Inflation in India

Meaning of Inflation

Inflation is nothing but a rise in the level of prices of goods and/or services in an economy over a certain period of time. When the price level rises, each unit of currency will buy fewer goods and services; consequently, leading to erosion in the purchasing power of money – it is a loss of real value in internal medium of exchange and a unit of account in the economy. The inflation rate is a chief measure of price inflation. It is the annualized percentage change in the general price index (normally Consumer Price Index) over time

Effects of Inflation

Inflation can have positive and/or negative effects on an economy. Negative effects of inflation could be a decrease in the real value of money and other monetary items over time; uncertainty about future inflation cal also discourage investment and savings, and high inflation might lead to shortages of goods if the consumers begin hoarding out of concern that the prices will increase in the future. Positive effects of inflation include a mitigation of economic recessions and debt relief by way of reducing the real level of debt.

Inflation in India 2009

India has been a cynosure for the past few years in the global economic scenario owing to its varying inflation patterns. In the fiscal year 2004-05 and 2007-2008, India experienced an average growth rate of more than 9%. However the global crunch pinched the economy so badly that the economy gave in to the adverse external shocks and some sectors experienced a slump. Inflation in India 2009 meaning the current rate of inflation in India stands at 11.49% Y-o-Y.

In 2008 industrial bodies, policy makers all were worried with the steadily-rising inflation. The middle of the year augmented the tension as majority of the population was wary about a double-digit inflation. However things changed within a few months. Inflation in India actually dropped below 1% during the 3rd week of March, 2009.

Inflation is such a situation where in too many people chase too few goods and/or too few services, that automatically leads to rise in the prices of the goods and services because of the high demand. On the other hand, when inflation drops below the desired mark, then too few people chase too many goods and services, leading to under pricing of goods and services.

The India inflation is measured by the Y-o-Y variation of the Wholesale Price Index. While the inflation as measured by WPI is currently at a very low level, the inflation measured by CPI that is Consumer Price Index is at higher levels of 9 to 10%.

Inflation in India statistics

• Inflation Control in India
• Impact of Inflation