Trends of inflation in indai
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Just like any other indicator, there are fluctuations, and therefore, trends in the CPI (or WPI). Generally, an inflation rate of 1-3% is considered to be healthy, although that would depend upon the nature of the economy. the resources it has it's disposal, the political climate engulfing the economy and a gazillion other reasons that need to be accounted for here.
(Don't take the rate window to heart. You will get 3 different answers from 2 different people if you ask them about the acceptable rate window)
Historically, India was (and is) a developing country. If you see the data from the last 4 months (Aug 14- Nov 14), the inflation rate has been in a record decline. Here are the inflation rates:
CPI Aug 2014: 7.73%
CPI Sep 2014: 6.46%
CPI Oct 2014: 5.52%
CPI Nov 2014: 4.38%
The CPI for Nov 2014 is the record lowest inflation rate recorded in the period 2012-2015. You could say we are going through a period of disiflation.
If you see the data for the period dated 2012-2015, there have been many extreme fluctuations in the inflation rate.
At the beginning of 2012, the inflation index measured 7.55% (Jan 2012), and shot up to in 11.16% in Nov 2013, before diving to 4.38% in Nov 2014.
For an in-depth month-wise inflation index, you could visit 300.000 INDICATORS FROM 196 COUNTRIES and see for yourself the various inflation rate data of other countries. What do you see when you compare the inflation rates of developed and under-developed countries to those of India's? Do you see a trend?
3. What is the impact of inflation on the Indian economy and the Indian individual?
This is a fascinating question, one that has a plethora of answers, some of them completely antagonistic to one another, depending upon the person's domain.
There is a reason why India's central bank, the Reserve Bank of India (RBI) is autonomous, aloof from the outreached hands of the Central Government.
There is a two-pronged approach towards controlling the economy, namely, the Fiscal Policy and the Monetary Policy.
Fiscal Policy: Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. The tax and expenditure programs levied and undertaken by the government are the drivers of the fiscal policy.
Monetary Policy: The Monetary Policy is governed by the nation's central bank (in this instance, the RBI) to control the money supply in the economy to maintain price stability and attain high economic growth. The central bank achieves this by controlling the interest rates.
Now, you have surely picked up the word inflation because of it being increasingly thrown around these days, in policy debates or hogging the headlines in those pink-colored newspapers.
"Does the monetary policy alone wag the tail of inflation?"
If the RBI decides to opt for low interest rates, then the money supply would grow fast, and people will have more money to spend. Consequently, there will be a greater demand for goods and services for consumption, thereby exerting an upward push on the total demand (called Aggregate Demand), resulting in inflation, as producers will charge more for a commodity beacuse of it's sheer demand.
(Don't take the rate window to heart. You will get 3 different answers from 2 different people if you ask them about the acceptable rate window)
Historically, India was (and is) a developing country. If you see the data from the last 4 months (Aug 14- Nov 14), the inflation rate has been in a record decline. Here are the inflation rates:
CPI Aug 2014: 7.73%
CPI Sep 2014: 6.46%
CPI Oct 2014: 5.52%
CPI Nov 2014: 4.38%
The CPI for Nov 2014 is the record lowest inflation rate recorded in the period 2012-2015. You could say we are going through a period of disiflation.
If you see the data for the period dated 2012-2015, there have been many extreme fluctuations in the inflation rate.
At the beginning of 2012, the inflation index measured 7.55% (Jan 2012), and shot up to in 11.16% in Nov 2013, before diving to 4.38% in Nov 2014.
For an in-depth month-wise inflation index, you could visit 300.000 INDICATORS FROM 196 COUNTRIES and see for yourself the various inflation rate data of other countries. What do you see when you compare the inflation rates of developed and under-developed countries to those of India's? Do you see a trend?
3. What is the impact of inflation on the Indian economy and the Indian individual?
This is a fascinating question, one that has a plethora of answers, some of them completely antagonistic to one another, depending upon the person's domain.
There is a reason why India's central bank, the Reserve Bank of India (RBI) is autonomous, aloof from the outreached hands of the Central Government.
There is a two-pronged approach towards controlling the economy, namely, the Fiscal Policy and the Monetary Policy.
Fiscal Policy: Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. The tax and expenditure programs levied and undertaken by the government are the drivers of the fiscal policy.
Monetary Policy: The Monetary Policy is governed by the nation's central bank (in this instance, the RBI) to control the money supply in the economy to maintain price stability and attain high economic growth. The central bank achieves this by controlling the interest rates.
Now, you have surely picked up the word inflation because of it being increasingly thrown around these days, in policy debates or hogging the headlines in those pink-colored newspapers.
"Does the monetary policy alone wag the tail of inflation?"
If the RBI decides to opt for low interest rates, then the money supply would grow fast, and people will have more money to spend. Consequently, there will be a greater demand for goods and services for consumption, thereby exerting an upward push on the total demand (called Aggregate Demand), resulting in inflation, as producers will charge more for a commodity beacuse of it's sheer demand.
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