WHAT IS INFLATION

In economics, inflation is a sustained increase in the

general price level of goods and services in an economy
over a period of time resulting in a loss of value of
currency. When the price level rises, each unit of currency
buys fewer goods and services. Consequently, inflation
reflects a reduction in the purchasing power per unit of
money a loss of real value in the medium of exchange
and unit of account within the economy.

HISTORY
Historically, large infusions of gold or silver into an
economy also led to inflation. From the second half of the
15th century to the first half of the 17th, Western Europe
experienced a major inflationary cycle referred to as the
"price revolution, with prices on average rising perhaps
six fold over 150 years. This was largely caused by the
sudden influx of gold and silver from the New World into
Habsburg Spain.
CAUSES OF INFLATION IN INDIA
Population - The population of India has been on a
continuous rise. The decadal growth rate according to the
2011 census of India has been 17.64%. The growth rate
of the essential goods and commodities (like food, oil,
land etc.) has not been able to match our population
growth. Factors like increase in the cost of land due to
population growth also lead to an increase in the cost of
production.
Unbalanced economic growth - The Indian economy has
been growing at a fast rate for the last few years. But this
economic growth has not been balanced. The
contributions towards economic growth from the primary
(agriculture), secondary (industry) and tertiary (services)
sectors are 17.2%, 26.4% and 56.4% respectively. So the
growth in the primary or agricultural output has been way
less than average. Due to this we are required to import a
good quantity of basic goods and commodities for
consumption. The weak INR has not helped in this regard.
The prices of these imported goods and commodities
have been on the rise due to a weak INR.
Increase in spending capacity Due to economic growth
people have more money to spend in general. Schemes
like MGNREGS and the Sixth Pay Commission have also
led to an increase in the spending power of people.
People employed in the private sectors have also seen a
jump in their earnings. Now this has led to an
improvement in the living standards of people, but since
it is not matched with a similar increase in output prices
have gone up.
Control measures

Monetary Policy: Monetary Policy essentially implies the

policy followed by financial institutions. High interest
rates and slow growth of the money supply are the
traditional ways through which central banks fight or
prevent inflation.

Fiscal Measures Reduction in unnecessary expenditure.

Increase in Taxes. Increase in savings Adopt Surplus
Budget(collecting more revenue and spending less).
Stop Repayment of Public Debt until inflationary
pressures are controlled
Present Scenario COUNTRY CATEGOR Y DATES ACTUAL HIGHEST INFLATIO 1969 6.46 N
RATE 2013 The inflation rate in India was recorded at 6.46 % in September-2013. INDIA From
1969 until 2013, India Inflation Rate averaged 7.7% Highest 34.7%September -1974