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V Food price inflation is

defined as a persistent
and appreciable rise in
general level of food
prices over the period of
time
V It is also an erosion in the
purchasing power of
money
V When the price level
rises, each unit of
currency buys fewer
goods.
V ` 
 When there is increase in aggregate
demand of goods not matched by aggregate supply it
results in rise of general price level

V `   
  government-By creating new money
, the purchasing power of commodity increases without a
simultaneous increase in the production of goods. This
leads to rise in the general price level.

V M  

dIt occurs when there is increase in
input cost of production

V     -Higher prices force workers to ask for


higher wages. If they get their way, then producers try to
recover with higher prices.
V M    It is a
situation in which the rise in
general price level is at a very
slow rate over a period of time

V 2   Ànder
running inflation, the price
increases is about 8% to 10%
per annum.

V {    It is a stage


of inflation which starts after
the level of full employment is
reached. Here price level rises
very rapidly within a short
period
V     It is a
stage when the rise in
price level gets out of
control.

V 3    
When price level is
suppressed by the short
term measures like
rationing, it results in
many evils such black
marketing & corruption
V ©    when
the general price level rises
due to an increase in the
cost of production of goods
and partly due to rise in
supply of money before the
full employment stage is
reached.

V    Full
inflation prevails when the
economy has reached the
level of full employment.
V WPI-Whole sale price index
V CPI-Consumer price index

V WPI measures the change in the average price level of


goods in wholesale market

V It is tracked through the total of 435 commodities

V Recently around 15% of commodities were reduced in wpi


calculation

V In India WPI is used to measure rate of inflation


V The Consumer Price Index (CPI) is based on the final prices of
goods at the retail level.

V CPI is a fixed quantity price index and considered by a cost of


living index

V Difference between WPI & CPI represents the intensity & rate at
which inflation affects consumers.

V WPI is calculated in a weekly basis and CPI monthly there is a 2


week time lag this is one of the reasons why India prefers WPI
over CPI

V In India, there are four different types of CPI indices,


The four CPI series are:
1. CPI Industrial Workers
2. CPI Àrban Non-Manual Employees
3. CPI Agricultural laborers'
4. CPI Rural labor.
£3 

 
 
    
V ºovernment should improve
storage facilities

V In 2008 India lost 58000 crore


worth of agricultural food items
because of inadequate storage

V ºovernment should help the


farmers adopt latest technology
to improve per hectare
agricultural yield which is
currently half of China

V Crackdown on hoarders and


black marketers
è Allowing the private sector to import and store the
primary agricultural commodities at zero import duty

è Ànload the wheat inventory ºovernment has in its


buffer stock

è ©  M
 

è Changes in taxation
è Changes in ºovt. expenditure
è Public borrowing
è Balanced budget changes
è Control of deficit financing
£ 

    

 
V 43% of the personal disposable income goes into food products

V Middle and Lower Income segment is experiencing highest inflation

V Consumers cut back on their spending

V Prefer going for fixed deposits currently yielding only around 8-10%

V Inflation for an average household is easily around 12-15% (even


education, health and housing cost are going up

V Large section of the population is losing out on their purchasing


power without realizing about it
V  en market o erations

V Variation in bank rates

V Credit rationing

V Varying reserve requirements

V Consumer credit regulations.


[ Regulate the interest rate, availability of credit

V Increased interest rate increase the cost of borrowing,


reducing s ending

V Increased interest rates make it more attractive to


save money

V Increased interest rates reduces the dis osable


income of those with mortgages

[ It is a Traditional A roach
V Im ortant for the ºovernment to control the FPI

V Ensure that these circumstances do not arise again in


the future.

V As mentioned earlier there are several ways of curbing


FPI

V It is only that the ºovernment needs to be more


roactive rather than being reactiveO
Pre ared By:

Abhinav Arora
Aditya Jain
ºur reet Singh
Karan Mehta
Kushal Badlani
Sahil Arora
Sushank Kukreja