Inflation in India has been caused by several factors over the past few decades including rising food prices, higher crude oil prices, and increased government spending. Inflation rates in India ranged from 2-10% from 2005-2015, peaking in 2008 during the global financial crisis when crude oil prices surged. While inflation has impacted consumption and economic growth, the Indian government has taken measures to control prices such as liberalizing trade and increasing agricultural productivity. Looking forward, India's growing economy is expected to lead to continued inflation, though the inflation rate may remain stable in the coming years.

1. INFLATION IN INDIA
GROUP:
PAL , PARTH , PRANALI , PRARTHANA , PREM , PRIYANSH , RACHANA

2. INTRODUCTION:
A general increase in prices and fall in the purchasing value of money.
“Too many rupees chasing too few goods and services”

3. CHARACTERISTICS:
• Excess demand over supply
• A result of interaction of economic forces
• Observed over a long period of time
• Non cyclic movement of price
• Inverse relationship with value of money

4. NEVER ENDING?

5. TYPES OF INFLATION:
Demand pull inflation
• Total demand for goods and services surpass the available supply
• Leads to increase in prices of commodities in the market

6. Cost Push inflation
• Increased price of factor of production
• Leads to overall increase in production price, hence supply

7. • Hyper inflation
Abnormal increase in general price levels
• Stagflation
Combination of money and unemployment
• Deflation
A fall in general price level or Negative Inflation

8. INFLATION THEORIES:
• The “cost–push” theory (A.W. Phillips, 1960)
“The basis of cost push theory of inflation is that organized groups, both business and
labor, establish higher prices for their products or services than would prevail in perfectly
competitive markets”
• The structural theory
“The rate of wage inflation as a whole is seen as proportional to the rate of structural
change in the economy.”

9. • The Keynesian theory (J.M. Keynes)
Consumers tend to spend a fixed proportion of any increases they receive in their
incomes.
• The quantity theory (David Hume, 18th century, Milton Friedman )
Basic contentions are that short-period changes of the money supply are, in fact,
followed by changes in income and that the velocity of circulation, though it fluctuates to
some extent with the money supply, tends to be stable, over long periods.

10. CAUSES OF INFLATION:
• Money Supply Growth
• High government expenditure
• High world oil prices
• Higher the growth of population leads to higher
private consumption of goods and services.
• Nominal effective exchange rate

11. INFLATION IN INDIA:
In addition to above given factors, causes of inflation specifically for the Indian
subcontinent are:
• Monsoon cycle
• Government subsidies on various resources
• Fiscal deficit
• Tension with neighboring countries and wars
• Hoarding of goods
• Rising farm wages

12. IMPACTS OF INFLATION:
The impacts of inflation in an economy can be classified as:
• Effects on production (changes in economics routine)
• Effects on income distribution (re-distribution of income and
wealth)
• Effects on consumption and welfare
• Affects the Economic deficit of government account
• Rate of import/export change
• Rating and stability of economy changes

13. INFLATION IN INDIA IN THE PAST FEW DECADES:

14. • After-affects of Indo-China war of 1962
• Policy review for resource allocation to India by World Bank and England
• Implementation of 5 year plan
• Devaluation of Rupee

15. • Sudden increase in crude oil prices during 1973-74 period (due to middle eastern war
situation, Yom Kippur War)
• After-affects of 1971 Indo-Pak war
• Measures:
• Government took measures for infrastructure improvement in 5 year plan such as
mining power and agriculture sector.
• Attaining self-reliance in food and energy became a top priority.

16. • India economy was in turmoil due to external debt crises
• Political situation at Centre was ambiguous.
• After economic reforms of 1991, government initiated Liberalization, Privatization and
Globalization.
• Float exchange rate implemented

17. INFLATION IN INDIA (2005 – 2015)
0
2
4
6
8
10
12
14
16
18
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
INFLATION
YEAR
INFLATION IN INDIA

18. 2005 - 2007
CAUSES:
• Rising income and the consequent changing
preference in terms of food items
• Higher value and more nutritious food items
preferred
• Very weak rains
• Rising population
• Limited supply of the demanded shifted items
IMPACTS:
• Competing uses of cultivable land
• Low agricultural productivity
• Disguised unemployment increased

19. 2008 - 2011
CAUSES:
• Impact of the US Economy, Global financial crises
• Increase in crude oil price
• Fragmented value chains for food supply, that allow
middlemen to grab large margins
IMPACTS:
• Exports became cheaper because the value of
dollar decreased
• Service sector (most contributing to the GDP)
ended up gaining less profits
• Farmers were not paid the deserted prices
• People stopped consuming those
commodities, leading to huge wastage of the
stock
• Food cost raised everywhere, many couldn’t
afford the most consumed veg like ‘onion’

20. 2012 - 2014
CAUSES:
• Rising incomes especially rural farm wages and
increase in real consumption
• Clear structural shift in food consumption towards
protein-based food items
• Mahatma Gandhi National Rural Employment
Guarantee Scheme (MGNREGA) increased the
bargaining power of the work force
IMPACTS:
• Temporary employment for the poor
• Increased government deficit ( the new assigned
employment wasn’t targeted to any pre planned
infrastructure )
• Hoarding was still an issue

21. 2015 (CHANGE OF GOVERNMENT):
• State governments were asked to allow farmers to bypass ‘mandis’ and sell fruits and
vegetables in the open market.
• It has added onions and potatoes to the Essential Commodities Act to check hoarding.
• Plans to break up the Food Corporation of India, the government company, to pave the
way for the private sector to enter the food-grain business.

22. HDI (HUMAN DEVELOPMENT INDEX):
2005 2008 2010 2011 2012 2013
0.527 0.554 0.570 0.581 0.583 0.586

23. FORECAST:
• Inflation rate could be maintained for upcoming few years.
• According to the CII and McKinsey report, India’s per-capita gross domestic product
(GDP) would increase by 320 per cent during 2012-2030.
• This increase in income would lead to 4 per cent increase per annum in overall food
consumption from `11 trillion in 2010 to ` 22.5 trillion.
• In line with this, per-capita consumption is expected to post an annual 3 per cent
increase from ` 9,360 to ` 15,390 during the period ().

24. REFERENCES:
1. https://www.boundless.com/economics/textbooks/boundless-economics-textbook/measuring-output-and-income-
19/cost-of-living-95/introduction-to-inflation-359-12456/
2. https://www.rbi.org.in/scripts/PublicationsView.aspx?id=16055
3. http://articles.economictimes.indiatimes.com/2014-08-19/news/52983505_1_food-inflation-food-prices-ashok-gulati
4. http://www.mb.com.ph/editorial-agriculture-remains-our-greatest-hope/
5. https://www.rbi.org.in/scripts/PublicationsView.aspx?id=16055
6. http://nicholsoncartoons.com.au/global-financial-crisis-where-to-now-600.html
7. http://www.ias.ac.in/jess/jul2014/1129.pdf)
8. CII and McKinsey, April 2013
9. https://www.rbi.org.in/scripts/PublicationsView.aspx?id=16055

25. REFERENCES:
1. http://www.gktoday.in/fifth-five-year-plan_22/
2. http://www.inflation.eu/inflation-rates/india/historic-inflation/cpi-inflation-india.aspx
3. http://en.wikipedia.org/wiki/Inflation
4. http://www.britannica.com/EBchecked/topic/287700/inflation/3511/The-Keynesian-theory
5. http://pixshark.com/effect-of-inflation-on-common-people.htm

26. THANK YOU