and it’s impact

BY, KRISHNA

INTRODUCTION•FROM THE TIME OF INDEPENDENCE

1947 TO 1951 $1 WAS EQUAL TO RS 1.•TO INCREASE THE FDI INDIAN

GOVERNMENT DEVALUATE THE INDIAN RUPEE.

•THEY HAVE FIXED THAT EVERY FOREIGN COMPANIES SET UP THEIR BUSINESS IN INDIA SHOULD GIVE 30% OF THEIR PROFIT TO INDIAN GOVERNMENT.

DEMAND OF RUPEE• IF TASTE AND PREFERENCES

OF INDIAN CUSTOMERS ARE TURNING TOWARDS THE FOREIGN GOODS THEN THE DEMAND OF INDIAN RUPEE WILL BE DECLINING .ALL THE INCOME WILL BE FLOWING TOWARDS THE FOREIGN MARKET.

• DEVALUATION OF RUPEE• DEPRECIATION OF RUPEE

1$ = Rs 66.55

DECLINE IN VALUE OF RUPEE

MEANING •INFLATION IS THE SITUVATION WHERE

PRICE OF GOODS INCREASES GRADUALLY AND VALUE OF INTERNAL MONEY COMES DOWN.

TYPES OF INFLATIONSBASICALLY INFLATIONS WILL HAPPENS IN THE PERIOD OF

BOOM IN BUSINESS CYCLE .

• Walking inflation: When the price rise is moderate (is in the range of 3 to 7 %) and the annual inflation rate is of a single digit, it is called walking inflation. It is a warning signal for the government to control it before it turns into running inflation

• Creeping Inflation are the circumstance where the inflation of a nation increases gradually, but continually, over time. This tends to be a typically pattern for many nations. Although the increase is relatively small in the short-term, as it continues over time the effect will become greater and greater.

• According to Samuelson, when prices are rising at double or  triple digit rates of 20, 100 or 200 per cent a year, the situation is described as 'galloping' inflation.  

• RUNNING INFLATION: "It refers to the situation where the price level rises very fast. In case, price level doubles up every 3 years. It is, generally, succeeded by galloping inflation

MAJOR CAUSES OF INFLATION

• BUSINESS CYCLE

• GLOBALISATION

• OVER CREDIT OF NATIONS

• MORE IMPORT THAN

EXPORT

• DEMAND AND SUPPLY

GRAPHS

IMPACT OF INFLATION ON COMMON MAN

In India inflation is above 9% mark from last year . This has hit budgets of salaried middle class in the country. Now lets evaluate how Inflation has hit the common man.

• 1.Food and dairy products which are of daily use are rising above 12%. For a middle class person it constitutes about 30-40% of his monthly spends. Such an impact leave him very less money for other activities.

• 2.Impact on Emi With inflation being on high almost all banks have increased

rates by 1-2% on existing borrowers of home loan. As home loans are mostly taken at floating rates most customers have to pay more EMI per month from last 1-2 years.

• 3.Petrol Prices The Petrol or diesel prices have been increased so many times this

year that travel or commuting budget have increased for most of the middle class.

• 4.Credit Card usage- As customers are short of cash, more customers are using credit cards and getting into a debt trap. To pay these  card dues they then take personal loan if the shortfall becomes higher thus one more EMI to pay.

Impact of inflation on business

Inflation can be either negative or positive -- and often times both for the same business. Negative effects of inflation include:

• Increased costs: As the money is worth less, so do costs increase for businesses. Not only do businesses have pay more for raw materials, they also have to do things like print out new menus and make more trips to the bank for money. Businesses generally also have increased labour costs during inflationary periods, as workers need more money to live on.

• Market bubbles: Less a result of inflation gone out of control, market bubbles happen when inflation is kept artificially low through the policies of a central bank. Low interests rates are traditionally associated with easy credit and an increased money supply. This, in turn, often leads to speculation in the market and bubbles that go along with it.

• Economic downturn: The cumulative effect of higher prices and bubbles is a downturn in the economy. When the market corrects itself, the bubble bursts and it is often small businesses and workers that are left holding the bag. When high rates of inflation occur, jobs are often the first place where businesses begin cutting back. This leads to a spike in unemployment, which in turn leads to less consumer spending.

Positive effect of inflation includes :• Decreased labour costs: Even though you might be shelling out more in dollars

for your workers, the real cost of labour, adjusted for inflation, can go down• Decreased debt: Once inflation is greater than your interest rates, you are

actually seeing your debt wiped out by inflation

REMEDIES FOR INFLATION• REDUCE IMPORTING .• INCRESE EXPORTING• CONVERT GOLD TO GOVERNMENT BONDS.• INVEST IN LONGTERM STOCKS • FAIR REMMUNERATION• DIG AND CLOSE POLICY• NEW EMPLOYMENT OPPERTUNITIES• HAVE TRADE AGREEMENTS WITH OTHER

STATES • LOANS FROM WORLD BANK• CREDIT CONTROL

EXAMPLE FOR EXTREAM INFLATION

Hyperinflation in Zimbabwe began shortly after destruction of productive capacity in Zimbabwe's civil war and confiscation of private farms. During the height of inflation from 2008 to 2009, it was difficult to measure Zimbabwe's hyperinflation because the government of Zimbabwe stopped filing official inflation statistics. However, Zimbabwe's peak month of inflation is estimated at 6.5 sextillion percent in mid-November 2008.In 2009, Zimbabwe abandoned its currency. As of 2013, Zimbabwe still has no national currency; currencies from other countries are used.

INDIA’S TOP ECONOMISTS•

• INDIA’S ECONOMIC• WIZARDS

FINDINGSTO PREVENT INDIA FROM THIS CRISIS •WE THE PEOPLE OF INDIA SHOULD

PROMOTE THE DOMESTIC PRODUCTS.•INDIAN GOVERNMENT SHOULD BRING

A LAW , STATES THAT THERE SHOULD BE LIMITS IN USAGE OF GOLD IN WEDDINGS.

•MOTOR VEHICLES WITH MORE MILAGE SHOULD BE PROMOTED.

•MORE TAX ON LUXURIOUS VEHICLES.

CONCLUSION