MoneyIndianEconomy: Inflation

Showing posts with label Inflation. Show all posts

Monday, 23 July 2018

Inflation: What Is Inflation?

Prafulla Anilkar July 23, 2018 0

Causes of inflation

money Indian economy

Inflation is the increase in the general cost of goods and services. Showing the percentage change in a reference period as an index is the index of inflation.

The main reason for the inflation is to increase demand and decrease in supply. Also, the increase in money supply or the low interest rates also lead to increase demand.

Causes of inflation:

It can be classified in two ways

1) Demand Pull Inflation

2) Cost push Inflation

1) Demand Pull Inflation

a) Increase in money supply

b) Increase in disposable income

c) Increase in Foreign Investments

2) Cost Push Inflation

a) Increased labor costs

b) increase indirect taxes

c) Export growth

d) Inadequate infrastructure

Effect of Inflation

1) Financial turnaround :

Increase in inflation leads to higher profits to producer. He makes a new investment through a higher profit. For this new workers are appointed. So unemployed jobs are available. As a result, there is an increase in the income of the people and overall demand is increased. But if the price goes up too much it can have adverse effects.

2) Change in the format of the product:

During the inflation period, the production of some commodities increases rapidly. Some of them remain stable Some of them decreasing. As a result, the resources are transferred from one production area to the second production area.

3) Creditors and borrowers:

If the lender has a loss due to inflation, then the borrowers benefit.

4) Fixed pay rollers and Salaried person:

Salaries for the laborers' wage or salaried person will be stable. So they lose them.

Investor:

During the time of inflation, Get benefit those investors who invest in share capital . However, investors who invest in securities or bonds that have no higher profit . .

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Saturday, 21 July 2018

Consumer Price Index (CPI)

Prafulla Anilkar July 21, 2018 0

Consumer Price Index

money Indian economy

CPI is calculated by measuring the price of various commodities at the customer level in the economy. In India, CPI-IW, CPI-AL,CPI-RL and CPI-UNME

These four different types of different people are counted differently for the group.
CPI-C (Consumer Price Index-combined) is calculated for the whole of India. The index will be published by the Central Statistical Organization(CSO).

Since 18th February 2011, rural India was being measured as CPI-Rural and CPI-Urban for urban areas began to be measured. Average calculation of these two indicators is expressed as an CPI-C. For 2010 was considered to be the base year. In addition to the 225 commodities and services for the rural area and the cost of 250 items and services for urban areas,

Since February 2015, 2012 is considered to take into account the new Base Year.
448 goods and services for rural areas And for urban areas 460 items and services were measured. According to states, the number of goods and services is different.
The following types of goods and services are considered when calculating CPI.

1) Food and Beverage - Food, meat, milk, oil, etc.

2) Pan and Tobacco - Tobacco and Intoxicants

3) Clothes and footwear

4) Home - (This component is considered for urban areas only. Not applicable for rural areas.)

5) Fuel and light

6) Others - In these households and services are considered. For example health,
transport, entertainment, education etc.

The above 6 factors are given as the weighted average of measuring CPI

Sr.	Factor	Rural	Urban	Combined
1	Food and Beverage	54.18%	36.29%	45.86%
2	Pan and Tobacco	3.26%	1.36%	2.38%
3	Clothes and footwear	7.36%	5.57%	6.53%
4	Home	------	21.67%	10.07%
5	Fuel and light	7.94%	5.58%	6.84%
6	Other	27.26%	29.53%	28.32%
	Total	100%	100%	100%

As per the new method, CSO used the survey done by the NSSO (Mix Recall Period) method.

Since 2014, CFPI (Consumer Food Price Index ) are published independently and based on prices of food items only.

Headline Inflation:
Headline inflation is said to be based on the Consumer Price Index (CPI) for all goods and services (448 for rural and 460 for urban and considering services and services).

Core Inflation:
Core inflation is the measurement rate of commodities and services leaving food items and fuel components

RBI policy

WPI Headline Inflation was considered before 2014. After deciding on the strategy for the currency.Consumer Headline Inflation is considered in the context of Urjit Patel Committee's recommendation since April 2014.

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Friday, 20 July 2018

Inflation index-(WPI)

Prafulla Anilkar July 20, 2018 0

Inflation Index

money indianeconomy

In the last article we saw the types of inflation. In this article, we will see the inflation index.

There are two types of inflation index in the Indian economy.

1) Wholesale price index

2) Retail price index

Wholesale price index

Measures the wholesale price index by calculating the price of various commodities at the wholesale level in the economy. The Wholesale Price Index is published by the Consultative Department of the Ministry of Commerce and Industry of India.

In India, the wholesale price index was first calculated in 1942, in which prices of 23 items and 23 price samples were considered. After this, the wholesale price index was published regularly since 1947

Base year:

Price Indexes are considered as a special base year's . Based on the recommendation of the Abhijit Sen Gupta Committee from 2010. 2004-2005 it was considered as the base year, but it has recently been changed. Currently, the base year is not 2004-2005 , 2011-2012 is the new base year.The Wholesale Price Index (WPI) series in India has undergone six revisions in 1952-53, 1961-62, 1970-71, 1981-82, 1993-94 and 2004-05 so far. The current series is the seventh revision. The revision entails shifting the base year to 2011-12 from 2004-05, changing the basket of commodities and assigning new weights to the commodities. It has generally been the practice to undertake the revisions on the advice of a Working Group constituted

each time. For the new series with base 2011-12=100, a Working Group was constituted on 19th March 2012 chaired by Late Dr. Saumitra Chaudhuri, Member, erstwhile Planning Commission and comprised most stakeholders.

WPI INDEX Changes from 2004-05 to 2011-12

Major Group	Weights		No. of Items		No. of
Major Group	Weights		No. of Items		Quotations
					Quotations

	2004-05	2011-12	2004-05	2011-12	2004-05	2011-12

ALL COMMODITIES	100.00	100.00	676	697	5482	8331

PRIMARY ARTICLES	20.12	22.62	102	117	579	983

FUEL & POWER	14.91	13.15	19	16	72	442

MANUFACTURED	64.97	64.23	555	564	4831	6906
PRODUCTS	64.97	64.23	555	564	4831	6906
PRODUCTS

The index basket of the new series has a total of 697 items including 117 items for Primary Articles, 16 items for Fuel & Power and 564 items for Manufactured Products.

Consumer Price Index:

CPI is calculated by measuring the prices of various commodities at the customer level. Different CPI numbers are counted for different types of community groups. You will find out about this in the next article.