Price rise in India and Inflation rate

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The prices of the commodities, may vary according to the market situations about the demand and supply. If any of the commodity or  crops have been made surplus, but the demand of the products, decreased, the decrease in the price, will lead to inflation. Inflation arises, when there is an imbalance between the demand and the supply of the money. Inflation is calculated on the basis of the WPI – wholesale price index.

To talk economically, in the formula = WPI in the month of the current year – WPI in same month in the previous year / ( divided by ) WPI in the same month the previous year. 

In the economic development, it is natural that a moderate increase of 2 to 3 percent per annum in the price levels.  Is there any tolerable limit for the price rise ? There is no clear cut answer for that.
Let us discuss about the factors for the rise in the prices :-

  • Area and the production, which is dependant according to the weather and technology
  • Minimum support price
  • Government policies
  • Substitute product
  • Demand/consumption
  • Seasonal cycles
  • International prices

Inflation during the period of 1970’s was 20 percent.  Then during 80’s it came down to 18 %. In the 1990’s the Indian money value depreciated by 37 % .  The year 2010-11 has been marked as the high rate of inflation. During the mid year of 2011-12, inflation as measured by WPI averaged 8.9% for 2011-12. To talk about the last year, lot of fluctuations in the inflation. In the first half the inflation was, 7.7 percent, and during September, 2012 it was 8.01 percent, and during December, it ends with 6.62% .
India is a moderate inflation country. If we calculate for the 62 years, on an average of 17% per annum.
Measures taken by the RBI and the Government of India  to control the inflation :-

  • Reduced the import duties, to zero
  • Banned the export of edible oils
  • Imposed the stock limits from time to time
  • Ban on export of onion, whenever required
  • Maintained the central issue price ( CIP)
  • Government allocated rice and wheat under open market sales scheme
  • Budgetary and monetary measures

Recessions in other countries :- The recessions of the other countries, affect the inflation of India. If the recession is more in the countries such as Japan, India and US, India will also get affected. Many believe that India’s growth is not much dependant on growth in the west. But the Indian stock markets have been affected by the global crisis.  India’s service sector and the manufacturing sector will be adversely impacted by the global downturn.
The prices of the vegetables have been increased by 16%  in the past one year. And whereas the cereals have been increased by 1% .
To conclude this topic, we can say, practically, the price rise , inflation makes the common man’s back bone to break. It is in the  hands of the political leaders, to control it. RBI should take still more proper measures to control the inflation in India. 

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