2. INTRODUCTION
• FROM THE TIME OF INDEPENDENCE 1947
TO 1951 $1 WAS EQUAL TO RS 1.
• TO INCREASE THE FDI INDIAN
GOVERNMENT DEVALUATE THE INDIAN
RUPEE.
• THEY HAVE FIXED THAT EVERY FOREIGN
COMPANIES SET UP THEIR BUSINESS IN
INDIA SHOULD GIVE 30% OF THEIR PROFIT
TO INDIAN GOVERNMENT.
3. DEMAND OF RUPEE
• IF TASTE AND PREFERENCES OF
INDIAN CUSTOMERS ARE
TURNING TOWARDS THE FOREIGN
GOODS THEN THE DEMAND OF
INDIAN RUPEE WILL BE
DECLINING .ALL THE INCOME
WILL BE FLOWING TOWARDS THE
FOREIGN MARKET.
• DEVALUATION OF RUPEE
• DEPRECIATION OF RUPEE
1$ = Rs 66.55
DECLINE IN VALUE OF RUPEE
4. MEANING
• INFLATION IS THE SITUVATION WHERE
PRICE OF GOODS INCREASES GRADUALLY
AND VALUE OF INTERNAL MONEY COMES
DOWN.
5. TYPES OF INFLATIONS
BASICALLY INFLATIONS WILL HAPPENS IN THE PERIOD
OF BOOM IN BUSINESS CYCLE .
• Walking inflation: When the price rise is moderate (is in the range of 3 to 7 %) and
the annual inflation rate is of a single digit, it is called walking inflation. It is a
warning signal for the government to control it before it turns into running inflation
• Creeping Inflation are the circumstance where the inflation of a nation increases
gradually, but continually, over time. This tends to be a typically pattern for many
nations. Although the increase is relatively small in the short-term, as it continues
over time the effect will become greater and greater.
• According to Samuelson, when prices are rising at double or triple digit rates of 20,
100 or 200 per cent a year, the situation is described as 'galloping' inflation.
• RUNNING INFLATION: "It refers to the situation where the price level rises very
fast. In case, price level doubles up every 3 years. It is, generally, succeeded by
galloping inflation
6. MAJOR CAUSES OF INFLATION
• BUSINESS CYCLE
• GLOBALISATION
• OVER CREDIT OF NATIONS
• MORE IMPORT THAN
EXPORT
• DEMAND AND SUPPLY
9. In India inflation is above 9% mark from last year . This has hit budgets
of salaried middle class in the country. Now lets evaluate how
Inflation has hit the common man.
• 1.Food and dairy products which are of daily use are rising above
12%. For a middle class person it constitutes about 30-40% of his
monthly spends. Such an impact leave him very less money for other
activities.
• 2.Impact on Emi
With inflation being on high almost all banks have increased
rates by 1-2% on existing borrowers of home loan. As home loans
are mostly taken at floating rates most customers have to pay more
EMI per month from last 1-2 years.
• 3.Petrol Prices
The Petrol or diesel prices have been increased so many times this
year that travel or commuting budget have increased for most of the
middle class.
• 4.Credit Card usage- As customers are short of cash, more customers
are using credit cards and getting into a debt trap. To pay these card
dues they then take personal loan if the shortfall becomes higher
thus one more EMI to pay.
11. Inflation can be either negative or positive -- and often times both for the same
business. Negative effects of inflation include:
• Increased costs: As the money is worth less, so do costs increase for
businesses. Not only do businesses have pay more for raw materials, they also
have to do things like print out new menus and make more trips to the bank for
money. Businesses generally also have increased labour costs during inflationary
periods, as workers need more money to live on.
• Market bubbles: Less a result of inflation gone out of control, market bubbles
happen when inflation is kept artificially low through the policies of a central
bank. Low interests rates are traditionally associated with easy credit and an
increased money supply. This, in turn, often leads to speculation in the market
and bubbles that go along with it.
• Economic downturn: The cumulative effect of higher prices and bubbles is a
downturn in the economy. When the market corrects itself, the bubble bursts
and it is often small businesses and workers that are left holding the bag. When
high rates of inflation occur, jobs are often the first place where businesses begin
cutting back. This leads to a spike in unemployment, which in turn leads to less
consumer spending.
Positive effect of inflation includes :
• Decreased labour costs: Even though you might be shelling out more in
dollars for your workers, the real cost of labour, adjusted for inflation, can go
down
• Decreased debt: Once inflation is greater than your interest rates, you are
actually seeing your debt wiped out by inflation
12. REMEDIES FOR INFLATION
• REDUCE IMPORTING .
• INCRESE EXPORTING
• CONVERT GOLD TO GOVERNMENT BONDS.
• INVEST IN LONGTERM STOCKS
• FAIR REMMUNERATION
• DIG AND CLOSE POLICY
• NEW EMPLOYMENT OPPERTUNITIES
• HAVE TRADE AGREEMENTS WITH OTHER
STATES
• LOANS FROM WORLD BANK
• CREDIT CONTROL
13. EXAMPLE FOR EXTREAM
INFLATION
Hyperinflation in Zimbabwe began shortly after destruction of productive
capacity in Zimbabwe's civil war and confiscation of private farms. During the
height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's
hyperinflation because the government of Zimbabwe stopped filing official
inflation statistics. However, Zimbabwe's peak month of inflation is estimated at
6.5 sextillion percent in mid-November 2008.
In 2009, Zimbabwe abandoned its currency. As of 2013, Zimbabwe still has no
national currency; currencies from other countries are used.
15. FINDINGS
TO PREVENT INDIA FROM THIS CRISIS
• WE THE PEOPLE OF INDIA SHOULD
PROMOTE THE DOMESTIC PRODUCTS.
• INDIAN GOVERNMENT SHOULD BRING A
LAW , STATES THAT THERE SHOULD BE
LIMITS IN USAGE OF GOLD IN WEDDINGS.
• MOTOR VEHICLES WITH MORE MILAGE
SHOULD BE PROMOTED.
• MORE TAX ON LUXURIOUS VEHICLES.
