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INFLATION
IN NEWS
IN NEWS
IN NEWS
IN NEWS
RELEVANCE – RBI GRADE B
RELEVANCE – NABARD GRADE A
RELEVANCE – SEBI GRADE A
EXPECTED QUESTION…..

Write a short note on inflation. Also, discuss the impacts of

persistent high inflation on the economy.

600 WORDS – 15 MARKS

LET’S BREAK IT DOWN…..
Write a short note on inflation. Also, discuss the impacts of
persistent high inflation on the economy.
600 WORDS – 15 MARKS

1. INTRODUCTION: Inflation – definition,

overviews
2. BODY PART-1: Causes
3. BODY PART-2: Measurement
4. BODY PART-3: Impacts on economy
5. CONCLUSION: Govt. steps + Summary
LET’S BREAK IT DOWN…..
Write a short note on inflation. Also, discuss the impacts of
persistent high inflation on the economy.
600 WORDS – 15 MARKS

1. INTRODUCTION: Inflation – definition,

overview
2. BODY PART-1: Causes
3. BODY PART-2: Measurement
4. BODY PART-3: Impacts on economy
5. CONCLUSION: Govt. steps + Summary
1. INTRODUCTION- INFLATION
❑ Inflation is the sustained increase in the general price
level of goods and services in an economy over a period
of time, typically measured annually.
❑ It means that, on average, the prices of goods and
services are rising, and each unit of currency is able to
buy less than it could in the past.
❑ Inflation can have both positive and negative effects on
an economy.
❑ Moderate inflation is generally considered normal and
can be a sign of a healthy economy, as it encourages
spending and investment.
❑ However, high or hyperinflation can erode the value of
money, disrupt economic stability, and harm consumers'
purchasing power.
LET’S DELVE DEEPER!
LET’S BREAK IT DOWN…..
Write a short note on inflation. Also, discuss the impacts of
persistent high inflation on the economy.
600 WORDS – 15 MARKS

1. INTRODUCTION: Inflation – definition,

overviews
2. BODY PART-1: Causes
3. BODY PART-2: Measurement
4. BODY PART-3: Impacts on economy
5. CONCLUSION: Govt. steps + Summary
2. BODY PART-1 CAUSES
occurs when the demand for goods and services exceeds their supply.
consumers and businesses are willing to pay higher prices for products, it
There are various causes drives up overall prices.
of inflation, including:
driven by an increase in production costs, such as rising wages or the cost
1.Demand-Pull Inflation of raw materials.
2.Cost-Push Inflation businesses face higher costs - pass them on to consumers through higher
prices.
LET’S BREAK IT DOWN…..
Write a short note on inflation. Also, discuss the impacts of
persistent high inflation on the economy.
600 WORDS – 15 MARKS

1. INTRODUCTION: Inflation – definition,

overviews
2. BODY PART-1: Causes
3. BODY PART-2: Measurement
4. BODY PART-3: Impacts on economy
5. CONCLUSION: Govt. steps + Summary
2. BODY PART-2 MEASUREMENT
Inflation can be measured
at three levels – producer,
wholesaler and retailer
(consumer)
RBI used Wholesale Price Inflation for most of its policy decisions before
2014 -WPI does not include services, and it neither reflects the
bottlenecks between producer and wholesaler nor between wholesaler
and retailer (consumer).
Hence from 2014, as part of the reforms initiated by RBI Governor
Raghu Ram Rajan, RBI shifted to Consumer Price Index for policy
decisions.

• In India, the Consumer Price Index (CPI) inflation rate has been rising
steadily after the COVID-19 pandemic and subsequent Russia-Ukraine
war which led to rise in prices of crude oil and shortage of essential
commodities.
• In June 2023, the CPI inflation rate was 7.01%, the highest it has been
since May 2014.
• The high inflation rate is being driven by a number of factors, including
rising food prices, fuel prices, and transportation costs.
LET’S BREAK IT DOWN…..
Write a short note on inflation. Also, discuss the impacts of
persistent high inflation on the economy.
600 WORDS – 15 MARKS

1. INTRODUCTION: Inflation – definition,

overviews
2. BODY PART-1: Causes
3. BODY PART-2: Measurement
4. BODY PART-3: Impacts on economy
5. CONCLUSION: Govt. steps + Summary
3. BODY PART-2 CONCERNS

• Lower real earnings

• formidable challenge of escalating production costs
• exports may become less attractive on the global market
1.On businesses
2.On markets
3.On consumers
• stock prices are undervalued, and the value of gold increases
• Sustained high inflation engenders an environment of uncertainty,
rendering future price and yield projections intricate for investors
• deter long-term investments, stymieing economic growth prospects
• potentially deters foreign investors, thereby influencing the trajectory of
foreign direct investment
3. BODY PART-2 CONCERNS
• erosion of purchasing power
• consumers gravitate towards essential goods and services as
discretionary spending becomes constrained, affecting industries
1.On businesses catering to non-essential items
2.On markets • creditors may lose out, as the value of the money they receive from
3.On consumers debtors decreases.
• debtors could benefit by repaying loans with money that is worth less
than when they borrowed it.
• trigger a cycle of rising wages and prices
• Reduced savings: The Reserve Bank of India's annual report highlights
that elevated inflation negatively affects real interest rates,
disincentivizing savings.
LET’S BREAK IT DOWN…..
Write a short note on inflation. Also, discuss the impacts of
persistent high inflation on the economy.
600 WORDS – 15 MARKS

1. INTRODUCTION: Inflation – definition,

overviews
2. BODY PART-1: Explanation (brief)
3. BODY PART-2: Impacts on economy
4. CONCLUSION: Govt. steps + Summary
4. CONCLUSION

• Both government and central bank (Reserve Bank) try

to tackle inflation with their policies which are known as
Fiscal and Monetary Policies respectively.
• The central government is empowered to constitute a
Monetary Policy Committee (MPC) which shall determine
the Policy Rate required to achieve the inflation target.
• High inflation in one country can lead to a decrease in
its international competitiveness. Hence, coordinated
measures are required to achieve real output and real
growth.
WRITE YOUR ANSWERS IN THE COMMENTS SECTION

Write a short note on inflation. Also,

discuss the impacts of persistent high
inflation on the economy.
FREE
600 WORDS – 15 MARKS EVALUATION!!!