Inflation : Trends & Direction

Submitted By:
Mrityunjay Kumar Pandey (15202030)
Mohit
Jaiswal
(15202029)
Gurpreet
Rait
(15202018)
Madhusmita
Nayak
(15202025)
Mandakini
(15202026)
Manisha
(15202027)
Mohini Khandelwal (15202028)

As we see Inflation is basically defined as a sustained increase in the general

level of prices for goods and services. It is measured as an annual percentage
increase.
INDIA Inflation rates are as follows :
2011-- 8.90
2012-- 9.30
2013-- 10.9
2014-- 6.4
The Varrious Causes Of Inflation are:
1) Increase In Demand:-

A) Increase in public expenditure-When govt. increases its public

expenditure e.g.- new jobs,development,factories etc. then purchasing power
of people increases.So increase in demand for goods and services happen.
B) Increase in private expenditure- When business conditions are
favorable,many private business partners venture into new business.This
leads to rise in prices of factors of production like rent, wages.So money
income of these factors of production increases and so does the expenditure
on consumption of goods.This rise gives a push to demand as supply of
goods and services cannot be increased overnight.So excess demand leads
to inflation.
C) Increase in consumer spending- Easy credit facilities help the
consumers to spend more.
D) Reduction in taxation-If govt reduces direct taxes,people need to pay
less as tax.So disposable income increases and thus demand increases.
E) Repayment of past internal debts-When govt pays its past internal
debts to the public it increases the purchasing power of the consumers.
F) Increase in population-Population increase is directly proportional to
demand for goods and services.
G) Increase in exports-Exports create shortage of goods for home
consumption.Thus increase in export reduces the goods for domestic
consumption and gives rise to inflationary pressure.
H) Deficit Financing-A condition where you spend more than you earn.This
leads to increase in supply of money and raises demand for goods and
services.

2) Decrease in Supply:A) Industrial Disputes- Unsatisfied workers go on strike,if they feel that
their employers dont fulfill their demands.This leads to reduction in supply
and thus price rises.
B) Shortage of factors of production- This problem mainly occurs in full
employment economy.Supply of goods and services decrease if factors of
production are in shortage.
C) Natural calamities- Floods,droughts,adversely affect the supply of
agricultural products and raw materials.Such shortage reduces the production
and raises cost of production.
D) Hoarding of goods-Traders purposely hold the essential goods with
them and dont sell it in the market to create a situation of artificial scarcity of
goods and pushes inflation upwards.Also individual consumers hoard
essential commodities to avoid higher prices in future.