This document discusses inflation trends and effects in India. It defines inflation as a sustained increase in the general price level. Inflation is measured through the wholesale price index (WPI) and consumer price index (CPI) in India. The WPI tracks weekly wholesale price movements across 435 commodities, while the CPI measures average consumer goods and service prices. Effects of inflation include an inefficient market, hoarding of commodities, discouraging investment and saving, and impacts on income, imports, and exports.

1. K J SOMAIYA COMPREHENSIVE COLLEGE OF EDUCATION, TRAINING &RESEARCHTOPIC : Inflation Trends & Its Effects.B.ED 2010 - 2011By Silvia FernandesSub- EconomicsRoll No - 15STD – 1X

2. INFLATION

3. Definition of Inflation.

4. Whole Price Index.

5. Consumer Price Index.

6. Trends in Inflation.

7. Impact of Inflation.

8. Effects of Inflation.CONTENT

9. What is Inflation?Inflation is defined as a sustained increase in the general price level of goods and services.As inflation rises, the value of currency goes down. Thus the purchasing power of the currency i.e. the good & services that can be bought in a unit of currency too goes down.

10. How is inflation measured?WPI ( wholesale Price Index ).

11. India – the only major country uses (1st published in 1902).What is WPI?

12. The WPI number is a weekly measure of wholesale price movement for the economy.

13. Indian Government constructed its present WPI way back in 1993-94 (1993-94 series replacing 1981-82 bases) by making a basket of 435 commodities.The 100 point index is subdivided into three groups.WPI Indian Example

14. 1. Primary Articles (98 items) – 22.02%. Food articles, non-food articles, minerals.2. Fuel, Power, Light and Lubricants (19 items) – 14.23%.3. Manufactured Products (318 items)-63.75%. Food products Beverages, tobacco & tobacco products Textiles……..etc.Major Groups

15. WPI Monthly Inflation(Rate of inflation Y-Y in %)

16. Consumer Price Index (CPI)A measure of the average price of consumer goods and services purchased by households. ( 1st published in 1970 ). CPI indicates the change in purchasing power of the consumer.CPI for Industrial workers (CPI-IW)

17. CPI for Agricultural Labourers/rural labourers (CPI-AL/RL)

18. CPI for urban Non-Manual Employees (CPI-UNME)

19. Published on monthly basis.India uses the WPI to calculate the inflation rate.

20. Most developed countries use the CPI to calculate inflation as this actually means the increase in price that a consumer will ultimately have to pay for.

21. Presently 145 countries practice CPI compared to 27 practicing WPI.Measure of Inflation

22. The current CPI is 218.71

23. Why is Inflation bad?Unanticipated inflation is bad because it makes the economy behave like a giant casino.

24. Gains & losses

25. Value of money

26. Resources

27. Unanticipated inflation leads to : Redistribution of income, borrower & lender Too much or too little lending or borrowing.

28. The Economic Impacts of InflationRedistribution of income and wealth among different groups.

29. Distortion in relative prices and outputs of different goods, or sometimes in output & employment for the economy as a whole.INFLATION RATES

30. Effects of InflationInefficient market.

31. Hoarding of Commodities

32. Discourages investment & saving

33. Higher income tax rates.

34. Increase imports and reduced exports.Examples : Increase in the price of wheat,rice,sugar, CNG etc.

35. EvaluationWhat do you mean by Inflation?How is Inflation calculated?What do you mean by CPI?How does India calculate the Inflation rate?What do you mean by WPI?What are the effects of Inflation?

36. ANSWERSInflation is general increase in price of goods and services.Inflation measured by WPI and CPI.It is the average price of consumer goods and services purchased by households.India uses the WPI to calculate the inflation rate.It is the weekly measure of wholesale price movement for the economy.Its effects are inefficient market, hoarding of Commodities, discourages investment & saving, higher income tax rates, increase imports and reduced exports.