Impact of Inflation on Indian Economy

Vikram Chavan Parth Desai Monika Pendse Amit Kamlapure 11210 11232 11259 11271

Introduction
A rise in general price level
Reduces purchasing power of currency Rising prices means you have to pay more for the same goods and services

 Historical Data for Inflation

Current Scenario
Current reported 9.5% (March, 2012) India Inc. hoarding cash + resilient consumer spending = Inflation
o 2.34 Lakh Crores held by India Inc. o Most Optimistic Market

The Impact

Increase in Economic Inequalities

Fixed income class suffers Businessmen Benefit and Suffer from inflation. Small farmers suffer due to lack of bargaining power. Impact is unevenly distributed in the society

Shift in the money supply from lenders to borrowers

Social Unrest

Obstacles to Overall Development

Rigidity of plans when finalized and outlay is determined. Low investment rate due to the fear of erosion of real value of saving in case of Indian households. Limited Employment Opportunities Inflation diminishes the purchasing power by consumers due to the rising costs of goods and services.

Effects on Balance of Payments

Demand of Indian products decline in foreign markets due to price rise in products. Also profit in home country increases which lead to ignorance of exports.

As inflation in India increased rapidly foreign goods became cheaper comparatively. Hence imports increased.

On a Positive note
A moderate level of inflation can increase investment in an economy leading to faster growth. It can benefit the cartels It might relatively benefit borrowers

Thank you !