Inflation- economic status

1. Inflation

2. Inflation Poor Man’s Tax Economic Principles 1)Increase in the money supply 2)Decrease in the demand for money 3)Decrease in the aggregate supply of goods & services 4)Increase in the aggregate demand for goods & services

3. Accepted Theories 1)Demand-Pull Inflation • Too much money chasing too few goods • Demand of macro economy 2)Cost-Push Inflation • Cost pushed Up • Increase in factors of production

4. Causes 1)Pricing disparity of agricultural products between producers & consumers 2)Sky-rocketing prices 3)Unstable international crude oil price 4)Decrease in production of agricultural goods 5)Continuous exports

5. So how does India calculate Inflation 1)Wholesale Price Index • Average price level of goods in wholesale market • 435 Commodities 2)Consumer Price index • Weighted average prices of specified set of goods & services

6. How to arrest inflation 1)Measures taken • RBI gave top priority to price stability in its recently drafted monetary policy • RBI raised the Cash Reserve Ratio 2)Preventive measure • Value of Indian Rupee should be revalued • Increase production of agricultural goods • Reduce expenses

7. Threats • Slows down Indian GDP growth • Banking system may become worsen • Highest level of political & economic uncertainty • BRIC countries • Challenges may increase in global financial markets