Preface

This study reports the distilled knowledge of economists on the real cost to an economy
from inflation. These are remarkably more varied than the outlays for shoe leather, long
reported to be the major cost of inflation. The costs of inflation are related to its rate, the
uncertainty it engenders, whether it is anticipated, and the degree to which contracts and
the tax system are indexed. A possible major cost, that related to the inefficient utiliation
of resources because economic agents mistake changes in nominal variables for changes
in real variables and act accordingly !the so"called signal problem#, may not have been
experienced in the $nited %tates during the post"&orld &ar '' era !shoe leather being a
shorthand term for the resources that have to be expended on less efficient methods of
exchanges#.The relationship between inflation and growth remains a controversial one in
both theory and empirical findings. (riginating in the )atin American context in the
*+,-s, the issue has generated an enduring debate between structuralisms and
monetarists. The structuralisms believe that inflation is essential for economic growth,
whereas the monetarists see inflation as detrimental to economic progress. There are two
aspects to this debate.
!a# the nature of the relationship if one exists and
!b# The direction of causality.
/irst chapter includes the detailed inflation. 't includes the inflation history. its activities
and operations, inflation definition, etc. this section attempts to give detailed information
about the inflation and the cause of its functioning. The second chapter deals with
inflation. 'n this section, a brief conceptual explanation to inflation is given. 't contains
the definition, process and significance and disadvantages of inflation. The third chapter
is the summary of the various research methodology uses for the development of the
*
project. 0ata analysis and interpretation of the report conducted is providing in chapter
four in this various graphs and tables are given as per the research. 1hapter , deals with
the finding and recommendation related to the project. These finding and
recommendations are based on the data analysis and interpretation done in the previous
chapter. The conclusion of the project is provided in 1hapter 2 and this chapter also deals
with the limitations of the study and research work.
&e are confident that anyone who goes through the report will learn how much we have
learnt 3 benefited during this period.

xxxxxxxxxxx
4
Acknowledgement
5efore ' thank anybody for the compilation of this work ' would like to thank Almighty
for providing guidance and me all the necessary help. 't is grace only that ' have
completed this work.
An understanding of the study like this is never the outcome of the efforts of an
individual6 rather it bears the imprint of a number of individuals who directly helped me
in completing the present study.
/irst 3 foremost, ' would like to express my regard to Mr. Rahul Anand Singh (H.O.D.
of M.B.A.) and Dr. eetu Singh! the training " #lacement$in$charge and the
honorable 7eaders of 8.5.A. 0epartment for this constant encouragement and support. '
would also like to express immense gratitude towards supervisor Dr. eetu Singh, for
providing the knowledge, guidance and cooperation in research report.
' am also sincerely thankful to all my friends for giving me opportunity and resource to
work on the research report and giving me support whenever necessary.
xxxxxxxxxxxxxxx



9
A BR%&' H%S(OR)
%ince the end of &orld &ar '', the $nited %tates has experienced more or less continuous
inflation. 't would be difficult to find a similar period in American history before that
war. 'ndeed, prior to &orld &ar '', the $nited %tates often experienced long periods of
deflation. 't is worth noting that the 1onsumer :rice 'ndex in *+;* was virtually at the
same level as in *<-=.0uring the last economic expansion, 8arch *++*"8arch 4--*, the
inflation rate remained low by historic standards. This is true regardless of which of the
indexes is used to calculate the rate at which the price of goods and services rose. A low
inflation rate is especially significant since the $.%. economy was fully employed, if not
over fully employed, according to many estimates for the last 9 years of that expansion.
>et, contrary to expectations, the inflation rate showed little tendency to accelerate.
?eeping an economy moving along a full employment path without igniting a burst of
inflation is a difficult policy task. 5ecause labor costs make up nearly two"thirds of total
production costs, the rate at which they rise is often regarded as an indication of future
inflation at the retail level. They tended to rise in the latter stage of the *++*"4--*
expansion, but have moderated since then as the unemployment rate rises and labor
markets ease. 7ather than measure inflation by using the actual rate at which prices are
rising, some economists prefer a measure of inflation that reflects primarily only the
;
systematic factors that act to raise prices. This is the so"called underlying or core rate of
inflation. Three measures of this rate show that inflation was in the ;@ to 2@ range
during *+<+"*++-, with some tendency to accelerate. Avidence for the end of the *++*"
4--* expansion also shows little tendency for the underlying rate to accelerate. 't was
then in the 4.,@ to 9@ range. This rate has also moderated over 4--4"4--9 allowing an
inference that the $.%. has now achieved a stable price level. &hy should the $nited
%tates be concerned about inflationB This study reports the distilled knowledge of
economists on the real cost to an economy from inflation. These are remarkably more
varied than the outlays for shoe leather, long reported to be the major cost of inflation.
The costs of inflation are related to its rate, the uncertainty it engenders, whether it is
anticipated, and the degree to which contracts and the tax system are indexed. A possible
major cost, that related to the inefficient utiliation of resources because economic agents
mistake changes in nominal variables for changes in real variables and act accordingly
!the so"called signal problem#, may not have been experienced in the $nited %tates
during the post"&orld &ar '' era !shoe leather being a shorthand term for the resources
that have to be expended on less efficient methods of exchanges#.The relationship
between inflation and growth remains a controversial one in both theory and empirical
findings. (riginating in the )atin American context in the *+,-s, the issue has generated
an enduring debate between structuralisms and monetarists. The structuralisms believe
that inflation is essential for economic growth, whereas the monetarists see inflation as
detrimental to economic progress. There are two aspects to this debate.
!a# the nature of the relationship if one exists and
!b# The direction of causality.
/riedman !*+=9. ;*# succinctly summaried the inconclusive nature of the relationship
between inflation and economic growth as follows. Chistorically, all possible
,
combinations have occurred. inflation with and without development, no inflation with
and without development. The impact of inflation on growth, output and productivity has
been one of the main issues examined in macroeconomics. Theoretical models in the
money and growth literature analye the impact of inflation on growth focusing on the
effects of inflation on the steady state eDuilibrium of capital per capita and output !e.g.,
(rphanides and %olow, *++-#. There are three possible results regarding the impact of
inflation on output and growth. i# none6 ii# positive6 and iii# negative. %idrauski !*+2=#
established the first result, showing that money is neutral and superneutral* in an optimal
control framework considering real money balances !8E:# in the utility function. Tobin
!*+2,#, who assumed money as substitute to capital, established the positive impact of
inflation on growth, his result being known as the Tobin effect. The negative impact of
inflation on growth, also known as the anti"Tobin effect, is associated mainly with cash in
advance models !e.g., %tockman, *+<*# which consider money as complementary to
capital. /ollowing /riedmanFs !*+==# Gobel )ecture the theoretical and empirical
research on the relationship between inflation and output growth has progresses along two
distinct lines. The first line of research starting with /riedmanFs hypothesis that higher
nominal inflation raises inflation uncertainty, has tended to investigate the relationships
among inflation, inflation uncertainty, growth and growth uncertainty. The second line of
research has tended to remain within the traditional macroeconomics and investigate the
relation between inflation and growth without reference to inflation uncertainty and
growth uncertainty. This study follows the second line and examines the nature of the
relation between inflation and growth in the 'ndian economy. &ithin the second line of
research two distinct camps, with opposite predictions on the relation between inflation
and growth, have distinguished themselves. 7esearchers of the first camp base their
arguments on the :hillips curve and output gap, defined as the difference between actual
2
and potential output and assert a positive relation between inflation and growth. The
underlying reasoning is that if actual output rises above potential output, this will create
an upward pressure on wages in the labor market. Higher wages, in turn, will lead to
higher production costs and hence higher prices. This conclusion has been supported by
empirical findings. Ierloch and %mets !*+++#, for instance, show that *@ increase over
potential output raises inflation by -.4@ in the subseDuent Duarter in the A8$",
countries. 8oreover, since inflation is serially correlated, future inflation rate will also
rise. Another interesting study has been undertaken by :aul et al. !*++=# who work with
data pertaining to =- countries and the *+2-"*+<+ periods. They report that the relation
between inflation and growth is positive only in some countries. 8allik and 1howdhury
!4--*# analyse inflation"growth dynamics in four %outh Asian countries !5angladesh,
'ndia, :akistan and %ri )anka# and find statistically significant evidence of a positive
relation between these two variables. 7esearchers belonging to the second camp base
their arguments on the 7eal 5usiness 1ycle theories and assert that inflation negatively
affects growth. (ne of the main studies investigating this negative relationship between
inflation and growth has been carried out by ?ydland and :rescott !*++-#. These authors
argue that supply shocks, not demand shocks, are responsible for the inverse relationship.
%upply shocks render the prices countercyclical, while demand shocks cause pro" cyclical
moves in prices towards output. However, there is a condition to be taken into account.
:rice flexibility. 'n an environment with sticky prices, a demand shock will increase the
output while prices move very little. As output is on the way towards its trend, prices may
be rising. Hence, a negative correlation between these variables can also be observed
even when a demand shock is responsible for these movements. 5all and 8ankiw !*++;#
and Judd and Trehan !*++,# study these effects. 'n addition, 0en Haan and &outer
!4---#, by using long forecast horions within a KA7 framework, argues that a negative
=
correlation between inflation and growth exists. >et another study showing the
divergence of output growth from inflation in developing countries is that of Agenor and
Hoffmaister !*++=#, who employ generalied KA7 analysis to examine the short run
dynamics among inflation, output, nominal wages and exchange rate. They find that a fall
in the depreciation of the exchange rate reduces inflation and stimulates output. 5ut the
expansion in output is short lived. ?irmanoglu !4--*#, by employing KA7 models shows
that high inflation rates in Turkey cause lower economic growth. 8endoa !4--9# finds
evidence of inflation"output trade off in the Turkish economy using KA7 and IA71H
models. 5eside KA7 models, panel data studies also support this negative relationship,
especially for countries that suffer from high inflation. 5arro !*++2#, for instance, shows
that a negative relation exists for a set of countries that had inflation rates above *,@.
