Effects of inflation in Indian economy?

Answer 1

current Indian inflation is 0.26 on 23/March/2009

1.54 percent for the week ended July 18 compared with last week's minus 1.17 percent.

2.inflation rate in India is 13.5 as on May 2010

Answer 2

Inflation is caused due to several economic factors:

• When the government of a country print money in excess, prices increase to keep up with the increase in currency, leading to inflation.
• Increase in production and labor costs, have a direct impact on the price of the final product, resulting in inflation.
• When countries borrow money, they have to cope with the interest burden. This interest burden results in inflation.
• High taxes on consumer products, can also lead to inflation.
• Demands pull inflation, wherein the economy demands more goods and services than what is produced.
• Cost push inflation or supply shock inflation, wherein non availability of a commodity would lead to increase in prices.

Problems

The problems due to inflation would be:

• When the balance between supply and demand goes out of control, consumers could change their buying habits, forcing manufacturers to cut down production.
• The mortgage crisis of 2007 in USA could best illustrate the ill effects of inflation. Housing prices increases substantially from 2002 onwards, resulting in a dramatic decrease in demand.
• Inflation can create major problems in the economy. Price increase can worsen the poverty affecting low income household,
• Inflation creates economic uncertainty and is a dampener to the investment climate slowing growth and finally it reduce savings and thereby consumption.
• The producers would not be able to control the cost of raw material and labor and hence the price of the final product. This could result in less profit or in some extreme case no profit, forcing them out of business.
• Manufacturers would not have an incentive to invest in new equipment and new technology.
• Uncertainty would force people to withdraw money from the bank and convert it into product with long lasting value like gold, artifacts.

Inflation in India Economy
India after independence has had a more stable record with respect to inflation than most other developing countries. Since 1950, the inflation in Indian economy has been in single digits for most of the years

Between 1950-1960
The inflation on an average was at 2.00%

Between 1960-1970
The inflation on an average was at 7.2%

Between 1970-1980
The inflation on an average was at 8.5%.

Inflation At Present
Inflation in India a menace a few years ago is at a 30 year low. The inflation ended at a low of 0.61% in the week ended May 9, 2009 this after reaching a 16 year high of 12.91 % in August 2008, bringing in a sigh of relief to policymakers.

Answer 3

Inflation affects both the economy of a country and its social conditions, as well as the political and moral lives of its inhabitants. However, the economic effects of Inflation are stated and described below:

• Price inflation has immense effect on the Time Value of Money (TVM). This acts as a principal component of the rates of interest, which forms the basis of all TVM calculations. The real or estimated changes occurring in the rates of inflation lead to changes in the rates of interest as well.
• Inflation exerts impact on the treasury of a nation as well. In United States of America, Treasury Inflation-protected Securities (TIPS) ensures safety to the American government, assuring the public that they will get back their money. However, the rates of interest charged by TIPS are less compared to the standard Treasury notes.
• The most immediate effect of inflation is the decrease in the purchasing power of dollar and its depreciation. Inflation influences the investments of a country. The Inflation-protected Securities (IPSs) may act as a guard against the loss in the purchasing power of the fixed-income investments (like fixed allowances and bonds), which may occur during inflation.
• Inflation changes the allocation of income. This exerts maximum effect on the lenders than the borrowers at the time of persisting inflation, because the loans sanctioned previously are paid back later in the form of inflated dollars.
• Inflation leads to a handful of the consumers in making extensive speculation, to derive advantage of the high price levels. Since some of the purchases are high-risk investments, they result in diversion of the expenditures from regular channels, giving birth to a few structural unemployments.

Answer 4

I don't think that there is any difference on how inflation effects the Indian economy as it effects any other economy in the world. Same thing happens to everyone. The government prints to much money which causes the prices to be raised and after a certain period of time it will all become next to worthless

Answer 5

International inflating Market Currency, poor policies of the ruling Indian National Congress and the BLACK MONEY lying abroad

Answer 6

whole sale price indix rose to 0.7 percent this week. previous week it was about 0.85

Answer 7

what is the current inflation rate in India today?as per today i.e 28-3-2009 the inflation rate is 0.27%

Answer 8

Population growth, skyrocketing energy costs, changing climate (and its associated effects on agriculture), increasing demand for products, and an expanding economy.