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Title : INFLATION: detailed analysis

Date : Dec 15, 2021

Description :



Topic à Indian Economy


  • What is Inflation:


  • Inflation is defined as an increase in the price of most everyday or common goods and services, such as food, clothing, housing, recreation, transportation, consumer staples, and so on. Inflation is defined as the average change in the price of a basket of goods and services over time. Deflation is the opposite and uncommon reduction in the price index of this bundle of items. Inflation is defined as a drop in the purchasing power of a country's currency unit. This is expressed as a percentage.


  • Various forms of Inflation:


  • Demand Pull Inflation: When aggregate demand in the economy exceeds aggregate supply, demand pull inflation occurs.
  • Cost-push inflation occurs when the aggregate supply of goods and services decreases, resulting in an increase in the cost of production.


  • Inflation's Impact on the Indian Economy:


  • As commodities and services become more expensive, a currency unit's purchasing power declines.
  • This has an effect on a country's cost of living. When inflation is strong, the cost of living rises along with it, resulting in a slowdown in economic growth.
  • In order for spending to be encouraged and saving to be discouraged, a certain degree of inflation is essential in the economy.


  • India's Inflation Targeting:


  • Inflation is tracked by a central government agency that is in charge of implementing policies to keep the economy running smoothly. The Ministry of Statistics and Programme Implementation in India keeps track on inflation.
  • With its tools to restrict money supply in the market, the RBI's Monitory Policy Committee controls inflation.
  • The Central Government has set a target of 4% Consumer Price Index (CPI) inflation from August 5, 2016, to March 31, 2021, with a 6% upper tolerance limit and a 2% lower tolerance limit.


  • Inflationary trends in the economy at the moment:


  • For the first time since 2010, wholesale pricing index (WPI)-linked inflation reached double digits in April 2021, at 10.5 percent year on year (up from 7.4 percent in March).
  • Inflation in the consumer price index (CPI) fell to 4.3 percent in April from 5.5 percent in March, owing to a high base from the previous year (it had spiked to 7.2 per cent in April 2020).
  • The trend of inflation should be examined in the ECONOMIC SURVEY of the relevant year, where a dedicated chapter provides a comprehensive picture.


  • Source à The Hindu à 14/12/21 à Page Number 1

Tags : consumer price index, ECONOMIC SURVEY

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