The Indian Economy : Dealing with Inflation Case Study 9

Presened By : Rubina Isidore

What is Inflation ?
It is an overall general upward price movement of

goods and services in an economy usually measured by the Consumer Price Index, The producer Price Index and The Wholesale Price Index

Inflation indicators
Increase in Global Oil prices

Price of Food articles Increase in demand and

decrease in supply Fuel Agricultural land Cement Prices

Causes of inflation
GDP growth led to the increase in money supply

leading to an increase in the demands of consumers. The agricultural supply couldnt get a boost Agricultural investment fell Lower harvests of wheat globally Price of edible oils which India imported increased a great deal Price of pulses went up to 25.04%

Measures Taken
Increase the CRR rates Resulted in increase of

bank rate and prime lending rate Cutting imports on cooking oil Strengthening the rupee to make imports cheaper Increase in education cess from 2% to 3 % Setting up of a monitoring cell to keep a watch on the price situation

Criticisms and Suggestions

Supply side constraints need to be removed

rather than reducing or increasing prices Restructuring agriculture with new and improved technology Reinforcing a good support system for the small and marginal farmers Fertilizer subsidies to reduce dependency on a particular use of fertilizer Improving soil quality

Criticisms and Suggestions

Strengthening the rupee led to competition of

Indian textile mills with the Bangladeshi counterparts. This will directly affect the GDP Hoarding of foodgrains by corporates should be banned Future trading of tur daal and urad dal should be stopped Raising the tax bar on higher income groups The WPI doesnt hold true in the service sector which forms a major part of the consumers expenditure

Thank You