Judson and (rphanides !*++2# use a *-@ threshold. 5runo and Aasterly !*++<# argue in
favor of a ;-@ inflation as the relevant threshold inflation rate. Ihosh and :hilips !*++<#
find a positive effect for low inflation rates, but for those above ,@ they find a non"linear
negative effect. 5ased on cross"country and panel regression, several studies have
demonstrated in recent years, that there is negative correlation between inflation and
growth in the long run due to the influence of the former on reducing investment and
productivity growth. There is yet another set of studies !5runo 3 Aasterly, *++<, %arel,
*++2# which show that harmful effects of inflation are not universal, but appear only over
the Cthreshold level of inflation. Gevertheless, there is the growing concern in
developed countries6 particularly in the A8$ area that excessively low inflation threshold
may hurt economic growth. 't is argued that the developed countries do have very well
developed financial markets and less government interventions in goods markets. %uch
economies are mostly demand driven, in which case stimulus to demand results in rising
prices and a clear trade off is observed at low level of inflation. (n the other hand, the
<
developing countries are more vulnerable to supply shocks causing high variability in
inflation and disturb the consumption, investment and production behaviour. /urther, the
government interventions in financial and goods markets and macroeconomic rigidities
such as rigidities in labour laws cause market failure and macroeconomic instability.
Therefore, prices do not give correct signals about the policies and the course of actions
of the economic agents. 't is in this context, it will be interesting to know the inflation"
growth nexus in developing countries. The objective of this study is to examine the
inflation"growth nexus in 'ndia using annual data for the period *+=4L4--=. &e will
examine the relationship between growth and inflation in 'ndia. 'n the short run, the
relationship between growth and inflation is usually positive. :olicies that raise output
!for example, expansionary fiscal and monetary policies# also raise prices. 'nflation is
undesirable because it adversely affects some sections of the population !especially the
poor and those whose earnings are not indexed to prices#, distorts relative prices, leads to
an appreciation of real exchange rates, erodes the value of the financial assets and creates
instability. The ultimate policy objective is a higher level of well"being for the
population, but a conflict arises in the means of achieving itMby higher growth or by
lower inflation. There is a trade"off involved and both cannot be achieved together.
A tightening of fiscal and monetary policies may achieve lower inflation but only at the
cost of growth. The government needs to find the right balance between contractionary
and expansionary policies to maximie the well"being of its people. 8acroeconomics
has, until recently, focused on the positive short"term relationship between the rate of
increase in prices, and output. 7ecently there has been an exploration into the nature of
the long"term relationship between inflation and long"term growth in output.
0evelopments in growth theory have resulted in both a theoretical and an empirical
analysis of the effect of inflation on long" term growth. Theoretically the relationship has
+
been located in the effect of inflation on investment. 'f investment is assumed to be the
engine of growth in a model of endogenous growth, an adverse impact of inflation on
investment implies an inverse relationship between inflation and growth. Ampirical
evidence supports the hypothesis of an inverse relationship between inflation and long"
term growth. This is in contrast to the short"term experience, where inflation and output
growth occur together.
%nflation
'nflation can be defined as a rise in the general price level and therefore a fall in the value
of money. 'nflation occurs when the amount of buying power is higher than the output of
goods and services. 'nflation also occurs when the amount of money exceeds the amount
of goods and services available. As to whether the fall in the value of money will affect
the functions of money depends on the degree of the fall. 5asically, refers to an increase
in the supply of currency or credit relative to the availability of goods and services,
resulting in higher prices. Therefore, inflation can be measured in terms of percentages.
The percentage increase in the price index, as a rate per cent per unit of time, which is
usually in years. The two basic price indexes are used when measuring inflation, the
producer price index !::'# and the consumer price index !1:'# which is also known as
the cost of living index number. 'nflation is one of the differentiating characteristics of
*-
the $.%. economy in the post"&orld &ar '' era. Axcept for *+;+ and *+,,, prices, on
average, have risen each year since *+;,. The cumulative effect of this inflation is
staggering. the price level has risen nearly +--@ since the end of &orld &ar ''.*This
was not true in the pre"&orld &ar '' period. (n the eve of that war, *+;*, the $.%. price
level was virtually the same as in *<-=. 0uring the periods from *<;2 to *<2* and *<<;
to *+-+, the $nited %tates experienced a near constant price level. And in the *, years
from *<2, through *<=+, the price level either remained constant or declined. The
principal periods of inflation between *<-- and *+;* were associated with wars and the
discoveries of gold and silver both here and abroad !and with increased efficiencies in
extracting both metals#.The experience with inflation during the *++*"4--* economic
expansion has been reassuring in the sense that even as the economy has been brought to
full employment and held there for about ; years, the inflation rate showed little tendency
to accelerate.'n the final year of the *+<4"*++- expansion, the 1onsumer :rice 'ndex
!1:'# rose 2.*@ followed by a 9.*@ increase in *++*. 0uring the first *- full years of the
*++*"4--* expansion, the 1:' rose, respectively, 4.+@, 4.=@, 4.=@, 4.,@, 9.9@, *.=@,
*.2@, 4.=@, 9.;@, and *.2@.
**
%nflation Defined
'nflation can be defined as a sustained or continuous rise in the general price level or,
alternatively, as a sustained or continuous fall in the value of money. %everal things
should be noted about this definition. /irst, inflation refers to the movement in the
general level of prices. 't does not refer to changes in one price relative to other prices.
These changes are common even when the overall level of prices is stable. %econd, the
rise in the price level must be somewhat substantial and continue over a period longer
than a day, week, or month.
(he &conomic *o+t+ of %nflation
Aconomists often discuss jointly the costs to an economy from unemployment and
inflation since for much of the period since the late *+,-s it was generally believed that a
long run tradeoff existed between the two. &hile the cost of unemployment was well
articulated the cost of inflation was relegated to shoe leather.The high $.%. inflation
rate of the late *+2-s, *+=-s and early *+<-s, caused economists to rethink the costs of
inflation to an economy. &hat follows is a distillation of those efforts.0escribing the
costs to an economy from inflation can be confusing for several reasons. /irst and
foremost there is the confusion over the cost to the economy versus the cost to specific
individuals. 1osts to individuals may not impose a burden on the economy because they
*4
are in the nature of a redistribution of either income andEor wealth. &hat is lost by some
is gained by others. Gevertheless, some of these redistributions can have real effects.
%econd, some of the costs of inflation are permanent in the sense that so long as the
inflation continues the costs will be incurred. (thers are only transitory and arise as the
economy moves from one inflation rate to another or because the rate of inflation itself is
variable. Third, some costs are incurred only because the inflation is unanticipated while
other costs arise even when the inflation is fully anticipated. /inally, some costs occur
only because of the absence for one reason or another of appropriate safeguards, for
example, the absence of indexed contracts.
%nflation and ,ncertaint-
Ampirical studies completed in the *+=-s support the view that inflation is associated
with greater uncertainty about future prices and that the degree of uncertainty rises with
the rate of inflation. 7ising uncertainty about future prices is believed to produce several
possible real effects. /irst, individuals appear to shift from buying assets denominated
in nominal terms !e.g., bonds# to so"called real assets such as residential structures, land,
precious metals, art work, etc. 5ecause some of these assets are in fairly fixed supply, the
resulting capital gain produced by the shift could conceivably raise private sector wealth
by a sufficient amount to cause a fall in the saving rate. %econd, to compensate for the
perceived greater uncertainty, lenders appear to reDuire a greater real reward for
supplying funds for investment. Third, contracts tend to be shortened. The first two
developments lead to rising real interest rates which tend to reduce the rate of investment
and capital formation. The third development leads businessmen to prefer shorter lived
assets.
*9
HO. %'/A(%O %S M&AS,R&D
'nflation is normally given as a percentage and generally in years or in some instances
Duarterly and is derived from the 1onsumer :rice 'ndex !1:'#. However, there are two
main indices used to measure inflation. The first is the 1onsumer :rice 'ndex, or the 1:'.
The 1:' is a measure of the price of a set group of goods and services. The Nbundle,N as
the group is known, contains items such as food, clothing, gasoline, and even computers.
The amount of inflation is measured by the change in the cost of the bundle. if it costs ,@
more to purchase the bundle than it did one year before, there has been a ,@ annual rate
of inflation over that period based on the 1:'. >ou will also often hear about the N1ore
7ateN or the N1ore 1:'.N There are certain items in the bundle used to measure the 1:'
that are extremely volatile, such as gasoline prices. 5y eliminating the items that can
significantly affect the cost of the bundle !in either direction# on a month"to"month basis,
the 1ore rate is thought to be a better indicator of real inflation, the slow, but steady
increase in the price of goods and services.
(he Mea+urement of %nflation
*hange+ in the Price+ of 0ood+ and Ser1ice+
The rise in the general level of prices, the essence of inflation, is measured by using a
price index. 'deally, the price index used should be broad based and one in which the
individual prices are weighted to indicate their importance to the economy. /or purposes
of this study, three separate price indexes are used. The first two are very broad based
and derived from the measurement of the GationOs gross domestic product !I0:#. They
differ in the Duantities that are used to weight the prices. The first uses side"by"side year
Duantities !that move every year# and is called, the chain weight deflator. The second
*;
uses current year Duantity weights and is called the implicit price deflator. The third index
is the 1onsumer :rice 'ndex !1:'#, which prices a market basket of goods and services
purchased by an urban family, a market basket whose individual items are weighted by
how much the urban family spent on them in a base year period currently *+<4"*+<;.
