SlideShare a Scribd company logo
1 of 15
Business Communication
  - Inflation & Index
               Pranay Veer
Meaning!!!
   General rise in the price level
    Fall in the purchasing power of money
   Too much money chasing too few goods
    It becomes harmful once it goes out of control
    It occurs under the volume of money increases
    faster than the available supply of goods
Types of Inflation - Causes
   Demand pull Inflation:
    Aggregate demand > Aggregate supply of
    goods and services
     Prices of goods and services rise.

   Cost push inflation:
       Cost of production      Rise in the prices of
    factors of production
     Prices of goods and services
How is it Measured?
   Consumer Price Index
   Wholesale Price Index
CPI - Consumer Price Index
   It measures changes in the price level of consumer
    goods and services purchased by households.
   Price of goods bought by consumers
   It tracks the prices of a specified basket of consumer
    goods and services, providing a measure of inflation.

COST OF LIVING INDEX
   This actually measures the increase in price that a
    consumer will ultimately have to pay for

   Countries:
       USA , China, Australia, etc.
Wholesale Price Index (WPI)
   WPI was first published in 1902
       Replaced by most developed countries by the CPI in the 1970s


    WPI is the index that is used to measure the change in
    the average price level of goods traded in wholesale
    market.

   It focuses on the price of goods traded between
    corporations


   Countries: India, Philippines
Composition of WPI(in India)
Weight = 100%
1. Primary articles (wt.=20.12%)
   -   Cereals, pulses, Fruits and vegetables, egg, oil etc.


2. Fuel power, Light and Lubricants (wt.=14.91%)
     Mineral Oil, Electricity, Coal Mining

3. Manufactured Products (wt. = 64.57%)
    Sugar, edible oils, textiles, chemicals, iron & steel,
     machinery, transport equipment, etc
Basis & Facts
   Base Year: 2004-05
   Data Release: Monthly basis
   No. of commodities: 674
   Current Inflation rate: 6.55% (Jan 12)
       2-year low
Inflation Rate
CPI – India

   India’s first ever annual inflation rate, based on the
    consumer price index (CPI)
   Rate -7.65%, January 2012
   Rural retail inflation - 7.38%
   Urban inflation rate - 8.25%
   Consumer Price Index (CPI) - Introduced a year ago
   Exist alongside the prevailing Wholesale Price Index
    (WPI)
CPI Major Groups
   CPI data tracks retail prices in five major Groups
       Food, beverages and tobacco;
       Fuel and light;
       Housing;
       Clothing, bedding and footwear
       Miscellaneous

   The CPI also reflects price movements in the
    services sector (55%)

   Base Year: 2010
CPI Facts
   CPI which took into account the consumption
    patterns of all segments of the population.

    CPI is 1% higher than the Wholesale Prices
    Index.
   Help the Reserve Bank take effective
    monetary policy steps to deal with inflation
CPI Index Preparation
   Prepared by the Ministry of Labour.
   CPI will be in addition to the three retail price
    indices:
       Agricultural laborers
       Rural laborers
       Industrial workers

    New CPI - Ministry of Statistics and Program
    Implementation (MOSPI)

   Eventually expected to replace the Wholesale Price
    Index (WPI) as the benchmark inflation.
Impact of Inflation
   Rising food prices
   Commodity prices
   Essential goods' prices
   Expensive borrowing
   Impact on stock markets
   The rich get richer and poor get poorer
   Loss to fixed income earners
   Loss to wage earners
   Economic growth
Inflation

More Related Content

What's hot

What's hot (20)

Handling Data in AS and A2 Economics
Handling Data in AS and A2 EconomicsHandling Data in AS and A2 Economics
Handling Data in AS and A2 Economics
 
Cpi wpi and iip
Cpi wpi and iipCpi wpi and iip
Cpi wpi and iip
 
Macro-Economic Policy
Macro-Economic PolicyMacro-Economic Policy
Macro-Economic Policy
 
Inflation and the RPI-CPI Wedge
Inflation and the RPI-CPI WedgeInflation and the RPI-CPI Wedge
Inflation and the RPI-CPI Wedge
 
Short run aggregate_supply
Short run aggregate_supplyShort run aggregate_supply
Short run aggregate_supply
 
CPI Measurement.
CPI Measurement.CPI Measurement.
CPI Measurement.
 
Prices & Inflation
Prices & InflationPrices & Inflation
Prices & Inflation
 
Government fiscal policy and the economy
Government fiscal policy and the economyGovernment fiscal policy and the economy
Government fiscal policy and the economy
 
Consumer price index
Consumer price indexConsumer price index
Consumer price index
 
INFLATION & ITS EFFECTS
INFLATION & ITS EFFECTSINFLATION & ITS EFFECTS
INFLATION & ITS EFFECTS
 
Demand side policies
Demand side policiesDemand side policies
Demand side policies
 
Monthly Newsletter 4/2015
Monthly Newsletter 4/2015Monthly Newsletter 4/2015
Monthly Newsletter 4/2015
 
