Month July 2011 8.

43%

Inflation Rate

In economics, inflation is a rise in the August 2011 8.99% general level of prices of goods September 2011 10.06% and services in an economy October 2011 9.39% over a period of time.[1] When November 2011 9.34% the general price level rises, December 2011 6.49% each unit of currency buys January 2012 5.32% fewer goods and services. February 2012 7.57% Consequently, inflation also March 2012 8.65% reflects an erosion in the April 2012 10.22% purchasing power of money May 2012 10.16% a loss of real value in the June 2012 10.05% internal medium of exchange and unit of account in the economy.[2][3] A chief measure of price inflation is the inflation rate, the annualized percentage change in a general price index (normally the Consumer Price Index) over time.[4] Inflation's effects on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation which may discourage investment and savings, and if inflation is rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring that central banks can adjust nominal interest rates (intended to mitigate recessions),[5] and encouraging investment in non-monetary capital projects.

Inflation in India 2012 Indias inflation rate has grown more than expectations in May 2012 with increase in fuel and food prices. It is being assumed that this decrease will not be enough to stop the interest rate deduction, which is due to be effected in order to address the present situation of slow growth.

The benchmark wholesale price index has increased by 7.55% compared to the 201112 fiscal. In April 2012 it had increased by 7.23%. 37 estimates done by a survey conducted by Bloomberg News had produced a median figure of 7.5 percent. Other reports have also shown that Indias imports and exports have been going down in May 2012. In the previous quarter Indias economic growth rate decreased to its lowest in the last ten years. A major reason for this was the lack of success of the initiatives for economic liberalization. The international sales prospects of India also took a beating thanks to the situation involving the debt crisis of Europe. The RBI is expected, as a result of the slowdown, to decrease borrowing expenses - the Indian economy, which is one of the largest emerging markets globally, is struggling with one of its quickest inflations.

The rate of increase in the prices of non-food manufactured goods is a proper indicator of core inflation. In April 2012 this rate was calculated at 4.77 percent, only to go up to 4.86 percent in May 2012. This information has been collected by Bloomberg, which also reveals that vegetable prices have increased by 49% compared to 2011, and power and fuel expenses have increased by 11.5%. Condition of the INR In the year gone by, the value of the INR with regards to the US Dollar has gone down by approximately. This has affected the share market negatively as well. Duvvuri Subbarao, the RBI Governor, is expected to bring down the benchmark repurchase rate by 7.75% and this is going to be a decrease of 0.25%.

Condition of Export and Import The global economy is going through its worst phase after the previous meltdown ended in 2009 and this has forced the authorities to take some steps. For example, China and Australia have reduced their benchmark rates. In May 2012, India exported goods and services worth 25.68 billion US dollars this was a reduction of 4.16 percent compared to May 2011. Anup Pujari, the Director General for Foreign Trade of India, provided provisional statistics at a media briefing session held in New Delhi.

According to the information, imports have come down to 41.9 billion US dollars, which is a decrease of 7.36 percent. The trade deficit has been calculated at $16.3 billion.

India Economic Growth In the quarter that ended in March 2012, Indias GDP saw a growth rate of 5.3 percent compared to the quarter that ended in March 2011. This was the slowest rate after 2003. India is the 3rd biggest economy in Asia but its economic growth, of late, has been rather modest and, even, this rate has been achieved after the RBI Governor increased the rates by 3.75 percentage points, which was an unprecedented figure. The change took place from mid March in 2010 till October 2011 and its major aim was to restrict the inflation. For majority of 2011, Indias inflation rate was more than 9 percent. Experts say that such situations conclude when the economic growth is sufficient to soak up the additional capacity. They think that it can be another 2-3 years for this process to be completed as a result of the high rates of investment during the time when the economy was doing well. Inflation affects both the economy of a country and its social conditions, as well as the political and moral lives of its inhabitants. However, the economic effects of Inflation are stated and described below:

Price inflation has immense effect on the Time Value of Money (TVM). This acts as a principal component of the rates of interest, which forms the basis of all TVM calculations. The real or estimated changes occurring in the rates of inflation lead to changes in the rates of interest as well. Inflation exerts impact on the treasury of a nation as well. In United States of America, Treasury Inflation-protected Securities (TIPS) ensures safety to the American government, assuring the public that they will get back their money. However, the rates of interest charged by TIPS are less compared to the standard Treasury notes. The most immediate effect of inflation is the decrease in the purchasing power of dollar and its depreciation. Inflation influences the investments of a country. The Inflationprotected Securities (IPSs) may act as a guard against the loss in the purchasing power of the fixed-income investments (like fixed allowances and bonds), which may occur during inflation. Inflation changes the allocation of income. This exerts maximum effect on the lenders than the borrowers at the time of persisting inflation, because the loans sanctioned previously are paid back later in the form of inflated dollars. Inflation leads to a handful of the consumers in making extensive speculation, to derive advantage of the high price levels. Since some of the purchases are high-risk investments, they result in diversion of the expenditures from regular channels, giving birth to a few structural unemployments

. The inflation rate is how much prices are increasing from year to year. Calculating the inflation rate in India requires information from the Consumer Price Index (CPI). The nation's Ministry of Statistics and Programme Implementation releases the CPI each month, and the inflation rate is the percentage change of the CPI from one period to another. Determine the CPI for the time periods you want to consider for calculating inflation. Use the Ministry of Statistics and Programme Implementation's website (see Resource). The drop-down box on the top banner allows you to change years. For example, in April 2010 the CPI was 583, while in April 2009 it was 536. Subtract the older CPI from the newer CPI. This gives the change in the CPI. In our example, 583 minus 536 equals 47. Divide the change in the CPI by the older CPI. In our example, 47 divided by 536 equals 0.08769. Multiply that figure by 100 to get an 8.769 percent inflation rate.