Inflation

A Comparative Study

Introduction
Increase

in the general level of prices in an economy that is sustained over a period of time is called inflation Inflation is measured for a basket of goods and services.

Impact of Inflation

Distribution of income and wealth The rich get richer and poor get poorer Loss to fixed income earners Gains to profit earners Gains to the debtors Loss to the creditor Loss to wage earners Government Economic growth Employment

Why is Inflation Bad..?

Losses to savers: Inflation erodes the purchasing power of the amount saved. Losses to people with fixed incomes: People with fixed incomes (such as the interest on a fixed deposit, or a fixed salary) find that the purchasing power of their income diminishes over time. Losses to taxpayers: If your salary increases in line with inflation, and no adjustments are made to income tax, you will shift into a higher tax bracket and end up paying a larger share of your salary to the taxman.

Current Scenario Aug-2012

Inflation below the 7% benchmark Figures not appeasing because core inflation has still rose in July to 5.44 per cent from 4.9 per cent in June The pull back came after petrol and vegetable prices fell by nearly 4 per cent and 6 per cent resp while Manufacturing rose to 5.58% from 5%. Persisting Treats

Drought Oil Weak Rupee

P Chidambaram, has promised to respond by unplugging supply bottlenecks which contribute to inflationary pressures and arresting a fiscal deficit that puts upward pressure on interest rates. Tough for RBI to try bolster growth with rate cut as credit worthiness of country is deteriorating. RBI is taking steps for flow of capital with focus on creation of non-debt capital, "We are trying to improve capital flows through FDI and NRI deposits."