GLOBALISATION

&
INFLATION
 DEFINITION
 “ GLOBALISATION IS A PROCESS
OF INTEGRATION OF THE WORLD
INTO A SINGLE HUGE MARKET”.
 IMPACTS OF GLOBALISATION
 CONCEPT OF 5 C’s
 Customer
 Competition
 Currency
 Company
 Country
 DEFINITION
 The term "inflation" usually refers to
a measured rise in a broad price
index that represents the overall
level of prices in goods and services
in the economy.
 WHAT INFLATION TELLS?
 INFLATION tells us two important things :-
 Firstly: Do not keep your money stagnant. If you just save
money by putting it your safe it will loose value over time.
If you have Rs.1000 in your safe today and you keep it
there for 10years or so, it will be worth a lot less after 10
years. If you can buy something for Rs.1000 today, you will
probably require Rs.1500 to buy it 10 years from now. So
do not keep money locked up in your safe.
 Always invest money.
 If you can’t think where to invest your money, then put it
in a bank. Let it grow by gaining interest. But whatever you
do, do not just lock your money up in your safe and keep it
stagnant. If you do this, you will be loosing money without
even knowing it. The more money you keep stagnant the
more money you will be loosing.
Secondly: When investing, you have to make sure that
the rate of return on your investment is higher than the
rate of inflation
 What is the rate of inflation?
 Current rate of inflation is 0.044%
 The prices of everything goes up over time and this phenomenon
is called inflation.
 The question is: By how much do the prices go up? At what rate
do the prices do up?
The rate at which the prices of everything go up is called the
"rate of inflation". For example, if the price of something is
Rs.100 this year and next year the price becomes approximately
Rs.104 then the rate of inflation is 4%. If the price of something
is Rs.80 then after a year with a rate of inflation of 4% the price
go up to (80 x 1.04) = 83.2
So, when you make an investment, make sure that your rate of
return on the investment is higher than the rate of inflation in
your country.
 CAUSES OF INFLATION
 The main cause of high inflation in India used to be
rises in global oil prices.
 The chief component of the inflation was the increase
in the prices of food articles - caused by increased
demand as well as supply constraints.
 Apart from the rise in prices of food articles, fuel and
cement prices too recorded high increases
 MEASURES OF CONTROLLING
INFLATION
 MONETARY POLICY :- Today the primary tool
for controlling inflation is monetary policy. High
interest rates and slow growth of the money
supply are the traditional ways through which
central banks fight or prevent inflation.
 Fixed exchange rates :- Under a fixed exchange
rate currency regime, a country's currency is
tied in value to another single currency or to a
basket of other .A fixed exchange rate is
usually used to stabilize the value of a
currency, vis-a-vis the currency it is pegged to.
It can also be used as a means to control
inflation.
 Wage and price controls:-Another method
attempted in the past have been wage and
price controls ("incomes policies”).

 Gold standard:-Gold was a common form of

representative money due to its rarity,
durability, divisibility, fungibility, and ease of
identification.Representative money and the
gold standard were used to protect citizens
from hyperinflation.
 MEASURES BY R.B.I
 These measures included:- increasing repo
rates, the Cash Reserve Ratio (CRR) and
reducing the rate of interest on cash deposited
by banks with the RBI.
FISCAL STIMULUS
PACKAGES
 1st Stimulus package came out on 7th
Dec 08
Its features
 Increase in govt spendings
 Exporters
 Support for medium,small&micro enterprises
 Textile sector
 Infrastructure financing
2 Stimulus package on 2 jan 09
nd nd

ITS MEASURES
 IIFCL
 INTEREST RATE CUTS
 ECB LIMITS
 CVDS
 FIIS IN DEBT MARKETS
 SME
 STATE GOVTS
 PUBLIC SECTOR BANKS
EFFECTS OF INFLATION ON
ECONOMY
Inflation is good for economy..
because the price gets higher
sales gets better...

In short:
INFLATION IS GOOD FOR COMPANIES
AND BAD FOR CUSTOMERS..
but Inflation above 4% mark ,make ....people to reduce their
spending on luxcury items..
this is what worries the branded companies,
but for the poor, and those who are in the job...
they suffer because they cannot save much....
some times they have to go for loan, to make their ends meet
on interest
which makes things worst for them.
So the effect of inflation is a mixed one.........
Double digit inflation over a period of six months is very
bad.
 POSITIVE IMPACT
 A small increase in price level is considered to be
beneficial for the economy. Inflation generally
increases the price level gradually over time. When
price starts increasing, the consumers may opt for
making purchases at present time, out of the fear of
further increase in price level in future. This tendency
of the buyers increases the spending and borrowing
activities in the short term period. It provides
additional mobility to the economic performance of
the economy.
 NEGATIVE IMPACTS
 Bad for fixed income group people
 Impact on Household Sector
 Impact on Business Sector
 Impact on Debtors and Creditors
 Impact on Govt
 Affects purchasing power
 IMPACT OF GLOBALISATION ON
INFLATION

 Policy Incentives:
 Trade Integration & Price Level Declines:
 Inflation responses to domestic Output
Fluctuations
 Productivity Growth, Aggregate supply
&Relative Prices:
 GROUP MEMBERS
 AMIT SHIRALE (32)
 GAURAV HIRANI(30)
 INDRAJEET (29)
 NAFISA MULLA (25)
 PRIYA SWAMI (52)
 ASHA PUJARI (23)