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CHAPTER- 1
INTRODUCTION
INFLATION
Inflation can be defined as a rise in the general price level and therefore a
fall in the value of money. Inflation occurs when the amount of buying power is
higher than the output of goods and services. Inflation also occurs when the
amount of money exceeds the amount of goods and services available. As to
whether the fall in the value of money will affect the functions of money depends
on the degree of the fall. Basically, refers to an increase in the supply of currencyor credit relative to the availability of goods and services, resulting in higher
prices. Therefore, inflation can be measured in terms of percentages. The
percentage increase in the price index, as a rate per cent per unit of time, which is
usually in years. The two basic price indexes are used when measuring inflation,
the producer price index (PPI) and the consumer price index (CPI) which is also
known as the cost of living index number.
When one describes inflation, it hardly makes any difference whether onerefers to it as an episode or a disaster.
Inflation is often described by economists as the general and persistent
increase in prices across an economy. The rise in prices affects the wages, real
income, production, unemployment and so on. For economies that are persistently
fighting high rates of inflation, the rise in prices brings no smiles. Inflation hits the
dinner table of both the rich and the poor, only the degree varies. While the
government considers a rise in prices as a signal of economic growth, central
bankers have often treated inflation as their first enemy.
Inflation is like a syndrome, which is always talked about, but only a few
are aware of its intricacies. However, inflation is not a supernatural phenomenon
which we do not have control over. The existence of inflation is man-made and
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potentially, we can not only overcome inflation, but also prevent its occurrence in
long run.
Types of Inflation
Subsequently, when either the prices of goods or services or the supply of
money rises; this is considered as inflation. Depending on the characteristics and
the intensity of inflation, there are several types, namely.
- Creeping inflation
- Trotting inflation
- Galloping inflation
- Hyper inflation
When there is a general rise in prices at very low rates, which is usually
between 2-4 percent annually, this is known as creeping inflation.
Whereas, trotting inflation occurs when the percentage has risen from 5 to
almost percent. At this level it is a warning signal for most governments to take
measures to avoid exceeding double digit figures.
Another type of inflation is the galloping inflation, where the rate of inflation
is increasing at a noticeable speed and at a remarkable rate, usually from 10-20
percent. However, when the inflation rate rises to over 20% it is generally
considered as hyper inflation and at this stage it is almost uncontrollable because
it increases more rapidly in such a little time frame.
CAUSES OF INFLATION
Inflation comes in different forms and those that are familiar with the
economic matters would observe that there are trends in the way that prices are
moving gradual and irregular in relation to aggregate sections of the economy.
This suggest that there is more than one factor that causes inflation and as
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different sections of the economy develop it gives rise to different types
inflationary periods. The main causes of inflation are:
- Demand-pull Inflation
- Cost push Inflation
- Monetary inflation
- Structural inflation
- Imported inflation
Demand-Pull Inflation: Demand-pull inflation occurs when the consumers,
businesses or the governments demand for goods and services exceed the
supply; therefore the cost of the item rises, unless supply is perfectly elastic.Because we do not live in a perfect market supply is somewhat inelastic and the
supply of goods and services can only be increased if the factors of production are
increased. The increase in demand is created from in increase in other areas,
such as the supply of money, the increase of wages which would then give rise in
disposable income, and once the consumers have more disposal income this
would lead to aggregate spending. As a result of the aggregate spending there
would also be an increase in demand for exports and possible hoarding and
profiteering from producers. The excessive demand, the prices of final goods and
services would be forced to increase and this increase gives rise to inflation.
Cost-Push Inflation: Cost-push inflation is caused by an increase in
production costs. It is generally caused by an increase in wages or an increase in
the profit margins of the entrepreneurs. When wages are increased, this causes
the business owner to in turn increase the price of final goods and services which
would be passed onto the consumers and the same consumers are also the
employees. As a result of the increase in prices for final goods and services the
employees realize that their income is insufficient to meet their standard of living
because the basic cost of living has increased. The trade unions then act as the
mediator for the employees and negotiate better wages and conditions of
employment. If the negotiations are successful and the employees are given the
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requested wage increase this would further affect the prices of goods and services
and invariably affected.