24
2424
24
 
Wpi and CPi
Wpi and CPiWpi and CPi
Wpi and CPi
 
Inflation
InflationInflation
Inflation
 
3.3 Macro Economic Models
3.3   Macro Economic Models3.3   Macro Economic Models
3.3 Macro Economic Models
 
Inflation revision
Inflation revisionInflation revision
Inflation revision
 
Aggregate demand
Aggregate demandAggregate demand
Aggregate demand
 
Handling Economic Data - Index Numbers
Handling Economic Data - Index NumbersHandling Economic Data - Index Numbers
Handling Economic Data - Index Numbers
 
Measuring The Cost of living
Measuring The Cost of livingMeasuring The Cost of living
Measuring The Cost of living
 

Viewers also liked

Social Media Connectivity in Pharmaceutical Industry
Social Media Connectivity in Pharmaceutical IndustrySocial Media Connectivity in Pharmaceutical Industry
Social Media Connectivity in Pharmaceutical IndustryPranay Veer
 
Financial puzzle with Nifty Junior - Pranay Veer
Financial  puzzle with Nifty Junior - Pranay VeerFinancial  puzzle with Nifty Junior - Pranay Veer
Financial puzzle with Nifty Junior - Pranay VeerPranay Veer
 
Venture Capital Funding for SMEs - Pranay Veer
Venture Capital Funding for SMEs - Pranay VeerVenture Capital Funding for SMEs - Pranay Veer
Venture Capital Funding for SMEs - Pranay VeerPranay Veer
 
O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013
O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013
O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013Christopher Craft
 
I tested phrase it
I tested phrase itI tested phrase it
I tested phrase itCristele4
 
S. Hieronymi Epistola ad Nepotianum
S. Hieronymi Epistola ad NepotianumS. Hieronymi Epistola ad Nepotianum
S. Hieronymi Epistola ad NepotianumCarlos A. García
 

Viewers also liked (6)

Social Media Connectivity in Pharmaceutical Industry
Social Media Connectivity in Pharmaceutical IndustrySocial Media Connectivity in Pharmaceutical Industry
Social Media Connectivity in Pharmaceutical Industry
 
Financial puzzle with Nifty Junior - Pranay Veer
Financial  puzzle with Nifty Junior - Pranay VeerFinancial  puzzle with Nifty Junior - Pranay Veer
Financial puzzle with Nifty Junior - Pranay Veer
 
Venture Capital Funding for SMEs - Pranay Veer
Venture Capital Funding for SMEs - Pranay VeerVenture Capital Funding for SMEs - Pranay Veer
Venture Capital Funding for SMEs - Pranay Veer
 
O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013
O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013
O.P.E.N. Routine Personal Branding Workshop Presentation - SRBLSA 2013
 
I tested phrase it
I tested phrase itI tested phrase it
I tested phrase it
 
S. Hieronymi Epistola ad Nepotianum
S. Hieronymi Epistola ad NepotianumS. Hieronymi Epistola ad Nepotianum
S. Hieronymi Epistola ad Nepotianum
 

Similar to Inflation

inflation-causes types and control methods
inflation-causes types and control methodsinflation-causes types and control methods
inflation-causes types and control methodsIMS GHAZIABAD
 
Inflation - Class 11
Inflation - Class 11Inflation - Class 11
Inflation - Class 11AnjaliKaur3
 
INFLATION : NATURE,EFFECT AND CONTROL
INFLATION : NATURE,EFFECT AND CONTROL INFLATION : NATURE,EFFECT AND CONTROL
INFLATION : NATURE,EFFECT AND CONTROL sreekanthskt
 
Zero inflation and rising food price final
Zero inflation and rising food price   finalZero inflation and rising food price   final
Zero inflation and rising food price finalNeel Kolageri
 
Stone ch16 lecture_powerpoints
Stone ch16 lecture_powerpointsStone ch16 lecture_powerpoints
Stone ch16 lecture_powerpointsKelly Giles
 
Chapter 03 inflation and the cost of living
Chapter 03   inflation and the cost of livingChapter 03   inflation and the cost of living
Chapter 03 inflation and the cost of livingrebyn
 
Whole sale price index
Whole sale price indexWhole sale price index
Whole sale price indexGeorgeGidudu
 
What Is Inflation. Describe In Details.written By Rizwan Rizvi
What Is Inflation. Describe In Details.written By Rizwan Rizvi What Is Inflation. Describe In Details.written By Rizwan Rizvi
What Is Inflation. Describe In Details.written By Rizwan Rizvi Rizwan Hussainy
 
Monetary policy & inflation@ ppt doms
Monetary policy & inflation@ ppt doms Monetary policy & inflation@ ppt doms
Monetary policy & inflation@ ppt doms Babasab Patil
 
monetary and its eloborateds policy.pptx
monetary and its eloborateds policy.pptxmonetary and its eloborateds policy.pptx
monetary and its eloborateds policy.pptxrajesshs31r
 

Similar to Inflation (20)

Sylvia f.
Sylvia f.Sylvia f.
Sylvia f.
 
inflation-causes types and control methods
inflation-causes types and control methodsinflation-causes types and control methods
inflation-causes types and control methods
 
