This document discusses inflation in India over time based on price increases of common goods from 1980-2014. It provides examples of milk prices rising from Rs. 4 per liter in 1980 to Rs. 38 in 2014, and petrol prices rising from Rs. 5 per liter to Rs. 70 per liter over the same period. It then explains that inflation is caused when key resources become scarce, causing a spiral of rising costs and prices. The document also shows how inflation is measured using the Cost Inflation Index published by the Income Tax Department, and provides sample calculations to determine if certain goods increased in price more or less than the official inflation rate.

1. Inflation
For 8th Std Students

2. Milk Prices
1980- Rs 4 per lt.
2014 –Rs 38 per lt.

3. Potato Prices
1980- Rs 4 per lt.
2014 –Rs 22 per lt.

4. Petrol Prices
1980- Rs 5 per lt.
(approx)
2014 –Rs 70 per lt.

5. Have you ever wondered why
prices are rising ?

6. We need some many items for every
day living

7. If any one of these items becomes
scarce, it affects every other item

8. If Land become scarce
• Rent Increases or House prices increase
• Workers working in Milk Diary demand more
Salary
• Milk Diary increases the prices of Milk
• Every other workers ask for increase because
now Milk and Rent have become more
expensive
• Finally every thing becomes higher

9. If petrol becomes scarce
• Bus Transport company increases Ticket prices
• Workers traveling by Bus to Milk Diary ask for
Salary increase
• Milk Prices are increased
• Now every one buying Milk in the city ask for
Salary increase
• Every other goods prices increase because
now every company has to give salary
increase

10. Inflation Spiral

11. It is not necessary that all prices will
increase
1999 2014
Rs 16 per min
cost of out going
call
Rs 0.5 per minute cost of
out going call
Rs 6000 – One
way Bangalore -
Mumbai
Rs 2500 – One way
Bangalore Mumbai
Rs 40000 – cost
of basic model
computer
Rs 20000 cost of basic
model computer

12. Even if prices of some
goods/services are falling, increase
in price of 1 or 2 items can push the
over all cost of our living expenses

13. How is inflation measured?
• Increase in Inflation can measured by the
number Cost Inflation Index (CII)
• Every year around June Income Tax
Department Publishes the figure ‘Cost
Inflation Index” for the particular year which
can be used for measuring inflation

14. How much is the increase in prices due
to Inflation?
Year CII Year CII Year CII
1981-82 100 1997-98 331 2013-14 939
1982-83 109 1998-99 351 2014-15 1024
1983-84 116 1999-00 389
1984-85 125 2000-01 406
1985-86 133 2001-02 426
1986-87 140 2002-03 447
1987-88 150 2003-04 463
1988-89 161 2004-05 480
1989-90 172 2005-06 497
1990-91 182 2006-07 519
1991-92 199 2007-08 551
1992-93 223 2008-09 582
1993-94 244 2009-10 632
1994-95 259 2010-11 711
1995-96 281 2011-12 785
1996-97 305 2012-13 852
If a family were able to
manage their expenses
with Rs 100 in 1981-82
they will need Rs 1024
In 2014-15

15. Sample Problems
1981-82 2005-6 2014-15
Cost Inflation Index 100 497 1024
Cost of 1 Lt of Milk Rs 4 Rs 18 Rs 38
Cost of 1 Lt of
Petrol
Rs 5 Rs 40 Rs 70
School Fees per
year
Rs 1000 Rs 15000 Rs 60000
Q1. If milk prices were to increase exactly in line with inflation what should be
the cost of milk in 2014 compared to 1981-82?
Q2. Which of the above goods services (Milk, Petrol, School Fees saw
Steepest increased more than inflation between 1981-82 and 2005-06?

16. Sample Problems
1981-82 2005-6 2014-15
Cost Inflation Index 100 497 1024
Cost of 1 Lt of Milk Rs 4 Rs 18 Rs 38
Cost of 1 Lt of
Petrol
Rs 5 Rs 40 Rs 70
School Fees per
year
Rs 1000 Rs 15000 Rs 60000
Q1. If milk prices were to increase exactly in line with inflation what should be
the cost of milk in 2014 compared to 1981-82? Ans: (1024/100)*4 = Rs 40.96
Q2. Which of the above goods services (Milk, Petrol, School Fees saw
Steepest increased more than inflation between 1981-82 and 2005-06?
Actual Price of Milk inline with inflation should be : (497/100)*4 = Rs 19.88
Actual Price of Petrol inline with inflation should be : Rs 24.85
Actual Price of School Fees in line with inflation should be : Rs 4970
Hence School Fees and Petrol increased more than inflation

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