Union Budget and Managing Inflation

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Presentation on

Union Budget And Managing Inflation

By:Abhishek SinhaPrakash KumarAyush HarshKishen Kumar

Singh


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Meaning of Inflationq Inflation means a persistent increase in the level of

consumers prices or a persistent decline in thepurchasing power of money, caused by an increasein available currency and credit beyond the

proportion of available goods and services.

q Inflation Rate = Current CPI/WPI Last CalculatedCPI/WPI X 100

Last Calculated CPI/WPI

= 150- 140 X 100140= 7.14 %


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Introduction To Budget

2011-2012q Budget has tried to bring transparency in all the

sectors of economy .

q Along with this the our finance minister hasthrown light on inflation rate of our country

q Budget aimed at achieving fast paced recovery

with the GDP which was 8.5% in 2010-2011while breaching the 9% mark in FY2012.


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FINANCIAL DATA ANALYSIS OF UNION OF INDAI FROM THE2003 TILL JULY 2011:

A) CORRELATION OF THE DATA:

FORMULA:

THE CORRELATION= 0.848741 TIMES

YEAR

TOTAL FISCAL

DEFICIT(In

Million RS.)

GDP (In Million

RS. DEFICIT (%)

2002-03 148352 2454561 6.04

2003-04 123272 2754620 4.47

2004-05 125794 3242209 3.87

2005-06 174784 3692482 4.73

2006-07 183518 4293672 4.27

2007-08 154966 4986428 3.1

2008-09 457498 5582623 8.19

2009-2010 432742 6550271 6.6

2010-2011 401298RE 7877947 5.092011-

2012(estimated

) 425583RE 8980860 4.73


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Types Of Inflation

q Hyperinflation

q Extremely high inflation

q Moderate inflation

q Low inflation


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Causes Of Inflation

q Demand Pull Inflation

q Cost Push Inflation

q Money Supply

q Deficit Financing

q Black Market And Corruption


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B) REGRESSION OF THE DATA:

FORMULA: y =na+bxxy =ax+bx

Here we get: a=2.48, b=0.052CONCLUSION : Here we found that with every increase in 5 units

of GDP it also leads to the increase of 0.24 in fiscal deficit.

Year GDP(x) In RS.

Million

Total Fiscal

deficit(y) In RS.

Million

X XY

2002-2003 2.5 1.5 6.25 3.75

2003-2004 2.8 1.2 7.84 3.36

2004-2005 3.2 1.3 10.24 4.16

2005-2006 3.7 1.3 13.69 4.81

2006-2007 4.3 1.7 18.49 7.31

2007-2008 5 1.8 25 9

2008-2009 5.6 1.5 31.36 8.4

2009-2010 6.6 4.6 43.56 30.36

2010-2011 7.9 4.3 62.41 31.6

2011-

2012(estimated)

9 4 81 38.7

TOTAL 50.6 27.5 299.84 141.45


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Effects Of Inflationq Decrease in real value of money.q Discourage investment and savings.q May lead to shortage of goods due to hoarding.q Rise in poverty.

q Less return to investors.q Illusions of making profits by the businessmen.q Rising prices of imports due to currency

debasement.q Fixed income recipients will be hurt.q Inflation Currency Devaluation Better

Margins for Exporters.


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Methods For Measuring

Inflation.1. Consumer Price Index2. Wholesale Price Index3. Monetary Measures:

A. Cash Reserve RatioB. Bank RateC. Repo RateD. Reverse Repo Rate

E. Statutory Liquidity RatioF. Fiscal Measures


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INFLATION IN ECONOMICRATES:


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C) STANDARD DEVIATION OF THEDATA:

FORMULA:

STANDARD DEVIATION = 0.863148 TIMES

CONCLUSION: Here the GDP of the country varies up to 0.863148TIMES

Year

GDP(X) IN MILLION X-X1 (X-X1)2002-2003

2.5 -2.56 6.55362003-2004

2.8 -2.26 5.10762004-2005

3.2 -1.86 3.45962005-2006

3.7 -1.36 1.84962006-2007

4.3 -0.67 0.44892007-2008

5 -0.06 0.00362008-2009

5.6 0.54 0.29162009-2010

6.6 1.54 2.37162010-2011

7.9 2.84 8.06562011-

2012(estimated) 9 3.94 15.5236TOTAL

50.6 43.6753


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Effect Of Inflation On DifferentSectors In Budget 2011

q Aviation sector: Increase in travelling cost dueto the introduction of service tax on domesticand international tickets.

q Hospitality: Increase in cost due to theintroduction of service tax on hotelaccommodation.

q Textile industry: Mandatory excise on branded

garments which will give the negative effect.q Health: This area includes health checkups andprivate hospitals become expensive.


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Remedies

q Cash Reserve Ratio increased.q Control over Price of Petrol and Diesel.q Decreased import tariff.

q Tax increase.q Price control on commodities.q Import duty on non-agricultural products

was brought down to 10% from 12.5%q Allowed appreciating the Rupee.


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Documents

Union Budget and Managing Inflation