This document discusses inflation in India. It defines inflation and describes the main causes as demand-pull, cost-push, pricing power, and skew inflation. It provides details on how inflation is calculated in India using the Wholesale Price Index (WPI) across various commodity groups. The effects of high inflation are outlined as well as some measures to control inflation such as reducing money supply and increasing policy rates. India is currently experiencing high food inflation which poses risks to nutrition and economic growth.

1. DIVYA VERMA

2. •Refers to persistent
increase in the general
price level of goods and
services in an economy
over a period of time.
•Too much money chasing
but very few goods.
•Each unit of currency buy
fewer goods and services.
•Reflects a reduction in
purchasing power per unit

3. •Increase in money
supply.
•Increase in exports.
•Black money.
•Increase in public
expenditure.
•Decrease in
aggregate supply of

4. 1. DEMAND PULL INFLATION
2. COST PUSH INFLATION
3. PRICING POWER
INFLATION
4. SKEW INFLATION

5. • Demand Pull Inflation
arises when aggregate
demand in an economy
outspaces aggregate supply.
• “Too much money chasing
too few goods”
OR
“Too much money spent
chasing too few goods”
Since only money that is
spent on goods and services
can cause inflation.
• This cannot happen unless
the economy is already at a
full employment level.

6. •Cost push Inflation is caused
by substantial increase in the
cost of important goods or
services where no suitable
alternative is available.
For example- inputs like
labour, raw material etc.
•Increased price of factors
of production leads to
decreased supply of such
goods.
•While the demand remain
constant ,the prices of
commodities increase causing
a rise in overall price level.

7. •Pricing power inflation
occurs when the
business houses and
industries decide to
increase the price of
respective goods and
services to increase
their profit margins.
•It does not occur at the
time of financial crises
and economic
depression.
•If a company doesn’t

8. An unusual type of
inflation in which
some sectors face
huge inflation while
on the other hand few
other sectors face no
inflation or even
deflation i.e. opposite
of inflation.

9. •Annualized inflation rate
in India is 8.9% as per the
Indian Ministry of Statics
and Programme
Implementation.
•Quoted as changes in
Wholesale Price Index(WPI)
for all commodities.
•India uses changes in WPI to
measure rate of inflation,
unlike other developing
countries who uses changes
in Consumer Price Index

10. There are mainly three groups:
Primary
Articles
(20.1% of
total
weight)
Transpo
rt
equipme
nt
&parts
(5.2%)
Machiner
y&
machine
tools
(8.9%)
Fuel and
Power
(14.9% of the
total
weight)
Chemica
l&
chemica
l
product
s
Manufact
ured
products
(65% of
total
weight)
Basic
metal
alloys
and metal
products
(10.8%)
Texti
les
(7.3%)

11. •
Inflation in India is calculated as per Wholesale
Price Index.
•
A set of 435 commodities and their price changes
are used.
•
WPI is available at the end of every
week(generally saturdays), for a period of one
year.
•
WPI is calculated on a base year and WPI for the
base year is assumed to be 100.

12. •When supply between supply and demand goes out
of control, consumers could change their buying
habits, forcing manufacturers to cut down
production.
•Price increase can worsen the poverty affecting
the low income household.
•Producers will not be able to control the cost
of raw material and labor and hence the price of
final product, which results in less profit or in
some cases no profit, forcing them out of business.
•Manufacturers will not have an incentive to

13. • Stop printing of excess money.
• Increase in credit policy rates.
• Don’t keep the cash in hand, invest it
somewhere since it loses its value constantly.
•Rising the prices of products which
automatically decreases the consumption of
consumers.
•Advertisement for minimum utilization
resources.
•General awareness of people about the effects

14. • India is witnessing a double digit food
inflation which had reached high of around
18% with prices of onions ,garlic and tomatoes
skyrocketing.
•India is running the risk having an entire
generation of malnourished children who
are otherwise considered the future of India.
•Inflationary pressure is forcing the
government to adopt measures which are
taking the steam out of Indian growth story.