*hange+ in /a2or *o+t+
%ince labor costs comprise nearly twoLthirds of the value of final output, some
economists believe that they are an important determinant of the rate of inflation. 'n
Table 9, the two major measures of labor cost, per unit labor costs in the nonfarm
business sector and the more comprehensive total employment cost index, are shown.
5oth these measures of labor cost showed a tendency to accelerate during the expansions
of the *+<-s and *++-s as labor markets tightened. :er unit labor costs rose most rapidly
in the final full year of each expansion, *++- and 4---. The subseDuent recessions and
growing unemployment had a depressing effect on the rise in per"unit labor costs. The
recession and the relatively slow pace of the economic expansion also slowed the rate of
increase in the Amployment 1ost 'ndex. 't slowly declined over the period *+<+"*++,.
0uring the last , years of the *++*" 4--* expansion it rose. This rise was initially
productivity driven. However, in the last full year of the expansion, 4---, the increase
appears to be due to tight labor markets as per unit labor cost rose ,@.
*,
()P&S O' %'/A(%O
%ubseDuently, when either the prices of goods or services or the supply of money rises6
this is considered as inflation. 0epending on the characteristics and the intensity of
inflation, there are several types, namely. L
3. 1reeping inflation
4. Trotting inflation
5. Ialloping inflation
6. Hyper inflation
&hen there is a general rise in prices at very low rates, which is usually between 4";
percent annually, this is known as creeping inflation. &hereas, trotting inflation occurs
when the percentage has risen from , to almost percent. At this level it is a warning signal
for most governments to take measures to avoid exceeding double" digit figures. Another
type of inflation is the galloping inflation, where the rate of inflation is increasing at a
noticeable speed and at a remarkable rate, usually from *-"4- percent. However, when
the inflation rate rises to over 4-@ it is generally considered as hyper inflation and at this
stage it is almost uncontrollable because it increases more rapidly in such a little time
frame.
*2
(he main difference 2etween the gallo#ing and h-#er inflation! i+
That hyperinflation occurs when prices rise at any moment and there is no level to which
the prices might rise. 0uring &orld &ar '' certain countries experienced a hyperinflation,
where the price index rose from * to over *,---,---,--- in Iermany during January *+44
to Govember *+49.
*=
*A,S&S O' %'/A(%O
There has been practically no period in American history in which a significant change in
the price level has occurred that was not simultaneously accompanied by a corresponding
change in the supply of money. This has led to a widely held view that inflation is
always and everywhere a monetary phenomenon resulting from and accompanied by a
rise in the Duantity of money relative to output.Although this view is generally accepted,
it is, in fact, consistent with two Duite different views as to the cause of inflation.
'n one view a more rapid rate of money growth plays an active role in inflation and
results either from mistaken policies of the /ederal 7eserve or the /ederal 7eserve
subordinates itself to the fiscal reDuirements of the federal government and finances
budget deficits through money creation. According to this view, the control of inflation
rests with the /ederal 7eserve and depends upon its willingness to limit the growth in the
money supply. An alternative view comes in several versions. They have in common a
belief that the major upward pressure on prices comes from activities which would
produce a fall in real output. A favorite candidate is the attempt by organied labor to
obtain increases in real wages. (ther activities include the monopolistic pricing behavior
of (:A1, major crop failures or changes in the terms of international trade produced by a
decline in the foreign exchange value of the dollar. The decline in real output that these
activities produce will, in general, lead to rises in unemployment. To prevent
unemployment from increasing, in one version of this alternative, the /ederal 7eserve is
seen to pump up demand by easing the growth of the money supply. 'n the process it
ratifies the rise in the price level. Thus, in this version, while a growth in the money
supply is necessary to ratify the upward movement in the price level, it is not the cause of
*<
the rise in prices. 't is interesting to speculate what would happen if the /ederal 7eserve
refused to expand demand in the face of the rise in unemployment. :resumably, after a
protracted period, the additional unemployment would lead to a fall in wages, costs, and
other prices. (ver the longer run, output would return to its previous level or growth
path, the price level would fall back to its previous level and only relative prices and
wages would be different. Thus, while the /ederal 7eserve has the power to curb
inflation, it is unlikely to exercise this power in the face of a large run up in
unemployment. 'n another extreme variant, what the /ederal 7eserve does is really
irrelevant. %hould it refuse to expand what is conventionally called money to pump up
demand in the presence of these developments that reduce output, money substitutes
under the guise of credit will emerge that will allow demand to grow and the price
increases to be ratified. This variation, interestingly, precludes excessive money growth
from causing inflation for it also holds that the /ederal 7eserve cannot force too much
money on the economy. 'nflation, then, cannot be a case in which too much money is
chasing too few goods. The first two explanations for inflation find many adherents
among American economists, whereas the third is more common among some 5ritish
economists.
'nflation comes in different forms and those at are familiar with the economic matters
would observe that there are trends in the way that prices are moving gradual and
irregular in relation to aggregate sections of the economy. This suggest that there is more
than one factor that causes inflation and as different sections of the economy develop it
gives rise to different types inflationary periods. The main causes of inflation are.
*+
0emand"pull 'nflation
1ost push 'nflation
8onetary inflation
%tructural inflation
'mported inflation
D&MAD$P,// %'/A(%O
0emand"pull inflation occurs when the consumers, businesses or the governmentsO
demand for goods and services exceed the supply6 therefore the cost of the item rises,
unless supply is perfectly elastic. 5ecause we do not live in a perfect market supply is
somewhat inelastic and the supply of goods and services can only be increased if the
factors of production are increased. The increase in demand is created from an increase in
other areas, such as the supply of money, the increase of wages which would then give
rise in disposable income, and once the consumers have more disposal income this would
lead to aggregate spending. As a result of the aggregate spending there would also be an
increase in demand for exports and possible hoarding and profiteering from producers.
The excessive demand, the prices of final goods and services would be forced to increase
and this increase gives rise to inflation. 0emand pull inflation occurs when aggregate
demand and output is growing at an unsustainable rate leading to increased pressure on
scarce resources and a positive output gap. &hen there is excess demand in the economy,
producers are able to raise prices and achieve bigger profit margins because they know
that demand is running ahead of supply. Typically, demand"pull inflation becomes a threat
when an economy has experienced a strong boom with I0: rising faster than the long
run trend growth of potential I0:. The last time this happened to any great extent in the
$? economy was in the late *+<-s.
4-
Po++i2le cau+e+ of demand #ull inflation
*. A de#reciation of the exchange rate which makes exports more competitive in
overseas markets leading to an injection of fresh demand into the circular flow
and a rise in national and demand for factor resources L there may also be a
positive multiplier effect on the level of demand and output arising from the initial
boost to export sales.
4. Higher demand from a go1ernment (fi+cal) +timulu+ e.g. via a reduction in
direct or indirect taxation or higher government spending and borrowing. 'f direct
taxes are reduced, consumers will have more disposable income causing demand
to rise. Higher government spending and increased borrowing feeds through
directly into extra demand in the circular flow.
9. 'a+ter economic growth in other countrie+ 7 providing a boost to $? exports
overseas.
;. %m#ro1ed 2u+ine++ confidence which prompts firms to raise prices and achieve
better profit margins.
0emand pull inflation is most likely to occur when an economy is becoming stretched
and is said to be danger of over"heating. This is often seen towards the end of a boom
when output is expanding beyond the economyOs usual capacity to supply, the result being
higher prices and also a larger trade deficit !imports act as a kind of safety valve to take
away some of the excess A0#.
4*
*OS($P,SH %'/A(%O
1ost"push inflation is caused by an increase in production costs. 't is generally caused by
an increase in wages or an increase in the profit margins of the entrepreneurs. &hen
wages are increased, this causes the business owner to in turn increase the price of final
goods and services which would be passed onto the consumers and the same consumers
are also the employees. As a result of the increase in prices for final goods and services
the employees realie that their income is insufficient to meet their standard of living
because the basic cost of living has increased. The trade unions then act as the mediator
for the employees and negotiate better wages and conditions of employment. 'f the
negotiations are successful and the employees are given the reDuested wage increase this
would further affect the prices of goods and services and invariably affected. (n the other
hand, when firms attempt to increase their profit margins by making the prices more
responsive to supply of a good or service instead of the demand for that said good or
service. This is usually done regardless to the state of the economy. This can be seen in
monopolistic economies where the firm is the only supplier or by entrepreneurs that are
seeking a larger profit for their own self interests. 1ost"push inflation occurs when
businesses respond to rising costs, by increasing their prices to protect profit margins.
There are many reasons why costs might rise.
*. *om#onent co+t+8 A.g. an increase in the prices of raw materials and
components. This might be because of a rise in global commodity prices such as
oil, gas copper and agricultural products used in food processing L a good recent
example is the surge in the world price of wheat.
44
4. Ri+ing la2or co+t+ " caused by wage increases that exceed improvements in
productivity. &age and salary costs often rise when unemployment is low
!creating labor shortages# and when people expect inflation so they bid for higher
pay in order to protect their real incomes.
9. Higher indirect taxe+ im#o+ed 2- the go1ernment 7 for example a rise in the
duty on alcohol, cigarettes and petrolEdiesel or a rise in the standard rate of Kalue
Added Tax. 0epending on the price elasticity of demand and supply, suppliers
may pass on the burden of the tax onto consumers.
;. A fall in the exchange rate 7 this can cause cost push inflation because it
normally leads to an increase in the prices of imported products. /or example
during 4--="-< the pound fell heavily against the Auro leading to a jump in the
prices of imported materials from Auro Pone countries.
