Group members

Gaurav Kakad-207 Nishant Gadhok- 203 Atharva Oswal- 219 Sulabh Gugnani- 204

Inflation
Definition

Inflation can be defined as a rise in the general price level of goods and services and therefore a fall in the value of money. That means the purchasing power of your
money decreases.

Effects of inflation

Positive Effect
Benefit the cartels formed by the companies Benefit borrowers Farmers may Gain in Inflation

Negative Effect
Increased risk - Higher uncertainties

Fixed income recipients will be hurt

Lowers national saving

Rising prices of imports

Income diffusion effect Illusions of making profits

Food inflation
Food price inflation is one of the most critical economic problems in the country today. The high food price inflation is having a significant impact on the Indian consumer. The chart below gives the way the Indians spend.

Facts
Food inflation accelerated to 9.8% for the week ended August 13 from 9.03% Food inflation has increased again from 7.33% in mid-july. Food inflation in INDIA has happened due to rise in the prices of fruits, onion, vegetables, egg, fish, rice and potato.

Facts Contd
Percentage of inflation for the corresponding week in the preceding year was 14.56 percent. The 52-week average inflation for the week ended August 13 was 11.61 percent, according to data released by the Ministry of Commerce & Industry. Annual percentage of inflation for "Non-Food Articles" increased to 17.80 percent from 16.07 in the preceding week. The 52-week average inflation for the week ended August 13 was 23.64 percent

Food inflation graph from jan13aug25-2011

18 16 14 12 10 8 week1 week2 week3

6
4 2 0 jan feb march april may june july aug

week4

Food inflation
The wholesale food prices in India touched a high with food inflation coming at 9.8% for the week ended August 25, 2011. The prices of all key agricultural commodities have risen sharply. Significant price increase has been observed in commodities like arhar dal, sugar etc.

Key Reasons
The key reason cited for the spiraling food price inflation is the bad monsoon in India India loses INR 58,000 crore worth of agricultural food items due to lack of post harvesting infrastructure such as cold chains, transportation, and storage facilities. The Indian farmers are largely dependent on the fourmonth monsoon season during which 80% of the year's total rainfall takes place. The reason is that 60% of the country's total cropped area is not irrigated.

Ways to ease food inflation

Crackdown on hoarders and black marketers could help prevent prices from rising further. This step might not significantly reduce prices but will ensure that prices don't escalate further. The Government should allow the private sector to import and store the primary agricultural commodities at zero import duty. This will help east the prices to a large extent. The Government also needs to unload the wheat inventory it has in its storage locations. This will have an immediate impact on the prices.

Impact of Food Inflation on Indian Consumers

The high food price inflation is having a significant impact on the Indian consumer in general and the Indian middle class in particular As evident from the chart above, nearly 43% of the personal disposable income goes into food products. Unfortunately, this is the segment which is experiencing highest inflation. A high food inflation ensures that consumers have to cut back on their spending (on non-necessary items). This in turn will impact the consumption part of the GDP growth.

Conclusion
Considering the above scenario it is very important for the Government to try and control the inflation or at least try and ensure that these circumstances do not arise again in the future. As mentioned above, there are several ways of curbing food inflation. It is only that the Government needs to be more proactive rather then being reactive.

Thank you!!