INFLATION AND ITS EFFECTS ON THE INDIAN ECONOMY Dr. Anjala Kalsie * & Ms. Shikha Mittal Shrivastav ** ABSTRACT India is going through a phase of declining growth and investor condence, depreciating currency and rising ination. All the government efforts to revive growth have so far failed miserably. From 2010, India has witnessed high and persistent ination which did decline in the end of 2012 but it increased further, thanks to massive depreciation in India rupee. This paper discusses the inationary experience of India from 1950-2013 and evaluated the causes of ination and its effects on Balance of Payment, Consumer, Industries, Investment, Poverty and Currency Depreciation. The paper also empirically analyzed the signicance & impact of Repo Rate, CRR, Exchange Rate and Petrol Prices on Ination measured by natural logarithm of Consumer Price Index. In the end, the paper comes out with certain recommendations such as better management of monetary policy, increase in productivity and scal consolidation in order to save the faltering economy. Keywords: Ination, Balance of Payment, Consumer Price Index (CPI), Repo Rate, Exchange Rate
1. INTRODUCTION “I don't mind going back to daylight saving time. With ination, the hour will be the only thing I've saved all year.” -Victor Borge Ination refers to a signicant rise in the general price level in a country over a long period of time. It is the opposite of price stability. In economics, price stability is not used in a rigid sense to mean price xity. A modest increase of 2 to 3 per cent per annum in the price level is a compatible, sometimes even desirable, in the context of economic development. However, when the general price rise appreciates (say in double-digit gure) and is experienced over a long period of time, it gets the dreaded name of ination. For the common person, there is something threatening about the phenomenon of ination, especially on those occasions when the rise in prices of goods is not matched by an equivalent rise in the prices of labor. Ination is usually measured based on certain indices. An Index number is a single gure that shows how the whole set of related variables has changed over time or from one place to another. In India, we use two major indices for measuring ination or price levels. 1.1 Wholesale Price Index In India, the wholesale price index (WPI) is the main measure of ination. The WPI measures the price of a representative basket of wholesale goods. It is an index that measures and tracks the 32 *Dr. Anjala Kalsie, Asst. Professor, Faculty of Management Studies, University of Delhi Email : kalsieanjala@gmail.com
**Ms. Shikha Mittal Shrivastav, (Corresponding Author) Asst. Professor, IILM, Gr. Noida Email : shikhamit20@gmail.com
Management Perspective Volume 3, Issue 1, October – March 2017