Inflation - Class 11
Inflation - Class 11Inflation - Class 11
Inflation - Class 11
 
Types of inflation
Types of inflationTypes of inflation
Types of inflation
 
Inflation
InflationInflation
Inflation
 
INFLATION : NATURE,EFFECT AND CONTROL
INFLATION : NATURE,EFFECT AND CONTROL INFLATION : NATURE,EFFECT AND CONTROL
INFLATION : NATURE,EFFECT AND CONTROL
 
Inflation
InflationInflation
Inflation
 
Inflation
InflationInflation
Inflation
 
Inflation
InflationInflation
Inflation
 
Inflation
Inflation  Inflation
Inflation
 
Zero inflation and rising food price final
Zero inflation and rising food price   finalZero inflation and rising food price   final
Zero inflation and rising food price final
 
Stone ch16 lecture_powerpoints
Stone ch16 lecture_powerpointsStone ch16 lecture_powerpoints
Stone ch16 lecture_powerpoints
 
Inflation
InflationInflation
Inflation
 
Chapter 03 inflation and the cost of living
Chapter 03   inflation and the cost of livingChapter 03   inflation and the cost of living
Chapter 03 inflation and the cost of living
 
Whole sale price index
Whole sale price indexWhole sale price index
Whole sale price index
 
Inflation
InflationInflation
Inflation
 
What Is Inflation. Describe In Details.written By Rizwan Rizvi
What Is Inflation. Describe In Details.written By Rizwan Rizvi What Is Inflation. Describe In Details.written By Rizwan Rizvi
What Is Inflation. Describe In Details.written By Rizwan Rizvi
 
Monetary policy & inflation@ ppt doms
Monetary policy & inflation@ ppt doms Monetary policy & inflation@ ppt doms
Monetary policy & inflation@ ppt doms
 
Causes
CausesCauses
Causes
 
monetary and its eloborateds policy.pptx
monetary and its eloborateds policy.pptxmonetary and its eloborateds policy.pptx
monetary and its eloborateds policy.pptx
 

Inflation

  • 1. Business Communication - Inflation & Index Pranay Veer
  • 2. Meaning!!!  General rise in the price level  Fall in the purchasing power of money  Too much money chasing too few goods  It becomes harmful once it goes out of control  It occurs under the volume of money increases faster than the available supply of goods
  • 3. Types of Inflation - Causes  Demand pull Inflation: Aggregate demand > Aggregate supply of goods and services  Prices of goods and services rise.  Cost push inflation: Cost of production  Rise in the prices of factors of production Prices of goods and services
  • 4. How is it Measured?  Consumer Price Index  Wholesale Price Index
  • 5. CPI - Consumer Price Index  It measures changes in the price level of consumer goods and services purchased by households.  Price of goods bought by consumers  It tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation. COST OF LIVING INDEX  This actually measures the increase in price that a consumer will ultimately have to pay for  Countries:  USA , China, Australia, etc.
  • 6. Wholesale Price Index (WPI)  WPI was first published in 1902  Replaced by most developed countries by the CPI in the 1970s  WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market.  It focuses on the price of goods traded between corporations  Countries: India, Philippines
  • 7. Composition of WPI(in India) Weight = 100% 1. Primary articles (wt.=20.12%) - Cereals, pulses, Fruits and vegetables, egg, oil etc. 2. Fuel power, Light and Lubricants (wt.=14.91%)  Mineral Oil, Electricity, Coal Mining 3. Manufactured Products (wt. = 64.57%)  Sugar, edible oils, textiles, chemicals, iron & steel, machinery, transport equipment, etc
  • 8. Basis & Facts  Base Year: 2004-05  Data Release: Monthly basis  No. of commodities: 674  Current Inflation rate: 6.55% (Jan 12)  2-year low
  • 10. CPI – India  India’s first ever annual inflation rate, based on the consumer price index (CPI)  Rate -7.65%, January 2012  Rural retail inflation - 7.38%  Urban inflation rate - 8.25%  Consumer Price Index (CPI) - Introduced a year ago  Exist alongside the prevailing Wholesale Price Index (WPI)
  • 11. CPI Major Groups  CPI data tracks retail prices in five major Groups  Food, beverages and tobacco;  Fuel and light;  Housing;  Clothing, bedding and footwear  Miscellaneous  The CPI also reflects price movements in the services sector (55%)  Base Year: 2010
  • 12. CPI Facts  CPI which took into account the consumption patterns of all segments of the population.  CPI is 1% higher than the Wholesale Prices Index.  Help the Reserve Bank take effective monetary policy steps to deal with inflation
  • 13. CPI Index Preparation  Prepared by the Ministry of Labour.  CPI will be in addition to the three retail price indices:  Agricultural laborers  Rural laborers  Industrial workers  New CPI - Ministry of Statistics and Program Implementation (MOSPI)  Eventually expected to replace the Wholesale Price Index (WPI) as the benchmark inflation.
  • 14. Impact of Inflation  Rising food prices  Commodity prices  Essential goods' prices  Expensive borrowing  Impact on stock markets  The rich get richer and poor get poorer  Loss to fixed income earners  Loss to wage earners  Economic growth