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INFLATION

INFLATION. CONCEPTS . INFLATION EFFECT ON ZIMBABWE. Decreasing value of Money. Worst effect due to Inflation. TYPES OF INFLATION. Hyperinflation: Is the most extreme inflation phenomenon, with yearly price increases of three-digits percentage points and an explosive acceleration.

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INFLATION

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  1. INFLATION

  2. CONCEPTS

  3. INFLATION EFFECT ON ZIMBABWE Decreasing value of Money Worst effect due to Inflation

  4. TYPESOF INFLATION Hyperinflation: Is the most extreme inflation phenomenon, with yearly price increases of three-digits percentage points and an explosive acceleration. Extremely high inflation It could range anywhere between 50% and 100%. High inflation is a situation of price increase of, say, 30%-50% a year. Both kinds can be stable or dangerously accelerate to enter in an hyperinflation condition.

  5. Contd. Moderate inflation It can be differently defined around the world, given the different inflation histories. As an indication only, one could consider an inflation as moderate when it ranges from 5% to 25-30%. For some countries, the higher part of this range is already "high inflation". Low inflation- It can be characterized from 1-2% to 5%. Around zero there is no inflation (price stability). Below zero, a country faces deflation

  6. RECENT INFLATION DATA Data source: www.rbi.gov.in

  7. METHODS OF CALCULATION

  8. YEAR WISE WPI INDIA Data source: www.mospi.nic.in

  9. CAUSE OF INFLATION IN INDIA • Demand-pull inflationrefers to the idea that the economy actual demands more goods and services than available. This shortage of supply enables sellers to raise prices until an equilibrium is put in place between supply and demand. • Thecost-push theory, also known as "supply shock inflation", suggests that shortages or shocks to the available supply of a certain good or product will cause a ripple effect through the economy by raising prices through the supply chain from the producer to the consumer. You can readily see this in oil markets. When OPEC reduces oil supply, prices are artificially driven up and result in higher prices at the pump.

  10. Contd.. • Money supplyplays a large role in inflationary pressure as well. Low interest rates correspond with a high levels of money supply and allow for more investment in big business and new ideas which eventually leads to unsustainable levels of inflation as cheap money is available.

  11. EFFECTS OF INFLATION BENEFITS LOSES • DEBTORS • ENTREPRENEURS • INVESTORS • FARMERS • UPPER INCOME GROUPS • CREDITORS • FIXED INCOME GROUPS • CONSUMERS • MIDDLE AND LOWER INCOME GROUPS

  12. EFFECT Contd… • As inflation inched towards 12% while the industrial growth nosedived to 3.8 per cent.

  13. CRUDE OIL PRICES AND INFLATION • Crude oil inflation

  14. INDIA VS CHINA

  15. CURRENT SCENARIO • Indeed, by July 2008, the key Indian Inflation Rate, the Wholesale Price Index, has risen above 11%, its highest rate in 13 years. • This is more than 6% higher than last year, almost three times the RBI’s target of 4.1%. • Hardening of inflation necessitated continuation and reinforcement of monetary policy actions to dampen excessive demand pressures, while providing a conducive environment for continuation of the growth momentum.

  16. REMEDIES • Cash Reserve Ratio increased. • Control over Price of Petrol and Diesel. • Decreased import tariff. • Tax increase • Cement price control. • Import duty on non-agricultural products was brought down to 10% from 12.5% • Allowed appreciating the Rupee.

  17. TACKLING FOOD PRICE INFLATION • The demand-supply mismatches need to be addressed , • Raising crop yields through the use of modern technology, improved irrigation facilities ,provision of market-based incentive systems for the farmers would help

  18. TACKLING CRUDE OIL ISSUE • limiting the adverse impact of higher international oil prices would require adopting strategies of greater decontrol of petroleum product pricing with targeted subsidies, rationalization of applicable taxes and duties to appropriate levels

  19. Inflation fell sharply to 8.98% in Nov 1st week due to: Fall in prices of fuel,mineral oil as well as manufactured products like steel. Current scenario

  20. Thank you……

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