Inflation PDF

Inflation Inflation means general rise in prices of most of the goods and services. Inflation means increase of money supply and decrease of value of money. Inflation is the rate of increase in prices over a given period of time. It is the decline of pu...

Inflation Inflation means general rise in prices of most of the goods and services. Inflation means increase of money supply and decrease of value of money. Inflation is the rate of increase in prices over a given period of time. It is the decline of purchasing power of a given currency over time. Mainly Inflation covered by two side of Economy– i. Factors effecting by demand: It is also known as demand pull inflation where increase in demand pulls the price level upward. a. Increase of money supply b. Increase of Income C. Increase in public expenditure by Govt. d. Expansion of private sectors. e. Black money- f. Deficit financing g. Increasing in import ii. Factors effecting by supply side It is also known as cost push inflation where shortage of supply pulls the price level upward. a. Decrease in money supply b. Decrease in poroduction C. Natioral calamites d. Artificial shortage of supply e. Increasing export ** f. Increasing of cost of production Advantage for - Creditor/Borrower Owner of Lands Producers Disadvantage For Debtor Exporters Demandfull Inflation: This Inflation mainly happend for demand and Supply side problem. Costpush Inflation: when price of raw meterials are increase than goods became costly. Structral Inflation: It is because of structod problem of our economy. [seasonal Inflations বলে] Reflation: Price level increases when the economy recovers from recession based on value of inflation. Disinflation: Reduction in the rate of inflation.A situation where inflation increases at a slower rate. It is the opposite of reflation. Disinflation is a good thing, especially in a growing economy. Deflation: Deflation is the general decline of the price level of goods and services.When it occurs, the value of currency grows over time. Thus, more goods and services can be purchased for the same amount of money. Bottleneck Inflation: When supply falls dustically and demand remains same. This inflation takes place when the supply falls drastically and the demand remains at the same level. Such situations arise due to supply-side accidents, hazards or mismanagement which is also known as 'structural inflation'. This could be put in the 'demand-pull inflation' category.(R.singh) skew Inflation: when price of few goods are increasing than its called skew Inflation. (Neither Negative nor positive) Stag Inflation: Inflation of unemployment will be stagned and economic growth will be low. Stagflation is an economic event in which the inflation rate is high, economic growth rate slows, and unemployment remains steadily high. Open Inflation: When Govt does not take any steps to prevent inflation than it is called open Inflation. Headline Inflation: Total inflation with in economy is headline inflation.[overall inflation of an economy ] Headline inflation – food & fuel inflation =Core inflation Core Inflation: Total inflation - (Food + Fuel / Energy) The core inflation rate is the price change of goods and services minus food and energy.Food and energy products are too volatile to be included. Earlier, in India WPI (Wholesale Price Index) was considered for headline inflation. Now, India has migrated to CPI (Consumer Price Index) as the measure of headline inflation. #In india inflation is measured by WPI and CPI. # Recession: কোনো দেশে Economics growth কমাকে বলে. #The effect of inflation on tax revenue results in a Situation know as Fiscaldrag. #Percentage of inflation tergeted by Indian Govt around 4 (+/-)2 (2-6%). Producer Price Index (India) → The Producer Price Index or PPI is an index that measures the average price change of both Goods & Services,received by the producerexcluding the indirect taxes. In India, inflation is primarily measured by two main indices — WPI (Wholesale Price Index) and CPI (Consumer Price Index), which measure wholesale and retail-level price changes, respectively.  WPI CPI Full Form: Wholesale Price Index Fullform: Consumer Price Index Base year: 2011-2012 Base year: 2011-2012 Index was publised by Advisor( Ministry of Index was publised by NSO (National commerce and industy) Statistical officel cso). Ministy of statistics and programme inplementation and Labour Bureau. Total No of items 697. Total no of items. a. Urban-460 Weights of items----- b. Rural- 448 A) Primary articles: 22.62% B) Fuel and Power: 13.15% Weights of Items(8 category)--- C) Manufactured Goods: 64.23% Top 3---- A) Food and beverages(45.75%), B) Housing(9.77%), C)fuel and light(9.49%) WPI published report weekly CPI published report monthly basis. (14th basis.(presently monthly basis) of every month) Maximam weightage was given to Maximum weight is given to food articles manufacturing goods. WPI does not include service sector. CPI include both service and goods. Goods only. WPI was first published in the year 1942 in India government in 1922 appointed Sumitra Chowdhury committee to review the wholesale price index mythology who is suggest changes in bas yaar weightage of commodities and number of commodities. There are around 697 items in the WPI basket and their weights are assigned based on the "Domestic production of that item plus Net imports" which is also called "Net traded value". And this weight is kept constant till we revise the base year and start a new series. The present base year for WPI is 2011-12. Types of CPI → There are four CPI in India for four different set of workers: 1) CPI (Industrial Workers) 2)CPI (Urban Non- Manual Employees)* [ CPI--U/R/C] 3) CPI (Agricultural Labour) 4) CPI (Rural Worker) Of these, the first three are compiled by the Labour Bureau in the Ministry of Labour and Employment. Fourth is compiled by the NSO in the Ministry of Statistics and Programme Implementation. The Monetary Policy Committee (MPC) uses CPI data to control inflation. In April 2014, the Reserve Bank of India (RBI) had adopted the CPI as its key measure of inflation. *From February 2011 the CPI (UNME) released by CSO is replaced as CPI (urban), CPI (rural) and CPI (combined). Consumer Food Price Index (CFPI): CFPI measures the change in retail prices of food items consumed by the population. It is also released monthly for rural, urban and combined (all India basis). Types of inflation based on Rate of Inflation:- i. Creeping Inflation: when inflation rate is around 1-⅘%. The word creep refers to a slow pace of movement. ii)Trolling Inflation: when inflation rate is around 5-10%. iii). Gallopin Inflation: when inflation rate is around 10-20% /50%. It is also known as double digit inflation. iv. Runway Inflation /Hyper Inflation: Inflation rate will be more than 100%/50% Inflation Tax : The inflation tax is a penalty on the cash you hold as the rate of inflation rises. Inflationary gap:An inflationary gap measures the difference between the current level of real GDP and the GDP that would exist if an economy was operating at full employment. DEFLATIONARY GAP The shortfall in total spending of the government (i.e., fiscal surplus) over the national income creates deflationary gap in the economy. This is a situation of producing more than the demand and bly-side the economy usually heads for a general slowdown in the level of demand. This is also known as the output gap. PHILLIPS CURVE It is a graphic curve which advocates a relationship between inflation and unemployment in an - economy. The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957' (published in Economica in 1958), Inflation Target: The Central Government, in consultation with the RBI, determines the inflation target in terms of the Consumer Price Index (CPI), once in five years and notifies it in the Official Gazette. In May 2016, the RBI Act, 1934 was amended to provide a statutory basis for the implementation of the flexible inflation targeting framework. The Government has notified in the Official Gazette 4% inflation as the target with the upper tolerance limit of 6% and the lower tolerance limit of 2%.