Impact of inflation on india

Selamet Riyadi and Dita Ayu Pritami. The variables tested in this study consisted of financial literacy, consumptive behavior, and m-banking services as independent variables and savings management as the dependent variable. The population in this study consisted of Bachelor students of the Perbanas Institute of Economics and Business Jakarta, Indonesia, for the period until Determination of the research sample using random sampling method and obtain a sample of 98 respondents based on certain criteria.

Impact of inflation on india

Cost-Push inflation is also called supply-side inflation: In the seventies the supply shocks causing increase in marginal cost of production became more prominent in bringing about cost-push inflation.

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During the seventies, rise in prices of energy inputs hike in crude oil price made by OPEC resulting in rise in prices of petroleum products. The sharp rise in world oil prices during and again in produced significant supply shocks resulting in cost-push inflation.

The sharp rise in the price of oil leads to inflation in all oil-importing countries. The rise in oil price also occurred inand again in which resulted in rise in rate of inflation in oil-importing countries such as India.

In recent years, there have been a good deal of fluctuations in oil prices; in some periods they go up and in some others they go down. It may be noted that rise in oil prices not only gives rise to the increase in inflation, but also adversely affects the balance of payments raising current account deficit of the oil-importing countries such as India.

Cost-push inflation can also come about from increase in prices of other raw materials, especially farm products, in economies such as that of India where they are of greater importance.

In India when monsoon is not adequate or come very late or when weather conditions are Impact of inflation on india unfavourable, they reduce the supply of agricultural products and raise their prices. These farm products are raw materials for various industries such as sugar industry, other agro-processing industries, cotton textile industry, jute industry and as a result when prices of farm products rise they lead to rise in prices of goods which use the farm products as raw materials.

This is farm price shock causing cost-push inflation. Even rise in food prices or what is called food inflation is caused by supply-side factors such as inadequate rainfall or untimely monsoon and other adverse weather conditions and inadequate availability of fertilizers which lead to reduction in output of food grains is the example of cost-push or supply-side inflation.

These days currencies of most countries of the world are flexible, that is, determined by demand for and supply of a currency and they can appreciate or depreciate every month in terms of the US dollar. For example, when the Indian rupee depreciates, more rupees are required to buy one US dollar and therefore in terms of rupees, imports become costlier.

The Indians who import raw materials for industries such as petroleum products, coal, machines and other equipment, oilseeds, fertilizers, Indian consumers who imports gold, cars and other final products have to pay higher prices in terms of rupees when Indian rupee depreciates against US dollar.

This raises the cost of production of the producers who in turn raise the prices of final products produced by them.

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This inflation is the result of import price shock. Thus depreciation of rupee causes cost-push inflation. For example, in the month of Junethere was sharp depreciation of the Indian rupee.

The value of rupee fell by about 9. It has been suggested that the growth of powerful trade unions is responsible for the spread of inflation, especially in the industrialized countries. When trade unions push for higher wages which are not justifiable either on grounds of a prior rise in productivity or of cost of living they produce a cost-push effect.

The employers in a situation of high demand and employment are more agreeable to concede to these wage claims because they hope to pass on these rises in costs to the consumers in the form of hike in prices.

If this happens we have cost-push inflation. It may be noted that as a result of cost-push effect of higher wages, short-run aggregate supply curve of output shifts to the left and, given the aggregate demand curve, results in higher price of output.

Let us consider Figure 22A. Further suppose that Y0 is the full-capacity i. Suppose there is increase in oil prices which causes shifts in short-run aggregate supply curve to the left from SAS0 to SAS1.


As a result, price level rises to P1 but output falls from Y0 to Y1. With decline in output unemployment will also increase. Thus cost-push inflation not only causes rise in price level or inflation but also brings about fall in GDP level.

The rise in price level or inflation and simultaneously fall in GDP level is called stagflation. Thus cost-push inflation results in stagflation.United Arab Emirates consumer price inflation almost doubled in January after the introduction of a 5 per cent value-added tax, with a weak real estate market preventing inflation from increasing.

In economics, inflation is a sustained increase in the price level of goods and services in an economy over a period of time.

Impact of inflation on india

When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation reflects a reduction in the purchasing power per unit of money – a loss of real value in the medium of exchange and unit of account within the economy.

Inflation in India: Causes, Effects and Curve! Meaning of Inflation: By inflation we mean a general rise in prices. To be more correct, inflation is a persistent rise in the general price level rather than a .

Impact of inflation rate on the inflow of foreign direct investment in India | Knowledge Tank

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IJAR has got Impact factor of . The statistic shows the average inflation rate in Canada from to , with projections up until The inflation rate is calculated using the price increase of a defined product basket. Inflation Targeting: Lessons from the International Experience [Ben S.

Bernanke, Thomas Laubach, Frederic S. Mishkin, Adam S. Posen] on *FREE* shipping on qualifying offers. How should governments and central banks use monetary policy to create a healthy economy?


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