Inflation

By
Dr. Gurendra Nath Bhardwaj
IILM GSM
gurendrabhardwaj@gmail.com
Gurendra.bhardwaj@iilmgsm.ac.in
 Inflation

“Inflation exists when money income is

expanding more than proportion to income
earning activities.”

A.C. Pigou
• So the basic cause of inflation is excess demand
of goods & services in relation to available
supply.
• This excess demand of goods & services creates
demand of bank credit.
• The bank credit is influenced by several money
market instruments, like bank rate, repo &
reverse repo etc.
Methods of Inflation Measurement
• Three are following three methods of inflation
measurement
– Wholesale Price Index
• Prices taken from wholesale market.
– Consumer Price Index
• Retail prices of product are taken
– CPI for Agricultural Workers (CPI-AL)
– CPI for Rural Laborers (CPI- RL)
– CPI for Urban Industrial Workers (CPI-IW)
– CPI for Non- Manual Employees (CPI-UNME)
– Producer’s Price Index
• Prices changes from producer’s prospective
 Composition of Products in WPI in India

Group Activities No. of Commodities Weightage in %

Primary Articles 98 22.0

(Food, Non-food and Minerals )

Energy Articles 19 14.2

(Fuel, Power and Lubricants)

Manufactured Products 318 63.8

(Textiles, Machinery, Automobiles,
Electronics Items Etc. )
 Group Activities Previous Year Current Year

Primary Articles 14.85 15.77

(Food, Non-food and Minerals )

Energy Articles
(Fuel, Power and Lubricants)

Manufactured Products
(Textiles, Machinery, Automobiles,
Electronics Items Etc. )

WPI 8.43 8.23

 Types of Inflation
• Creeping Inflation
• Walking Inflation
• Running Inflation
• Hyper Inflation