1ost"push inflation can be illustrated by an inward shift of the short run aggregate supply
curve. The fall in %7A% causes a contraction of I0: together with a rise in the level of
prices. (ne of the risks of cost"push inflation is that it can lead to stagflation. 'mportant
note. 8any of the causes of cost"push inflation come from external economic shocks e.g.
unexpected volatility in the prices of internationally traded commodities and large"scale
movements in variables such as the exchange rate. A country can also import cost"push
inflation from another country that is suffering from rising inflation of its own.
49
.hat +hould we look out for a+ e1idence for co+t$#u+h and demand$#ull
inflation9
*o+t$#u+h inflation
The rate at which wages and salaries are rising
0ata on producer prices and input costs such as the prices of raw materials
Trends in international commodity prices
The effects of changes in indirect taxes on prices
Demand$#ull inflation
How fast is aggregate demand growing !and the component parts '.e. 1Q'QIQR"
8# Astimated sie of the output gap
:rofitability of businesses in different sectors of the economy
Irowth of the money supply and credit E consumer borrowing
Trends in the values of assets such as property prices
'ndicators of consumer and business confidence
&hether a firmOs prices are rising faster than their costs !tells you what is
happening to profit margins#
4;
MO&(AR) %'/A(%O
8onetary inflation occurs when there is an excessive supply of money. 't is understood
that the government increases the money supply faster than the Duantity of goods
increases, which results in inflation. 'nterestingly as the supply of goods increase the
money supply has to increase or else prices actually go down. &hen a dollar is worth less
because the supply of dollars has increased, all businesses are forced to raise prices just to
get the same value for their products.
S(R,*(,RA/ %'/A(%O
:lanned inflation that is caused by a governmentSs monetary policy is called structural
inflation. This type of inflation is not caused by the excess of demand or supply but is
built into an economy due to the governmentOs monetary policy. 'n developed countries
they are characteried by a lack of adeDuate resources like capital, foreign exchange, land
and infrastructure. /urthermore, over"population with the majority depending on
agriculture for their livelihood means that there is a fragmentation of the land holdings.
There are other institutional factors like land"ownership, technological backwardness and
low rate of investment in agriculture. These features are typical of the developing
economies. /or example, in developing country where the majority of the population live
in the rural areas and depend on agriculture and the government implements a new
industry, some people get employment outside the agricultural sector and settle down in
urban areas. 5ecause there might be an uneDual distribution of land ownership and
tenancy, technological backwardness and low rates of investments in agriculture inclusive
of inadeDuate growth of the domestic supply of food which corresponds with an increase
4,
in demand arising from increasing urbaniation and population prices increase. /ood
being the key wage"good, an increase in its price tends to raise other prices as well.
Therefore, some economists consider food prices to be the major factor, which leads to
inflation in the developing economies.
%MPOR(&D %'/A(%O
Another type of inflation is imported inflation. This occurs when the inflation of goods
and services from foreign countries that are experiencing inflation are imported and the
increase in prices for that imported good or service will directly affect the cost of living.
Another way imported inflation can add to our inflation rate is when overseas firms
increase their prices and we pay more for our goods increasing our own inflation.
42
&''&*( O' %'/A(%O
'nflation can have positive and negative effects on an economy. Gegative effects of
inflation include loss in stability in the real value of money and other monetary items over
time6 uncertainty about future inflation may discourage investment and saving, and high
inflation may lead to shortages of goods if consumers begin hoarding out of concern that
prices will increase in the future. :ositive effects include a mitigation of economic
recessions, and debt relief by reducing the real level of debt. 8ost effects of inflation are
negative, and can hurt individuals and companies alike, below are a list of negative and
positive effects of inflation.
&0A(%:& &''&*(S AR&8
Hoarding !people will try to get rid of cash before it is devalued, by hoarding food
and other commodities creating shortages of the hoarded objects#.
0istortion of relative prices !usually the prices of goods go higher, especially the
prices of commodities#.
'ncreased risk " Higher uncertainties !uncertainties in business always exist, but
with inflation risks are very high, because of the instability of prices#.
'ncome diffusion effect !which is basically an operation of income redistribution#.
4=
Axisting creditors will be hurt !because the value of the money they will receive
from their borrowers later will be lower than the money they gave before#.
/ixed income recipients will be hurt !because while inflation increases, their
income doesnOt increase, and therefore their income will have less value over
time#.
'ncreased consumption ratio at the early stages of inflation !people will be
consuming more because money is more abundant and its value is not lowered
yet#.
)owers national saving !when there is a high inflation, saving money would mean
watching your cash decrease in value day after day, so people tend to spend the
cash on something else#.
'llusions of making profits !companies will think they were making profits while
in reality theyOre losing money if they donOt take into consideration the inflation
rate when calculating profits#.
1auses an increase in tax bracket !people will be taxed a higher percentage if their
income increases following an inflation increase#.
4<
1auses mal"investment !in inflation times, the data given about an investment is
often deceptive and unreliable, therefore causing losses in investments#.
1auses business cycles !many companies will have to go out of business because
of the losses they incurred from inflation and its effects#.
1urrency debasement !which lowers the value of a currency, and sometimes cause
a new currency to be born#
7ising prices of imports !if the currency is debased, then itOs purchasing power in
the international market is lower#.
;POS%(%:&; &''&*(S O' %'/A(%O AR&8
't can benefit the inflators !those responsible for the inflation#
't is benefit early and first recipients of the inflated money !because the negative
effects of inflation are not there yet#.
't can benefit the cartels !it benefits big cartels, destroys small sellers, and can
cause price control set by the cartels for their own benefits#.
't might relatively benefit borrowers who will have to pay the same amount of
money they borrowed !Q fixed interests#, but the inflation could be higher than the
interests6 therefore they will be paying less money back. !example, you borrowed
4+
T*--- in 4--, with a ,@ fixed interest rate and you paid it back in full in 4--=,
letOs suppose the inflation rate for 4--,, 4--2 and 4--= has been *,@, you were
charged @, of interests, but in reality, you were earning @*- of interests, because
*,@ !inflation rate# L ,@ !interests# U @*- profit, which means you have paid
only =-@ of the real value in the 9 years. ote8 5anks are aware of this problem,
and when inflation rises, their interest rates might rise as well. %o donSt take out
loans based on this information.
8any economists favor a low steady rate of inflation, low !as opposed to ero or
negative# inflation may reduce the severity of economic recessions by enabling
the labor market to adjust more Duickly in a downturn, and reducing the risk that a
liDuidity trap prevents monetary policy from stabiliing the economy. The task of
keeping the rate of inflation low and stable is usually given to monetary
authorities. Ienerally, these monetary authorities are the central banks that control
the sie of the money supply through the setting of interest rates, through open
market operations, and through the setting of banking reserve reDuirements.
Tobin effect argues that. a moderate level of inflation can increase investment in
an economy leading to faster growth or at least higher steady state level of
income. This is due to the fact that inflation lowers the return on monetary assets
relative to real assets, such as physical capital. To avoid inflation, investors would
switch from holding their assets as money !or a similar, susceptible to inflation,
form# to investing in real capital projects.
9-
The first three effects are only positive to a few elite, and therefore might not be
considered positive by the general pu
M&(HODS (O *O(RO/
A high inflation rate is undesirable because it has negative conseDuences. However, the
remedy for such inflation depends on the cause. Therefore, government must diagnose its
causes before implementing policies.
MO&(AR) PO/%*)
'nflation is primarily a monetary phenomenon. Hence, the most logical solution to check
inflation is to check the flow of money supply by devising appropriate monetary policy
and carefully implementing such measures. To control inflation, it is necessary to control
total expenditures because under conditions of full employment, increase in total
expenditures will be reflected in a general rise in prices, that is, inflation. 8onetary policy
is used to control inflation and is based on the assumption that a rise in prices is due to
excess of monetary demand for goods and services by the consumersEhouseholds e
because easy bank credit is available to them. 8onetary policy, thus, pertains to banking
and credit availability of loans to firms and households, interest rates, public debt and its
management, and the monetary standard. 8onetary management is aimed at the
commercial banking systems, and through this action, its effects are primarily felt in the
economy as a whole. 5y directly affecting the volume of cash reserves of the banks, can
regulate the supply of money and credit in the economy, thereby influencing the structure
of interest rates and the availability of credit. 5oth these, factors affect the components of
aggregate demand and the flow of expenditure in the economy.
9*
The central bankOs monetary management methods, the devices for decreasing or
increasing the supply of money and credit for monetary stability is called monetary
policy. 1entral banks generally use the three Duantitative measures to control the volume
of credit in an economy, namely.
7aising bank rates
(pen market operations and
Kariable reserve ratio
However, there are various limitations on the effective working of the Duantitative
measures of credit control adapted by the central banks and, to that extent, monetary
measures to control inflation are weakened. 'n fact, in controlling inflation moderate
monetary measures, by themselves, are relatively ineffective. (n the other hand, drastic
monetary measures are not good for the economic system because they may easily send
the economy into a decline.
'n a developing economy there is always an increasing need for credit. Irowth
reDuires credit expansion but to check inflation, there is need to contract credit. 'n such an
encounter, the best course is to resort to credit control, restricting the flow of credit into
the unproductive, inflation"infected sectors and speculative activities, and diversifying the
flow of credit towards the most desirable needs of productive and growth"inducing sector.
't should be noted that the impression that the rate of spending can be controlled
rigorously by the contraction of credit or money supply is wrong in the context of modern
economic societies. 'n modern community, tangible, wealth is typically represented by
claims in the form of securities, bonds, etc., or near moneys, as they are called. %uch near
94
moneys are highly liDuid assets, and they are very close to being money. They increase
the general liDuidity of the economy. 'n these circumstances, it is not so simple to control
the rate of spending or total outlays merely by controlling the Duantity of money. Thus,
there is no immediate and direct relationship between money supply and the price level,
as is normally conceived by the traditional Duantity theories. &hen there is inflation in an
economy, monetary restraints can, in conjunction with other measures, play a useful role
in controlling inflation.
