Inflation
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An attempt to cover the latest and the basics on Economics. A lot of key info included in the presentation !!
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Inflation
- 2. Inflation : Structural or Monetary Causes? β’ Monetary Inflation: Sustained increase in the money supply of a country. β’ Structural Inflation: Strongly influenced by Govtβs monetary policy and economic structure. β’ Inflation in India is more structural than monetary. β’ Indiaβs economy is dotted by structural imbalances in various sectors. β’ Major sectors contributing to inflation are Agriculture, Manufacturing,services and Fuel. β’ Bottleneck in supply side ,slump in production,decline in agriculture growth are all major causes for inflation in india.
- 3. β’ The graph shows a very high correlation between repo rate and growth in WPI and IIP. β’ As per the graph, the constant rise in rates has been adversely affecting the industry as the cost of borrowing has increased, investments have dried up and profit margins have taken a hit.
- 4. In the case of food inflation, as the repo rate is increasing, the growth rate also is increasing. β’ Major Contributor to food Inflation is protein rich foods like milk, pulses, eggs, fish etc.
- 5. Impact of FDI : Structural/Institutional Inclusion of 51% foreign direct investment in multi-brand retail β’ Attract global supermarkets, such as Walmart, Tesco and Carrefour (Min FDI - $100 million (Rs 450 crore) Impact Urban Retail Market Rural Retail Market Local Small Retailer Local Big Retailer Supply Chain Localized β’ Increased Competitiveness β’ Product Differentiation β’ Price Wars β’ Increased Penetration of Markets β’ Backward and Forward Linkages to Kirana Shops, Local Farmers, Local Stores in Villages β’ Harder to Compete β’ Sales Based on -Convenience -Competitive Pricing β’ Harder to Compete β’ Impetus to innovate β’ Brand War eminent Job Creation / Offset β’ Training Institutes & other ancillaries β’ Employment for Middle / Upper Class β’ Offset : Medium Size Retailer β’ Agriculture best practices β’ Transportation & Administrative Jobs β’ Offset : Local Supermarket store will face severe competition β’ Indirect competition β minimal impact β’ Direct competition βimpact eminent β’ Survival of the fittest Warehousing / PDS β’ Inclusion of multi brand stores will lead to localizing the supply chain & pds system will be impacted parallelly, adding best practices for supply chain management
- 6. IMPACT of FDI : Inflation Rate Investment by Multi Brand Outlets Increased Competition Organized Supply Chain Job Creation Increased Disposable Income Increased Consumption Inflation Decrease Source : India Retail Report 2011 SIMPLISTIC VIEW OF IMPACT OF INFLATION Reduced Waste Middle Man Cut Out Increased Income Of Farmers Offset of Existing Distributors
- 8. Producer Prices in India increased 1.77 percent in October of 2014 over the same month in the previous year. Producer Prices Change in India averaged 7.66 Percent from 1969 until 2014, reaching an all time high of 34.68 Percent in September of 1974 and a record low of -11.31 Percent in May of 1976. Producer Prices Change in India is reported by the Office of the Economic Advisor, India.
Editor's Notes
- With the change in purchasing power, the trend of food consumption has shifted from carbohydrate rich foods to protein rich foods. In the case of pulses,the problem is compounded by the fact that India is the single biggest consumer and only a handful of other countries produce in quantities that India demands.