All About Inflation

Inflation is measure of rise in general price level of goods and services.It is measured by taking a set (consumer price Index) of goods and services and then the price of the items in the set are compared to prices one time period ago.

In India, Inflation is measured based upon wholesale price index (WPI) which measures the change in price of selection of goods at wholesale price. Inflation is of 2 types :

• Inflation due to cost price.

This is due to rise in costs of input material or labour.

• Demand pull Inflation.

This is due to increase in demand beyond installed capacity.

Govt in consultation with RBI,decides the infation threshold in the country. Inflation target is one of the key parameters that go into determining fiscal and monetary policies.

INFLATION IN EYES OF 5 PEOPLE :

• House Broker: He understand only the fact that prices are increasing. So good for him by renting home at higher rate.
• Politician: Good for him also. After all he he is having social cause to make noise on and attract attention. This is his golden chance to establish himself and his party.
• RBI:Most difficult period for pe0ple of RBI. They have to control inflation.They will start making changes to monetary policy. Tighten the credit.Any change in monetary policy will take approx. 4-6 months to show its effects.
• Ruling Party: This is worst thing that can happen to them. Not because they are worried about it's effect on the common man but they are worried because the opposition party or the politicians will make this the biggest weapon to use against them for coming elections.
• Common Man:Worst for him because the price of every product starts increasing BUT the common man need to wait for the tiny appraisal of 10% till the end of year. He has no other option then to CRY within and wait for the market to get stable.