'%S*A/ M&AS,R&S
/iscal policy is another type of budgetary policy in relation to taxation, public borrowing,
and public expenditure. To curve the effects of inflation and changes in the total
expenditure, fiscal measures would have to be implemented which involves an increase in
taxation and decrease in government spending. 0uring inflationary periods the
government is supposed to counteract an increase in private spending. 't can be cleared
noted that during a period of full employment inflation, the aggregate demand in relation
to the limited supply of goods and services is reduced to the extent that government
expenditures are shortened. Along with public expenditure, governments must
simultaneously increase taxes that would effectively reduce private expenditure, in an
effect to minimie inflationary pressures. 't is known that when more taxes are imposed,
the sie of the disposable income diminishes, also the magnitude of the inflationary gap in
regards to the availability of the supply of goods and services. 'n some instances, tax
policy has been directed towards restricting demand without restricting level of
production. /or example, excise duties or sales tax on various commodities may take
away the buying power from the consumer goods market without discouraging the level
99
of production. However, some economists point out that this is not a correct way of
combating inflation because it may lead to a regressive status within the economy.
As a result, this may lead to a further rise in prices of goods and services, and inflation
can spread from one sector of the economy to another and from one type of goods and
services to another. Therefore, a reduction in public expenditure, and an increase in taxes
produces a cash surplus in the budget. ?eynes, however, suggested a programmed of
compulsory savings, such as deferred pay as an anti"inflationary measure. 0eferred pay
indicates that the consumer defers a part of his or her wages by buying savings bonds
!which, of course, is a sort of public borrowing#, which are redeemable after a particular
period of time, this is sometimes called forced savings. Additionally, private savings have
a strong disinflationary effect on the economy and an increase in these is an important
measure for controlling inflation. Iovernment policy should therefore, include devices
for increasing savings. A strong savings drive reduces the spendable income of the
consumers, without any harmful effects of any kind that are associated with higher
taxation. /urthermore, the effects of a large deficit budget, which is mainly responsible
for inflation, can be partially offset by covering the deficit through public borrowings. 't
should be noted that it is only government borrowing from non"bank lenders that has a
disinflationary effect. 'n addition, public debt may be managed in such a way that the
supply of money in the country may be controlled. The government should avoid paying
back any of its past loans during inflationary periods, in order to prevent an increase in
the circulation of money. Anti"inflationary debt management also includes cancellation of
public debt held by the central bank out of a budgetary surplus.
/iscal policy by itself may not be very effective in combating inflation6 therefore a
combination of fiscal and monetary tools can work together in achieving the desired
outcome.
9;
D%R&*( M&AS,R&S O' *O(RO/
0irect controls refer to the regulatory measures undertaken to convert an open inflation
into a repressed one. %uch regulatory measures involve the use of direct control on prices
and rationing of scarce goods. The function of price control is a fix a legal ceiling, beyond
which prices of particular goods may not increase. &hen ceiling prices are fixed and
enforced, it means prices are not allowed to rise further and so, inflation is suppressed.
$nder price control, producers cannot raise the price beyond a specified level, even
though there may be a pressure of excessive demand forcing it up. /or example, during
wartimes, price control was used to suppress inflation. 'n times of the severe scarcity of
certain goods, particularly, food grains, government may have to enforce rationing, along
with price control. The main function of rationing is to divert consumption from those
commodities whose supply needs to be restricted for some special reasons6 such as, to
make the commodity more available to a larger number of households. Therefore,
rationing becomes essential when necessities, such as food grains, are relatively scarce.
7ationing has the effect of limiting the variety of Duantity of goods available for the good
cause of price stability and distributive impartiality. However, according to ?eynes,
rationing involves a great deal of waste, both of resources and of employment. Another
control measure that was suggested is the control of wages as it often becomes necessary
in order to stop a wage"price spiral. 0uring galloping inflation, it may be necessary to
apply a wage"profit freee. 1eilings on wages and profits keep down disposable income
and, therefore the total effective demand for goods and services.
(n the other hand, restrictions on imports may also help to increase supplies of essential
commodities and ease the inflationary pressure. However, this is possible only to a
9,
limited extent, depending upon the balance of payments situation. %imilarly, exports may
also be reduced in an effort to increase the availability of the domestic supply of essential
commodities so that inflation is eased. 5ut a country with a deficit balance of payments
cannot dare to cut exports and increase imports, because the remedy will be worse than
the disease itself.
'n overpopulated countries like 'ndia, it is also essential to check the growth of the
population through an effective family planning programmed, because this will help in
reducing the increasing pressure on the general demand for goods and services. Again, the
supply of real goods should be increased by producing more. &ithout increasing
production, inflation just cannot be controlled. %ome economists have even suggested
indexing in order to minimie certain ill"effects of inflation. 'ndexing refers to monetary
corrections through periodic adjustments in money incomes of the people and in the
values of financial assets such as savings deposits, which are held by them in relation to
the degrees of price rise. 5asically, if the annual price were to rise to 4-@, the money
incomes and values of financial assets are enhanced by 4-@, under the system of
indexing. 'ndexing also saves the government from public wrath due to severe inflation
persisting over a long period. 1ritics, however, do not favor indexing, as it does not cure
inflation but rather it encourages living with inflation. Therefore, it is a highly
discretionary method.
'n general, monetary and fiscal controls may be used to repress excess demand but direct
controls can be more useful when they are applied to specific scarcity areas. As a result,
anti"inflationary policies should involve varied programmed and cannot exclusively
depend on a particular type of measure only.
92
O(H&R MO&(AR)
PH&OM&A
'n ?eynesO view, rising prices in all situations cannot be termed as inflation. 'n a
condition of under"employment, when an increase in money supply and rising prices are
accompanied by the expansion of output and employment, but when*here are bottlenecks
in the economy, an increase in money supply may cause cost and prices to rise more than
the expansion of output and employment. This may be termed as semi"inflation or
reflation till the ceiling of full employment is reached. (nce full employment level is
reached, the entire increase in money supply is reflected simply by the rising prices " the
real inflation.
'ncidentally, ?eynes mentions the following four related terms while discussing the
concept of inflation.
0eflation
0isinflation
7eflation
%tagflation
D&'/A(%O
't is a condition of falling prices accompanied by a decreasing level of employment,
output and income. 0eflation is just the opposite of inflation. 0eflation occurs when the
total expenditure of the community is not eDual to the existing prices. 1onseDuently, the
9=
supply of money decreases and as a result prices fall. 0eflation can also be brought about
by direct contractions in spending, either in the form of a reduction in government
spending, personal spending or investment spending. 0eflation has often had the side
effect of increasing unemployment in an economy, since the process often leads to a
lower level of demand in the economy. However, each and every fall in price cannot be
called deflation. The process of reversing inflation without either creating unemployment
or reducing output is called disinflation and not deflation. Therefore, some perceive
deflation as an underemployment phenomenon.
D%S%'/A(%O
&hen prices are falling due to anti"inflationary measures adopted by the authorities, with
no corresponding decline in the existing level of employment, output and income, the
result of this is disinflation. &hen acute inflation burdens an economy, disinflation is
implemented as a cure. 0isinflation is said to take place when deliberate attempts are
made to curtail expenditure of all sorts to lower prices and money incomes for the benefit
of the community.
R&'/A(%O
7eflation is a situation of rising prices, which is deliberately undertaken to relieve a
depression. 7eflation is a means of motivating the economy to produce. This is achieved
by increasing the supply of money or in some instances reducing taxes, which is the
opposite of disinflation. Iovernments can use economic policies such as reducing taxes,
changing the supply of money or adjusting the interest rates6 which in turn motivates the
country to increase their output. The situation is described as semi"inflation or reflation.
9<
S(A0'/A(%O
%tagflation is a stagnant economy that is combined with inflation. 5asically, when prices
are increasing the economy is decreasing. %ome economists believe that there are two
main reasons for stagflation. /irstly, stagflation can occur when an economy is slowed by
an unfavorable supply, such as an increase in the price of oil in an oil importing country,
which tends to raise prices at the same time that it slows the economy by making
production less profitable. 'n the *+=-Ss inflation and recession occurred in different
economies at the same time. 5asically, what happened was that there was plenty of
liDuidity in the system and people were spending money as Duickly as they got it because
prices were going up Duickly. This gave rise to the second reason for stagflation.
9+
%nflation in %ndia
The annualied inflation rate in 'ndia is <.+@ as of June 4-*4, as per the 'ndian 8inistry
of %tatistics and :rogramme 'mplementation. This represents a modest reduction from the
previous annual figure of +.2@ for June 4-**. 'nflation rates in 'ndia are usually Duoted
as changes in the &holesale :rice 'ndex, for all commodities. 8any developing countries
use changes in the 1onsumer :rice 'ndex !1:'# as their central measure of inflation.
