NCRDs Sterling Institute of Management studies

Subject: Economic Environment of Business Submitted to: Prof. Mayur Malvia

Group Members Sachin Sargar Sujit Sawant Priyanka Shewale Pranav Shinde Priyanka Shinde (A-56) (A-57) (A-58) (A-59) (A-60)

Inflation and its Impact on Indian Economy

INTRODUCTION ABOUT INFLATION

MEANING OF INFLATION
Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. When inflation goes up, there is a decline in the purchasing power of money.

How to calculate Inflation ?

Wholesale Price Index (WPI) Consumer Price Index (CPI)

CAUSES OF INFLATION
Too much money chasing too few goods Increase in production cost Taxation Increase in price of imported raw materials Depreciation in exchange rates Decrease in interest rates Rapid economic growth

PROBLEM DUE TO INFLATION

Balance between supply and demand goes out of control Price increase can worsen the poverty affecting low income household Economic uncertainty and is a dampener to the investment climate slowing growth reduce savings and consumption Out of control the cost of raw material and labor Less profit or in some extreme case no profit Manufacturers would not have an incentive to invest in new equipment and new technology Problem to people to withdraw money from the bank and convert it into product

EFFECTS ON ECONOMY
Increase in the prices of goods and services Decrease in real income It encourages hoarding Decrease in the values of investments It can lead to wage a spiral Lowers the domestic saving rates When inflation becomes very acute, hyper inflation may result

economic growth is manifested in the following cases:

I) Investment II) Interest rates

III) Exchange rates

IV) Unemployment V) Stocks

CONCLUSION

Thank You