Well, we're talking of soaring inflation rates which is a cause of worry for every citizen concerned. Not in India, this has been the hot potato for every country concerned. And this hot potato can't be dropped all of a sudden.
Whenever the word inflation comes to our mind, what we start thinking??? Inflation is causing us to pay more and all that.. As per oxford dictionary, inflation is a general increase in prices and fall in the purchasing value of money. As per economic definitions, inflation is may be defined as- more money chasing few goods.
The topic of Inflation is very sensitive and in the past, the governments have paid heavy prices for not controlling its soaring rate. Many economists believe that high rates of inflation are caused by high rates of growth of the money supply. If we look on the factors that determine moderate rates of inflation are more varied: changes in inflation are sometimes attributed to fluctuations in real demand for goods and services or in available supplies (i.e. changes in scarce), and sometimes to changes in the supply or demand for money. In the mid-twentieth century, two camps disagreed strongly on the main causes of inflation at moderate rates: the "monetarists" argued that money supply dominated all other factors in determining inflation, while "others" argued that real demand was often more important than changes in the money supply.
Inflation can be measured in multiple ways, like different price indices that affect different class of people. It can be done by Consumer Price Indices (CPI), Cost of living Indices (COLI), Gross Domestic Product Deflater (GDP Deflater), etc.
The general people or "The aam aadmi" wants to know, why the government has not been able to stem the soaring inflation rate?
As far as I'm concerned, there are no concrete ways to completely stop the inflation rate, but there is every possibility to keep it under control, rather comfort zone where it doesn't hurts or burn a hole into the "Aam aadmi's pocket"....
1.) Repo rate: Repo rate is the rate at which the Reserve Bank of India (RBI) lends money to other banks. Now when the inflation rates are zooming, the government (RBI) increases the repo rate by some basis points, which results in the rise in the interest rates on the loans. This encourages more savings by the people and the money gets parked into their savings acounts in the banks. When the rates are high people automatically stop spending more and hence it helps in checking the inflation rate. Moreover the increase in repo rate is not a welcome move, but definitely it helps in getting hold of inflation upto some extent.
2.) Rise in petroleum prices: As on 14/06/2008 the price of crude oil is $135 per barrel, which was a reason enough for the government to increase the price of petroleum products in order to save the bleeding navratnas, rather Oil Marketing Companies (OMC). This step will further add fuel to the inflation fire. But, one should remember that our OMCs were running out of cash and government was keeping the prices of petro products artificially low, which was not in favour of OMC. Finally, the government was forced to take the difficult decision of increasing the prices. And due to this, there has been further increase in the prices of essential commodities. We can't overcome the petroleum problem unless we start using it effectively. The respective state governments has to slash the sales tax duty in order to contain inflation marginally.
3.) Growth rate & Inflation: Our economy has shown impressive growth rate over the years and the GDP rate has been well over 8% mark. It'll show continuous improvement in the coming years also. Some economists have argued that, in the past inflation levels were low and it was good for us. But, as far as I'm concerned, in the past when the inflation levels were very low (say 2-4%), our growth rate was dismal. Whereas as the economy opened up and more FDIs and FIIs started pouring into our country, GDP rate surged ahead and alongside that inflation levels also increased. Purchasing power of people increased, now there is sizable population in the middle class category, which is a good sign for our economy. I'd prefer to have, say a growth rate of 10% and inflation rate of 6% as compared to the growth rate of 5% and inflation rate of 2%. Because, more is the GDP rate of our country, more is the chances of we becoming a developed nation.
4.) A ray of light at the end of tunnel: Well, all is not over for us and let's not loose heart over it, that inflation has burnt a hole into our pockets. Where growth is there, inflation will be also there. And moreover, as the crude oil prices calm down we'll see a downward trend in the inflation rate.
So, dear friends let's not loose heart and hope for the best, because in 2020 we are gonna rock the world... Hey world here comes India, at it's very best....
Whenever the word inflation comes to our mind, what we start thinking??? Inflation is causing us to pay more and all that.. As per oxford dictionary, inflation is a general increase in prices and fall in the purchasing value of money. As per economic definitions, inflation is may be defined as- more money chasing few goods.
The topic of Inflation is very sensitive and in the past, the governments have paid heavy prices for not controlling its soaring rate. Many economists believe that high rates of inflation are caused by high rates of growth of the money supply. If we look on the factors that determine moderate rates of inflation are more varied: changes in inflation are sometimes attributed to fluctuations in real demand for goods and services or in available supplies (i.e. changes in scarce), and sometimes to changes in the supply or demand for money. In the mid-twentieth century, two camps disagreed strongly on the main causes of inflation at moderate rates: the "monetarists" argued that money supply dominated all other factors in determining inflation, while "others" argued that real demand was often more important than changes in the money supply.
Inflation can be measured in multiple ways, like different price indices that affect different class of people. It can be done by Consumer Price Indices (CPI), Cost of living Indices (COLI), Gross Domestic Product Deflater (GDP Deflater), etc.
The general people or "The aam aadmi" wants to know, why the government has not been able to stem the soaring inflation rate?
As far as I'm concerned, there are no concrete ways to completely stop the inflation rate, but there is every possibility to keep it under control, rather comfort zone where it doesn't hurts or burn a hole into the "Aam aadmi's pocket"....
1.) Repo rate: Repo rate is the rate at which the Reserve Bank of India (RBI) lends money to other banks. Now when the inflation rates are zooming, the government (RBI) increases the repo rate by some basis points, which results in the rise in the interest rates on the loans. This encourages more savings by the people and the money gets parked into their savings acounts in the banks. When the rates are high people automatically stop spending more and hence it helps in checking the inflation rate. Moreover the increase in repo rate is not a welcome move, but definitely it helps in getting hold of inflation upto some extent.
2.) Rise in petroleum prices: As on 14/06/2008 the price of crude oil is $135 per barrel, which was a reason enough for the government to increase the price of petroleum products in order to save the bleeding navratnas, rather Oil Marketing Companies (OMC). This step will further add fuel to the inflation fire. But, one should remember that our OMCs were running out of cash and government was keeping the prices of petro products artificially low, which was not in favour of OMC. Finally, the government was forced to take the difficult decision of increasing the prices. And due to this, there has been further increase in the prices of essential commodities. We can't overcome the petroleum problem unless we start using it effectively. The respective state governments has to slash the sales tax duty in order to contain inflation marginally.
3.) Growth rate & Inflation: Our economy has shown impressive growth rate over the years and the GDP rate has been well over 8% mark. It'll show continuous improvement in the coming years also. Some economists have argued that, in the past inflation levels were low and it was good for us. But, as far as I'm concerned, in the past when the inflation levels were very low (say 2-4%), our growth rate was dismal. Whereas as the economy opened up and more FDIs and FIIs started pouring into our country, GDP rate surged ahead and alongside that inflation levels also increased. Purchasing power of people increased, now there is sizable population in the middle class category, which is a good sign for our economy. I'd prefer to have, say a growth rate of 10% and inflation rate of 6% as compared to the growth rate of 5% and inflation rate of 2%. Because, more is the GDP rate of our country, more is the chances of we becoming a developed nation.
4.) A ray of light at the end of tunnel: Well, all is not over for us and let's not loose heart over it, that inflation has burnt a hole into our pockets. Where growth is there, inflation will be also there. And moreover, as the crude oil prices calm down we'll see a downward trend in the inflation rate.
So, dear friends let's not loose heart and hope for the best, because in 2020 we are gonna rock the world... Hey world here comes India, at it's very best....