However, this method is unsuitable for use in 'ndia, for structural and demographic
reasons. 1:' numbers are typically measured monthly, and with a significant lag, making
them unsuitable for policy use. 'nstead, 'ndia uses changes in the &holesale :rice 'ndex
!&:'# to measure its rate of inflation .:rovisional annual inflation rate based on all 'ndia
;-
general 1:' !1ombined# for Govember 4-*9 on point to point basis !Govember 4-*9
over Govember 4-*4# is **.4;@ as compared to *-.*=@ !final# for the previous month of
(ctober 4-*9. The corresponding provisional inflation rates for rural and urban areas for
Govember 4-*9 are **.=;@ and *-.,9@ respectively. 'nflation rates !final# for rural and
urban areas for (ctober 4-*9 are *-.*+@ and *-.4-@ respectively. The &:' measures
the price of a representative basket of wholesale goods. 'n 'ndia, this basket is composed
of three groups. :rimary Articles !4-.*@ of total weight#, /uel and :ower !*;.+@# and
8anufactured :roducts !2,@#. /ood Articles from the :rimary Articles Iroup account
for *;.9@ of the total weight. The most important components of the 8anufactured
:roducts Iroup are 1hemicals and 1hemical products !*4@#6 5asic 8etals, Alloys and
8etal :roducts !*-.<@#6 8achinery and 8achine Tools !<.+@#6 Textiles !=.9@# and
Transport, ADuipment and :arts !,.4@#.&:' numbers are typically measured weekly by
the 8inistry of 1ommerce and 'ndustry. This makes it timelier than the lagging and
infreDuent 1:' statistic.
%++ue+
The challenges in developing economy are many, especially when in context of the
monetary policy with the 1entral 5ank, the inflation and price stability phenomenon.
There has been a universal argument these days when monetary policy is determined to
be a key element in depicting and controlling inflation. The 1entral 5ank works on the
objective to control and have a stable price for commodities. A good environment of price
stability happens to create saving mobiliation and a sustained economic growth. The
former Iovernor of 75' 1. 7angarajan points out that there is a long"term trade"off
between output and inflation. He adds on that short"term trade"off happens to only
introduce uncertainty about the price level in future. There is an agreement that the
;*
central banks have aimed to introduce the target of price stability while an argument
supports it for what that means in practice.
(he O#timal %nflation Rate
't arises as the basis theme in deciding an adeDuate monetary policy. There are two
debatable proportions for an effective inflation, whether it should be in the range of *"9
per"cent as the inflation rate that persists in the industrialied economy or should it be in
the range of 2"= per"cents. &hile deciding on the elaborate inflation rate certain problems
occur regarding its measurement. The measurement bias has often calculated an inflation
rate that is comparatively more than in nature. %econdly, there often arises a problem
when the Duality improvements in the product are in need to be captured out6 hence it
affects the price index. The consumer preference for cheaper goods affects the
consumption basket at costs, for the increased expenditure on the cheaper goods takes
time for the increased weight and measuring inflation. The 5oskin 1ommission has
measured *.* per cent of the increased inflation in $%A every"annum. The commission
points out for the developed countries comprehensive study on inflation to be fairly low.
Mone- Su##l- and %nflation
The Vuantitative Aasing by the central banks with the effect of an increased money
supply in an economy often helps to increase or moderate inflationary targets. There is a
pule formation between low"rate of inflation and a high growth of money supply. &hen
the current rate of inflation is low, a high worth of money supply warrants the tightening
of liDuidity and an increased interest rate for a moderate aggregate demand and the
avoidance of any potential problems. /urther, in case of a low output a tightened
monetary policy would affect the production in a much more severe manner. The supply
shocks have known to play a dominant role in the regard of monetary policy. The bumper
harvest in *++<"++ with a buffer yield in wheat, sugarcane, and pulses had led to an early
;4
supply condition further driving their prices from what were they in the last year. The
increased import competition since *++* with the trade liberaliation in place have widely
contributed to the reduced manufacturing competition with a cheaper agricultural raw
materials and the fabric industry. These cost"saving driven technologies have often helped
to drive a low"inflation rate. The normal growth cycles accompanied with the
international price pressures has several times being characteried by domestic
uncertainties.
0lo2al (rade
'nflation in 'ndia generally occurs as a conseDuence of global traded commodities and the
several efforts made by The 7eserve 5ank of 'ndia to weaken rupee against dollar. This
was done after the :okhran 5lasts in *++<. This has been regarded as the root cause of
inflation crisis rather than the domestic inflation. According to some experts the policy of
75' to absorb all dollars coming into the 'ndian Aconomy contributes to the appreciation
of the rupee.
W
&hen the $% dollar has shrieked by a margin of 9-@, 75' had made a
massive injection of dollar in the economy makes it highly liDuid and this further
triggered off inflation in non"traded goods. The 75' picture clearly portrays for
subsidiing exports with a weak dollar"exchange rate. All these account for a dangerous
inflationary policies being followed by the central bank of the country. /urther, on
account of cheap products being imported in the country which are made on a high
technological and capital intensive techniDues happen to either increase the price of
domestic raw materials in the global market or they are forced to sell at a cheaper price,
hence fetching heavy losses.
;9
'actor+
There are several factors which help to determine the inflationary impact in the country
and further help in making a comparative analysis of the policies for the same. The major
determinant of the inflation in regard to the employment generation and growth is
depicted by the :hillips curve.
Demand 'actor+
't basically occurs in a situation when the aggregate demand in the economy has exceeded
the aggregate supply. 't could further be described as a situation where too much money
chases just few goods. A country has a capacity of producing just ,,- units of a
commodity but the actual demand in the country is =-- units. Hence, as a result of which
due to scarcity in demand the prices of the commodity rises. This has generally been seen
in 'ndia in context with the agrarian society where due to droughts and floods or
inadeDuate methods for the storage of grains leads to lesser or deteriorated output hence
increasing the prices for the commodities as the demand remains the same.
Su##l- 'actor+
The supply side inflation is a key ingredient for the rising inflation in 'ndia. The
agricultural scarcity or the damage in transit creates a scarcity causing high inflationary
pressures. %imilarly, the high cost of labor eventually increases the production cost and
leads to a high price for the commodity. The energies issues regarding the cost of
production often increases the value of the final output produced. These supply driven
factors have basically had a fiscal tool for regulation and moderation. /urther, the global
level impacts of price rise often impacts inflation from the supply side of the economy.
;;
Dome+tic 'actor+
The underdeveloped economies like 'ndia have generally a lesser developed financial
market which creates a weak bonding between the interest rates and the aggregate
demand. This accounts for the real money gap that could be determined as the potential
determinant for the price rise and inflation in 'ndia. There is a gap in 'ndia for both the
output and the real money gap. The supply of money grows rapidly while the supply of
goods takes due time which causes increased inflation. %imilarly Hoarding has been a
problem of major concern in 'ndia where onions prices have shot high in the sky. There
are several other stances for the gold and silver commodities and their price hike.
&xternal 'actor+
The exchange rate determination is an important component for the inflationary pressures
that arises in the 'ndia. The liberal economic perspective in 'ndia affects the domestic
markets. As the prices in $nited %tates of America rises it impacts 'ndia where the
commodities are now imported at a higher price impacting the price rise. Hence, the
nominal exchange rate and the import inflation are measures that depict the
competitiveness and challenges for the economy.
Value
The inflation rate in 'ndia was recorded at 2.*@ !&:'# in August 4-*9. Historically, from
*+2+ until 4-*9, the inflation rate in 'ndia averaged =.=@ reaching an all time high of
9;.=@ in %eptember *+=; and a record low of "**.9@ in 8ay *+=2. The inflation rate for
:rimary Articles is currently at +.<@ !as of 4-*4#. This breaks down into a rate =.9@ for
/ood, +.2@ for Gon"/ood Agricultural, and 42.2@ for 8ining :roducts. The inflation
rate for /uel and :ower is at *;.-@. /inally, the inflation rate for 8anufactured Articles
is currently at =.9@.
;,
0rowth and inflation in the %ndian econom-
The growth rate of I0: in 'ndia increased from 9., @ in the *+=-s to ,., @ in the *+<-s.
This increase in growth has been attributed to both demand and supply"side factors. 5ut it
has been suggested that X?eynesian expansionF, or the increase in aggregate demand due
to higher government spending and larger fiscal deficits, was primarily responsible for
pushing up growth rates !Joshi and )ittle *++;#. 'n the early *+<-s public investment was
growing rapidly, but in the second half of the decade it slowed down and government
consumption expenditure grew at a much faster pace. The revenue deficit grew, indicating
that government consumption was being financed by borrowing, which entailed interest
and repayment commitments. The success of expansionary fiscal policies in raising
output growth, at least in the short run, can partly be attributed to the underutiliation of
productive capacity in the preceding years. 5y the end of the *+<-s, when output was
above trend levels, fiscal policy continued to be expansionary creating excess demand in
the system !Joshi and )ittle *++;#. The reform of the financial sector consists primarily
of a reduction in the statutory liDuidity ratio and a rationaliation of subsidied credit to
priority sectors, relaxation of interest controls and restrictions on firmsF access to capital
markets, and more autonomy for public sector banks. The major reform in the case of
public sector enterprises consisted of eliminating privileges such as protection from
external and domestic competition and preferential access to budget and bank resources.
Though the condition relating to an effective exit policyFfor the closure or restructuring of
;2
money"losing firms in the private and public sector has not been fulfilled, the reforms
made have largely been in line with the programFs objectives.
Monetar- #olic- and growth8
A noteworthy feature of 'ndian growth process over the last one and a half decades has
been its stability. This is evident from the substantially lower coefficient of variation of
real I0: growth during the post"reform period as compared to that during the pre"reform
period, that is, before the nineties. 't is also important to note that 'ndiaSs growth is driven
by domestic consumption, contributing on an average to almost two"thirds of the overall
demand, while investment and export demand are also accelerating. As consumption is
less volatile component of demand, this has also contributed to reducing the volatility of
I0:. The inflation rate accelerated steadily from an annual average of *.=@ during the
*+,-s to 2.; @ during the *+2-s and further to +.- @ in the *+=-s before easing
marginally to <.- @ in the *+<-s. 'ndia had generally not experienced runaway inflation.
