MEASURES
 To Increase Production
 Rational Wage Policy
 Price Control
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12. How is it Measured?
 Consumer Price Index
 Wholesale Price Index
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13. 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 within the
same area (city, region, or nation).
 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.

14. Wholesale Price Index
 WPI was published in 1902,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 the
1970.
 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 The Philippines) use WPI
changes as a central measure of inflation. However, India and
the United States now report a producer price index instead.
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15. Problems with WPI
 In present day service sector plays a key role in Indian
economy. Consumers are spending loads of money on
services like education and health. And these services are
not incorpated in calculation of WPI.
 WPI measures general level of price changes either at
level of wholesaler or at the producer and does not take
into account the retail margins. Therefore we see here that
WPI does give the true picture of inflation. 15

16. Problems with WPI
 WPI is supposed to measure impact of prices on business.
“But we use it to measure the impact on consumers. Many
commodities not consumed by consumers get calculated in
the index.
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17. Inflation rate
PI for a certain year - PI for a comparative year X 100
PI for a comparative year
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18. CURRENT ANNUAL INFLATION RATE
SOURCE: www.InflationData.com

19. CURRENT INFLATION RATES
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20. Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Ave
2011 1.63% 2.11% 2.68% 3.16% 3.57% 3.56% 3.63% 3.77% 3.87% 3.53% NA NA NA
2010 2.63% 2.14% 2.31% 2.24% 2.02% 1.05% 1.24% 1.15% 1.14% 1.17% 1.14% 1.50% 1.64%
2009 0.03% 0.24% -0.38% -0.74% -1.28% -1.43% -2.10% -1.48% -1.29% -0.18% 1.84% 2.72% -0.34%
2008 4.28% 4.03% 3.98% 3.94% 4.18% 5.02% 5.60% 5.37% 4.94% 3.66% 1.07% 0.09% 3.85%
2007 2.08% 2.42% 2.78% 2.57% 2.69% 2.69% 2.36% 1.97% 2.76% 3.54% 4.31% 4.08% 2.85%
2006 3.99% 3.60% 3.36% 3.55% 4.17% 4.32% 4.15% 3.82% 2.06% 1.31% 1.97% 2.54% 3.24%
2005 2.97% 3.01% 3.15% 3.51% 2.80% 2.53% 3.17% 3.64% 4.69% 4.35% 3.46% 3.42% 3.39%
2004 1.93% 1.69% 1.74% 2.29% 3.05% 3.27% 2.99% 2.65% 2.54% 3.19% 3.52% 3.26% 2.68%
2003 2.60% 2.98% 3.02% 2.22% 2.06% 2.11% 2.11% 2.16% 2.32% 2.04% 1.77% 1.88% 2.27%
2002 1.14% 1.14% 1.48% 1.64% 1.18% 1.07% 1.46% 1.80% 1.51% 2.03% 2.20% 2.38% 1.59%
2001 3.73% 3.53% 2.92% 3.27% 3.62% 3.25% 2.72% 2.72% 2.65% 2.13% 1.90% 1.55% 2.83%
2000 2.74% 3.22% 3.76% 3.07% 3.19% 3.73% 3.66% 3.41% 3.45% 3.45% 3.45% 3.39% 3.38%
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21. EFFECTS OF INFLATION
 They add inefficiencies 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.
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22. EFFECTS OF INFLATION
 There can also be negative impacts to trade from an
increased instability in currency 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 balance of trade.
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23. EXAMPLE
 Increase in the price of transport
 Increase in the price of world oil
 Increase in the price of rice
 Increase in the price of housing
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24. The conclusion from all
this is:
You don’t have to
live cheap, just live
smart!
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