INFLATION
INDIA PHILIPPINES
Annual consumer price inflation
in India increased to 7.61
percent in October of 2020 from
a downwardly revised 7.27
percent in September, above
market expectations of 7.3
percent.
Effects/ Results of Inflation
on Indian Economy
Persistent inflation in an
economy can have some very
adverse effects. Many problems
currently plaguing our economy
are results of inflation in our
economy. Rapid inflation can
disrupt our entire economy can
cause a financial crisis in the
country. Let us take a look at
some of the adverse effects that
are results of inflation in the
Indian Economy.
BALANCE OF PAYMENTS
India’s current account deficit is
around 17 billion dollars for the
last quarter of 2018. This is
roughly 2.5% of our GDP. This
is because for years now India’s
imports are mismatched with
their exports. With increasing
prices of goods in India, exports
have seen a further decline. And
the imports have actually
become cheaper. So the current
account deficit will continue to
be a problem for our economy.
INDUSTRIAL SECTOR
UNITED STATES
The country’s headline inflation
accelerated to 2.5 percent in
October 2020, from 2.3 percent
in September 2020. In October
2019, inflation was posted at 0.8
percent.
Effects/ Results of Inflation
on Philippine Economy
The Philippines' economy is
considered as one of the most
dynamic economies in East Asia
and the Pacific. In 2019, GDP
growth rate decreased but
remained high, reaching 5.9%
according to IMF estimates.
This slowdown is mainly due to
a deceleration in investment
growth and a weak external
environment. According to the
updated IMF forecasts from
14th April 2020, due to the
outbreak of the COVID-19,
GDP growth is expected to fall
to 0.6% in 2020 and pick up to
7.6% in 2021, subject to the
post-pandemic global economic
recovery. Key economic drivers
include solid fundamentals, a
competitive workforce, a stable
job market, steady remittances,
and investment in the
construction sector (World
Bank).
LABOR-MARKET
ADJUSTMENTS
The annual inflation rate for the
United States is 1.2% for the 12
months ended October 2020 as
compared to 1.4% previously,
according to U.S. Labor
Department data published on
November 12, 2020.
Effects/ Results of Inflation
on Philippine Economy
Despite facing challenges at the
domestic level along with a
rapidly transforming global
landscape, the U.S. economy is
still the largest and most
important in the world. The U.S.
economy represents about 20%
of total global output, and is still
larger than that of China.
Moreover, according to the IMF,
the U.S. has the sixth highest per
capita GDP (PPP). The U.S.
economy features a highly-
developed and technologically-
advanced services sector, which
accounts for about 80% of its
output. The U.S. economy is
dominated by services-oriented
companies in areas such as
technology, financial services,
healthcare and retail.
ERODES PURCHASING
POWER
Inflation is a decrease in the
purchasing power of currency
due to a rise in prices across the
economy. Within living
memory, the average price of a
India has seen a stagnation in     Nominal wages are slow to cup of coffee was a dime. Today
the industrial growth in the last adjust downwards. This can lead the price is closer to two dollars.
few years. The industrial growth to prolonged disequilibrium and
for the month of February 2019 high unemployment in the labor Such a price change could
year-on-year was merely 0.1%. market. Since inflation allows conceivably have resulted from
This is because inflation has real wages to fall even if a surge in the popularity of
adversely affected the industrial nominal wages are kept coffee, or price pooling by a
sector as well. constant, moderate inflation cartel of coffee producers, or
enables labor markets to reach years of devastating
The rising prices mean that the equilibrium faster. drought/flooding/conflict in a
factors of production like labor key coffee-growing region.
and raw materials have also ROOM TO MANEUVER
become expensive. The profit     The primary tools for ENCOURAGES SPENDING,
margins of the companies are controlling the money supply INVESTING
decreasing. And after an extent, are the ability to set the discount A predictable response to
the companies pass on the rate, the rate at which banks can declining purchasing power is to
burden of these additional borrow from the central bank, buy now, rather than later. Cash
expenses to the final consumer. and open market operations, will only lose value, so it is
And the entire economy suffers. which are the central bank's better to get your shopping out
interventions into the bonds of the way and stock up on
FINAL CONSUMER market with the aim of affecting things that probably won't lose
The person most affected by the nominal interest rate. value. 
rising inflation is the final
consumer of goods. The prices COST-PUSH INFLATION  REDUCES
of goods and services are     High inflation can prompt UNEMPLOYMENT
constantly rising. But the employees to demand rapid There is some evidence that
salaries and income of consumer wage increases, to keep up with inflation can push
do not rise proportionately, there consumer prices. In the cost- down unemployment. Wages
is a lag. So the goods and push theory of inflation, rising tend to be sticky, meaning that
services become less affordable wages in turn can help fuel they change slowly in response
to these final consumers. And inflation. In the case of to economic shifts. John
the population in the lowest collective bargaining, wage Maynard Keynes theorized that
income group are the most growth will be set as a function the Great Depression resulted in
affected. They cannot even of inflationary expectations, part from wages' downward
afford basic necessities. which will be higher when stickiness. Unemployment
inflation is high.  surged because workers resisted
Actions/Solutions made by pay cuts and were fired instead
the country (the ultimate pay cut). 
Soaring inflation in India is a
grave source of concern, given
the differences between rich and Actions/Solutions made by Actions/Solutions made by
poor. This paper will focus on the country the country
role of the Reserve Bank of The Palace considers the easing The U.S. essentially has two
India and the way ahead. of the August 2020 inflation to weapons in its arsenal to help
Increased prices are the result of 2.4% a positive development. guide the economy toward a
excess money relative to the We credit this to the gradual re- path of stable growth without
goods and services produced. opening of the economy, where excessive inflation: monetary
we see a decrease in food prices. policy and fiscal policy. Fiscal
The Reserve Bank of India has policy comes from the
various roles, amongst which Keeping the prices of basic government in the form of
“Price Control” is one of the commodities stable in this taxation and federal budgeting
most important. Reserve Bank period of global health crisis and policies. While fiscal policy can
of India is the authority to economic uncertainty remains be very effective in specific
control inflation through our topmost priority. This is in cases to spur growth in the
monetary policies which it does line with the vow of President economy,
by increasing bank rates, repo Rodrigo Roa Duterte that no
rates, cash reserve ratio, buying Filipino gets hungry amid theMost market watchers look to
dollars, regulating money supply COVID-19 pandemic. monetary policy to do most of
and availability of credit. the heavy lifting in keeping the
We will therefore continue to economy in a stable growth
These measures reduce the monitor prices of basic goods pattern. In the United States, the
money supply in the market thus and make sure there is Federal Reserve Board's Open
reducing demand which further unhampered flow in the Market Committee (FOMC) is
decreases the prices. But the movement and delivery of charged with implementing
ineffectiveness of these tools is essential commodities to other monetary policy, which is
hampering the growth rate and places, notwithstanding the defined as any action to decrease
investment patterns. localized actions imposed in or increase the amount of money
some areas. that is circulating in the
economy.
We are also encouraged by data
showing the agriculture sector’s Whittled down, that means the
resilience, and proving the Federal Reserve (FED) can
effectiveness of President make money easier or harder to
Duterte’s policies and programs come by, thereby encouraging
for farmers and fisherfolks. We spending to spur the economy
will sustain these programs to and constricting access to capital
boost agricultural production in when growth rates are reaching
the long-term. what is deemed unsustainable
levels.