(n the other hand, the volatility in the inflation rate, as measured by the coefficient of
variation, which was fairly high in the *+,-s at ;.;, moved in a narrow band of -.;L*.- in
the subseDuent decades, thus reducing the inflation"risk premium. The pickup in inflation
rate from *+=-s onwards reflected the impact of a sharp rise in money supply growth and
also partly supply shocks from crude oil prices and crop failures. 0emand pressures,
emanating partly from the widening fiscal imbalances, also contributed to inflationary
pressures in the *+<-s. The second half of the *++-s was marked by a significant
turnaround in the inflation outcome reflecting the improved monetary"fiscal interface.
;=
O2<ecti1e+ of the +tud-
To study about the inflation can be demand pull as well as cost push.
;<
To study about the inflation is politically unpopular in 'ndia but fiscal deficit are not.
To know about the most significant cost push factor are fluctuation in agricultural and
industrial output.
To study about the ways of financing fiscal deficit borrowing from 75' and public
borrowing from 75' and inflationary as these increase the total liDuidity with public
To know about the administrative inefficiency in all areas management of rural
development scheme :0%, fertilier subsidy etc.
%m#ortance of the +tud-
The importance of a project report is following.
The study will help to know that what additional features 3 what facilities should
be to increase.
;+
The effect of inflation in developing economies.
't helps in identify reason behind problems.
The importance of project study is that it is helpful to make good knowledge about
the inflation and inflation in developing economies.
't is important to know challenges 3 prospects in view of future with uniDue
suggestions and inflation in developing economies.
Anvironmental factors of inflation are prime influencing elements of change in
economies strategy.
't gives professionals time to anticipate opportunities and time to :lan optional
responses to these opportunities.
't helps professionals to develop an early warning system to prevent threats
emerging out from scenario, or to develop strategies, which can turn a threat.
't forms a basis of aligning the organiation strengths to the changes in the
environment.
,-
Sco#e of the +tud-
The scope of the study for the A %tudy on :erformance 'nflation in 0eveloping
Aconomies is very broad in nature and it shows its effect on the economy and personnel
researches of the industrial enterprise. This study is also very important from research
point of view because it develops an insight in the researcher and knowledge about
various aspects of a research and also the researcher has got experience about the subject.
The purpose of this study is to obtain information about recent rates and effect of inflation
in the economy. The main scope of the study is 'ndian economy as a developing
economy.
,*

Re+earch Methodolog-
7esearch is a common language refers to a search of knowledge. 7esearch is scientific 3
systematic search for pertinent information on a specific topic, infect research is an art of
scientific investigation. 7esearch 8ethodology is a scientific way to solve research
problem. 't may be understood as a science of studying how research is donOt
scientifically. 'n it we study various steps that are generally adopted by researchers in
studying their research problem. 't is necessary for researchers to know not only know
research method techniDues but also technology. The scope of 7esearch 8ethodology is
wider than that of research methods.
The research problem consists of series of closely related activities. At times, the first step
determines the native of the last step to be undertaken. &hy a research has been defined,
what data has been collected and what a particular methods have been adopted and a host
of similar other Duestions are usually answered when we talk of research methodology
,4
concerning a research problem or study. The project is a study where focus is on the
following points.
Re+earch De+ign8$
A research design is defined, as the specification of methods and procedures for acDuiring
the 'nformation needed. 't is a plant or organiing framework for doing the study and
collecting the data. 0esigning a research plan reDuires decisions all the data sources,
research approaches, 7esearch instruments, sampling plan and contact methods. (he
+tud- wa+ de+cri#ti1e kind of re+earch.
7esearch design is mainly of following types.
*. Axploratory research.
4. 0escriptive studies
9. 1ausal studiesEAxperimental studies
3. &x#lorator- re+earch8$
The major purposes of exploratory studies are the identification of problems, the more
precise /ormulation of problems and the formulations of new alternative courses of
action. The design of exploratory studies is characteried by a great amount of flexibility
and ad"hoc veracity.
4. De+cri#ti1e re+earch8$
0escriptive research in contrast to exploratory research is marked by the prior
formulation of specific research Vuestions. The investigator already knows a substantial
amount about the research problem. :erhaps as a 7esult of an exploratory study, before
,9
the project is initiated. 0escriptive research is also characteried by a :replanned and
structured design.
5. *au+al +tudie+=&x#erimental +tudie+
A casual design investigates the cause and effect relationships between two or more
variables. The hypothesis is tested and the experiment is done. There are following types
of casual designs
a. After only with control design
b. 5efore after with control design
c. 5efore after without control design
d. 1onsumer panel design
e. Ax"post facto design
7esearch 0esign has been classified into four subsections they are.
*. %ample selection and sie6
4. %ampling procedure6
9. 0ata collection6 and
;. Analytical tools
Sam#le Selection and +i>e
The first step of research is sample selection, for which the respondents were consumers
in Karanasi city. The total consumers covered were *4-. The same Duestionnaires were
distributed, but only *-- fully"completed Duestionnaires were received. 7esults are based
on the response of these *-- respondents, and in this <- respondent chosen Aveready
batteries.
,;
Sam#ling Procedure
There are basically two methods of sampling."
Pro2a2ilit- +am#ling
't is also known as random sampling. $nder this sampling design every item of the
universe has an eDual chance of inclusion in the sample. 't is, so to say, a lottery method
in which individual units are picked from the whole group not deliberately but by some
mechanical process. Here it blind chance alone that determines whether one item or the
other is selected. The results obtained from probability sampling can be assured in terms
of probability.
on Pro2a2ilit- +am#ling
Gon :robability sampling is that sampling procedure which does not afford any basis for
estimating the probability that each item in the population has been included in the
sample. 'n this type of sampling, items for the sample selected deliberately by the
researcher6 his choice concerning the items remains supreme.
/or the study the consumers are selected by the convenience sampling method.
The selection of units from the population based on their easy availability and
accessibility to the researcher is known as convenience sampling
Data *ollection method
Data *ollection Method
,,
Primar- Secondar-
0irect personal 'nterview
'ndirect personal 'nterview Iovt. publication
'nformation from correspondents 7eport 1ommittees
8ailed Duestionnaire 3 1ommissions :rivate :ublication
Vuestion filled by enumerators 7esearch 'nstitute
The task data collection begins after research problem has been defined. There are two
methods for data collection.
Primar- data
:rimary data may be described as those data that have been observed and recorded by the
researcher for the first time to their knowledge.
Secondar- data
%econdary data are those data which have been already collected and analyed by some
earlier agency for its own use6 and later the same data are used by a different agency.
/or the present study, the survey method was used for collecting primary data. A
structured Duestionnaire was used for the purpose. The Duestionnaire included multiple
choice Duestions. The main source of secondary data has been the leafy journal of
1onsumer 5ehavior, and 'ndian journal of 8arketing. The study employs primary data
collected by communicating with the respondents with the help of structured
Duestionnaire. The study mainly deals with the behavior of individual towards 1onsumer
:reference for Aveready 5atteries in )ucknow.
,2
:ublished %ources $npublished %ources
Anal-tical Data
The data thus collected, was tabulated, interpreted and analyed with a view to make the
study meaningful. 'n the present study, hypothesis testing, percentage, freDuency and
cross tabulation methods have been used for analysis.
Pro1i+ional all %ndia annual inflation rate+ (?) for 'e2ruar- 4@36 in Rural .
(a2le$ 3
1ategory 7ural
/eb.*9 'ndex
Final
/eb.*; 'ndex :rovisional 7ate
!@#
1ereals and products
*4;.< *9=.< *-.;4
:ulses and products
**,.; *4-.* ;.-=
(ils and fats
*;9.9 *;,.4 *.99
Agg, fish and meat
*9;.+ *;<.; *-.-*
8ilk and products
*9,.+ *;+.9 +.<2
1ondiments and spices
*4<., *9<.* =.;=
Kegetables
*4;.* *;,.4 *=.--
/ruits
*9+.= *29.+ *=.94
,=
%ugar etc
***.< *-=.4 ";.**
Gon"alcoholic beverages
*4<., *9<.2 =.<2
:repared meals etc
*4<.- *9+.9 <.<9
/uel and light
*9*.4 *9+.< 2.,,
1lothing, bedding and
footwear
*92.; *;+.< +.<4
Ieneral 'ndex !All
Iroups#
*4<.* *9+.- <.,*
*hart$ 3
Anal-+i+
,<
't is found that inflation rate change in 'e2.35 %ndex 'inal General Index (All
Groups) percentage is the is 128.1 and 'e2.36 %ndex Pro1i+ional General Index (All
Groups) is the 139.0.
%nter#retation
/rom the above analysis the researcher came to know that in !e".13 Index !inal
#139.0 in 'e2.36 %ndex Pro1i+ional in rural.
.
Pro1i+ional all %ndia annual inflation rate+ (?) for 'e2ruar- 4@36 in ,r2an.
(a2le$ 4
1ategory $rban
/eb.*9 'ndex
Final
/eb.*; 'ndex :rovisional Rate
(%)
1ereals and products
*4,.* *9,.= <.;=
:ulses and products
**;., **2.= *.+4
(ils and fats
*;=.+ *9<.< "2.*,
Agg, fish and meat
*9<.2 *,*.9 +.*2
8ilk and products
*9-.< *;,.; **.*2
1ondiments and spices
*4;.2 *9<.; **.-<
Kegetables
**2.< *4,.; =.92
/ruits
*9;.; *,4.= *9.24
%ugar etc
**-.- *--.* "+.--
Gon"alcoholic beverages
*9-.- *;-.4 =.<,
,+
:repared meals etc
*9*.- *;4.4 <.,,
/uel and light
*4+.4 *92.4 ,.;4
1lothing, bedding and
footwear
*9=.9 *;<.; <.-<
Ieneral 'ndex !All
Iroups#
*4,.< *9,.9 =.,,
*hart$ 4
Anal-+i+
't is found that inflation rate change in 'e2.35 %ndex 'inal General Index (All
Groups) percentage is the is 12$.8and 'e2.36 %ndex Pro1i+ional General Index (All
Groups) is the 13$.3.
