TREND OF INFLATION FROM THE YEAR 1991

TILL DATE.

Submitted by : Bharat Sharma(11)Prachi Agrawal(55)

Pulkit Tiwari(64) Ritesh Sood(69)

Submitted to :Prof. Monika Dhinge

inflation Inflation means a general and continual increase in

prices level in the economy, all the goods and services. India has been affected by this problem since 1950s It came drastically forward with its ill effects post

Liberalization i.e. since 1991. Ab initio there was fiscal deficit in 1991 Marked by deficits in Government finances and

devaluation of the Rupee, A whopping inflation of 13.66 per cent took its toll on

the Indian economy.

Methods to Measure Inflation.

• Consumer Price Index (CPI)

• Wholesale Price Index (WPI)

Consumer Price Index (CPI)

• It is the measure of the changes in the price level of predetermined consumer goods and services

• two data are required for CPI1) Price Data 2) Weighting Data

CPI is very widely used to identify whether there is inflation or deflation.

Wholesale price index (WPI)

• WPI is related to the change in prices of the goods and services at wholesale level even before entering into the retail level.

• The inflation rate figure is released in every 10 days which regulates stock and fixed price markets

• WPI indirectly determines supply and demand because it continuously monitors the change in the price levels

Current CPI/WPI – Last Calculated CPI/WPI

Last Calculated CPI/WPI

InflationRate

=

150 - 140 140

InflationRate = 100

100

= 7.12%

Causes/Reasons of Inflation In 1990s

• The oil prices in the international market increased.

• In 1991 imports were exceeding exports ie trade deficit rose to 15600 Cores which led India to borrow pecuniary resources from International Monetary Fund(IMF).

• Prices of oil also doubled when Iraq invaded Kuwait , which leads to rise in the oil prices in the international market.

In 20th Century• In the beginning of the period during 2002-03 ,India

witnessed uptrend in inflation as the prices of the oil was increased doubly during that era(period).

• Due to drought conditions there was ill effect on agricultural products which led to the increase in the prices of edible oils and oil seeds

• Inflation was 3.3 % points up during the fiscal 2002-03and as per the RBI report unlike preceding years ,this period inflation was dominated by non-food items.

• The official expenditure on defense also gave up a sudden rose to four times from Rs 16,347 cores to Rs 65,000 cores in the budget of 2002-03

Cont…

• Between the period 2005-2010 inflation showed the real hike the wholesale price of commodities went up to 38%. Few of the food items showed a drastic increment in the prices like milk which showed 101% which is the major cause of concern .

• In 2009-10 their was drought in the country due which the prices of all the household, agricultural goods were high causing food inflation

• In 2010-11 due to an increased demand of fruits and vegetables , and also due to increase in the commodity prices eg crude oil high inflation was caused.

OTHER FACTORS

• Growth in population • Growth in private expenditure • Increase in Export• Money reduction in direct taxes

Impact On Indian Economy

• Indicator of liquidity.

• Deficit financing.

• Trade imbalance.

• Reduction of subsidies on agricultural products.

• Higher interest rates of bank.

• Demand of increment in wages by trade union.

Co relation

• Relationship between US Dollar and Crude oil.

• Relationship between US Dollar and Gold.

Conclusion

• Gold – Crude oil Positive Relation

• Us dollar – Gold Negative Relation

• Us dollar- crude oil Negative Relation