%nter#retation
/rom the above analysis the researcher came to know that in !e".13 Index !inal
#13$.3in 'e2.36 %ndex Pro1i+ional in rural.
2-
%nflation i+ cree#ing u# acro++ the countrie+
(a2le$ 5
1ountry 4-*4 !@# 4-*9!@#
7ussia 2 *-
'ndia *; <
5rail , =
1hina 9 ,
Japan "4 *
*hart$ 5
2*
Anal-+i+
't is found that in 2012creeping inflation is *;@ and in 4-*9 its became <@ .
%nter#retation
/rom the above analysis the researcher came to know that creeping inflation decrease in
'ndia in 4-*9 with 2 @ .
24
'inding+
'n rural Inflation rate change in /eb.*9 'ndex /inal Ieneral 'ndex !All Iroups#
percentage is the is *4,.<@and /eb.*; 'ndex :rovisional Ieneral 'ndex !All
Iroups# is the *9,.9@.
'n urban inflation rate change in /eb.*9 'ndex /inal Ieneral 'ndex !All Iroups#
percentage is the is *4,.<@and /eb.*; 'ndex :rovisional Ieneral 'ndex !All
Iroups# is the *9,.9@.
in 4-*4creeping inflation is *;@ and in 4-*9 its became <@.
5etween July 4--= and June 4--<,global food 5etween July 4--= and June
4--<,global food grain prices had gone up ;,@6in 'ndia they had grain prices had
gone up ;,@6in 'ndia they had risen only 2@.
&orld oil prices had risen +9@, domestic oil prices &orld oil prices had risen
+9@, and domestic oil prices a fraction of that.
The only commodities whose domestic prices had The only commodities whose
domestic prices had gone up in tandem with global prices were edible gone up in
tandem with global prices were edible oils, whose global prices had risen +2@.
(ils, whose global prices had risen +2@.
Half of the rise in &:' was due to minerals.
29
'ron ore prices had shot up owing to global 'ron ore prices had shot up owing to
global shortage, while 'ndia is an important exporter.
The rise in 'ron ore prices along with coal and oil the rise in 'ron ore prices along
with coal and oil prices had positive impact on rise of %teel prices.
8inerals thus accounted for a half of the rise in 8inerals thus accounted for a half
of the rise in &:'6 along with oil and steel they contributed to WPI; along with oil
and steel they contributed to two thirds of rise.
'nflation calculated according to Thus 'nflation calculated according to &:' over
last few months is irrelevant to &:' over last few months is irrelevant to peopleOs
cost of living.
'nflation according to consumer price 'nflation according to consumer price index
for the industrial workers went up index for the industrial workers went up to
=.+@ in 8arch, 202 fro! "."% in to #.$% in %arch& 202 fro! "."% in
February; 202and is stable at that February& 202 and is stable at that le'el.
Recommendation+
After completion of the research work the researcher came to some conclusions which
could help the economy in development 3 improvement of process. This is helpful in
future development of the developing economy. The following points come in the
suggestion parts which came after the analysis and conclusion of the research."
2;
(n the basis of this study, it can be recommended to keep the inflation below the level of
= percent in the economy. Therefore, the policy makers and the %tate 5ank of 'ndia
should concentrate on those options which keep the inflation rate stable and below the
level which has been found helpful for the achievement of sustainable economic growth.
8oderate and stable inflation is also helpful for minimiing the fluctuations and
uncertainties in the financial sector of economy, which, in turn, boost the capital
formation activities in the country. %o that it may exert its positive effects on the
economy. %o, maintaining price stability will ultimately be the best policy
recommendation to stable and sustained economic growth of the economy.
The recommendations by the 75' 1ommittee are set out in this 1hapter.
'nflation should be the nominal anchor for the monetary policy framework. This
nominal anchor should be set by the 7eserve 5ank as its predominant objective of
monetary policy in its policy statements.
The 75' should adopt the new 1:' !combined# as the measure of the nominal
anchor for policy communication. The nominal anchor should be defined in terms
of headline 1:' 'nflation, which closely reflects the cost of living and influences
inflation expectations relative to other available metrics.
The nominal anchor or the target for 'nflation should be set at ; per cent with a
band of QE" 4 per cent around it .
'n view of the elevated level of current 1:' 'nflation and hardened 'nflation
expectations, supply constraints and weak output performance, the transition path
to the target one should be graduated to bringing down 'nflation from the current
level of *- per cent to < per cent over a period not exceeding the next *4 months
2,
and to 2 per cent over a period not exceeding the next 4; month period before
formally adopting the recommended target of ; per cent 'nflation with a band of
QE" 4 per cent. The 1ommittee is also of the view that this transition path should
be clearly communicated to the public.
Administered setting of prices, wages and interest rates are significant
impediments to monetary policy transmission and achievement of the price
stability objective, reDuiring a commitment from the Iovernment towards their
elimination.
8onetary policy decision"making should be vested in a monetary policy
committee.
'n view of the freDuency of data availability and the process of revisions in
provisional data, the 8:1 will ordinarily meet once every two months, although it
should retain the discretion to meet and recommend policy decisions outside the
policy review cycle .
The 75' will also place a bi"annual 'nflation report in the public domain, drawing
on the experience gained with the publication of the document on 8acroeconomic
and 8onetary 0evelopments.
As an overarching prereDuisite, the operating framework has to sub serve stance
and objectives of monetary policy. Accordingly, it must be redesigned around the
central premise of a policy rule.
The Axpert 1ommittee to 7evise and %trengthen the 8onetary :olicy /ramework
several variants are available in the literature and in country practice, the
22
1ommittee is of the view that a simple rule defined in terms of a real policy rate
!that is easily communicated and understood#.
&hen 'nflation is above the nominal anchor, the real policy rate is expected, on
average, to be positive. The 8:1 could decide the extent to which it is positive,
with due consideration to the state of the output gap !actual output growth relative
to trendEpotential# and to financial stability.
'n addition to the above, the 75' should engage proactively in the development of
vibrant financial market segments, including those that are missing in the
spectrum, with regulatory initiatives that create depth and instruments, so that
risks are priced, hedged, and managed onshore.
*onclu+ion+
After completing this report, we should have some insight into inflation and its effects.
/or starters, you now know that inflation isnSt intrinsically good or bad. )ike so many
things in life, the impact of inflation depends on your personal situation.
2=
/rom above analysis we can conclude as follows6
%ome points to remember.
'nflation is a sustained increase in the general level of prices for goods and
services.
&hen inflation goes up, there is a decline in the purchasing power of money.
Kariations on inflation include deflation, hyperinflation and stagflation.
Two theories as to the cause of inflation are demand"pull inflation and cost"push
inflation.
&hen there is unanticipated inflation, creditors lose, people on a fixed"income
lose, Nmenu costsN go up, uncertainty reduces spending and exporters arenSt as
competitive.
)ack of inflation !or deflation# is not necessarily a good thing.
'nflation is measured with a price index.
The two main groups of price indexes that measure inflation are the 1onsumer
:rice 'ndex and the :roducer :rice 'ndexes.
'nterest rates are decided in the $.%. by the /ederal 7eserve. 'nflation plays a
large role in the /edSs decisions regarding interest rates.
'n the long term, stocks are good protection against inflation.
'nflation is a serious problem for fixed income investors. 'tSs important to
understand the difference between nominal interest rates and real interest rates.
'nflation"indexed securities offer protection against inflation but offer low returns.
2<
/imitation+ of the Re+earch
The time available to conduct the study is little6 it being a wide topic has a limited
time.
)imited resources are available to collect the information about the inflation on
developing economies.
0eveloping economies are so much volatile and it is difficult to forecast anything
about it whether you trade online or offline.
2+
%ome of the aspects may not be covered in my study, its gives knowledge about
inflation small prospects and its challenges.
'n a rapidly changing, analysis on one day or in one segment can change very
Duickly. The environmental changes are vital to be considered in order to
assimilate the findings.
The foremost limitation is regarding the sources of information. The information
contained has been obtained from sources believed to be reliable and in good
faith, but which may not be verified independently.
The limitation is that some of the calculations are based on certain assumptions
considered appropriate.
Bi2liogra#h-
Book+=Maga>ine+ Referred8$
Aotler! Phili# " Arm+trong! 0raw$ BPrinci#le of MarketingC!
:earson Aducation, Gew 0elhi 4--=. :ublisher" 0orling
?indersley !'ndia# :vt. )td.
Aotler! Phili#$ Marketing ManagementC8 Anal-+i+! #lanning!
%m#lementation+ " control! :earson Aducation, Gew 0elhi
4--9, **
t h
Adition.
Aothari *. R. 7 BRe+earch Methodolog-C 4
nd
revised edition
4--; published by Gew Age 'nternational )td.
=-
Beri$ Marketing Re+earchC ((ata Mc 0raw$Hill)! *++9 4
nd
Adition.
BMarketing Strateg- and ManagementC$ Mr. Michael D.
Baker.
0u#ta *B$BAn %ntroduction to Stati+tical Method !Kikas#C!
*++,, +
t h
Adition.
&1eread- %n$hou+e ew+letter+
E
B,S%&SS MA0AF%& " &.S PAP&R8
The Times of 'ndia
The Aconomic Ti mes
;:s, :itch, 5usiness 3 Aconomy
5usiness &ord3 5usiness %tandard
5usiness Today
5usiness
%nternet8
=*
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=4