On the other hand, when firms attempt to increase their profit margins by
making the prices more responsive to supply of a good or service instead of thedemand for that said good or service. This is usually done regardless to the state
of the economy. This can be seen in monopolistic economies where the firm is the
only supplier or by entrepreneurs that are seeking a larger profit for their own self
interests.
Monetary Inflation: Monetary inflation occurs when there is an excessive
supply of money. It is understood that the government increases the money
supply faster than the quantity of goods increases, which results in inflation.
Interestingly as the supply of goods increase the money supply has to increase or
else prices actually go down.
When a dollar is worth less because the supply of dollars has increased, all
businesses are forced to raise prices just to get the same value for their products.
Structural Inflation: Planned inflation that is caused by a government's
monetary policy is called structural inflation. This type of inflation is not caused by
the excess of demand or supply but is built into an economy due to thegovernments monetary policy.
In developed countries they are characterized by a lack of adequate
resources like capital, foreign exchange, land and infrastructure. Furthermore,
over-population with the majority depending on agriculture for their livelihood
means that there is a fragmentation of the land holdings. There are other
institutional factors like land-ownership, technological backwardness and low rate
of investment in agriculture. These features are typical of the developingeconomies. For example, in developing country where the majority of the
population lives in the rural areas and depends on agriculture and the government
implements a new industry, some people get employment outside the agricultural
sector and settle down in urban areas. Because there might be an unequal
distribution of land ownership and tenancy, technological backwardness and low
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rates of investments in agriculture inclusive of inadequate growth of the domestic
supply of food which corresponds with an increase in demand arising from
increasing urbanization and population prices increase. Food being the key wage-
good, an increase in its price tends to raise other prices as well. Therefore, some
economists consider food prices to be the major factor, which leads to inflation in
the developing economies.
Imported Inflation: Another type of inflation is imported inflation. This
occurs when the inflation of goods and services from foreign countries that are
experiencing inflation are imported and the increase in prices for that imported
good or service will directly affect the cost of living.
Another way imported inflation can add to our inflation rate is when
overseas firms increase their prices and we pay more for our goods increasing our
own inflation.
HOW INFLATION IS MEASURED?
Inflation is normally given as a percentage and generally in years or in
some instances quarterly and is derived from the Consumer Price Index (CPI).
However, there are two main indices used to measure inflation.
The first is the Consumer Price Index, or the CPI. The CPI is a measure of
the price of a set group of goods and services. The "bundle," as the group is
known, contains items such as food, clothing, gasoline, and even computers. The
amount of inflation is measured by the change in the cost of the bundle: if it costs
5% more to purchase the bundle than it did one year before, there has been a 5%
annual rate of inflation over that period based on the CPI. You will also often hear
about the "Core Rate" or the "Core CPI." There are certain items in the bundle
used to measure the CPI that are extremely volatile, such as gasoline prices. By
eliminating the items that can significantly affect the cost of the bundle (in either
direction) on a month-to-month basis, the Core rate is thought to be a better
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indicator of real inflation, the slow, but steady increase in the price of goods and
services.
The second measure of inflation is the Producer Price Index, or the PPI.
While the CPI indicates the change in the purchasing power of a consumer, thePPI measures the change in the purchasing power of the producers of those
goods. The PPI measures how much producers of products are getting on the
wholesale level, i.e. the price at which a good is sold to other businesses before
the good is sold to a consumer. The PPI actually combines a series of smaller
indices that cross many industries and measure the prices for three types of
goods: crude, intermediate and finished.
Generally, the markets are most concerned with the finished goods
because these are a strong indicator of what will happen with future CPI reports.
The CPI is a more popular measure of inflation than the PPI, but investors watch
both closely.
Effects of Inflation
Various explanations for the causes of inflation have been offered, but the
bottom line still remains that the consumer bears the brunt of it and it unequally
affects population. Inflation indirectly means an insidious, cancerous
inflammation of prices and the attrition of the purchasing power of peoples
incomes and savings (Buehler, 1959). If a high rate of inflation persists without
any intention to control it, the monetary system may crumple, government and
other debts may be repudiated and private and public insolvency may emerge.
Inflation results from the super-abundance of currency in relation to the existing
supply of goods and services. With higher demand, a limited supply and a higherinflow of purchasing power, the upsurge in prices is inevitable. Too many rupees
are said to be purchasing too few goods. This is the so-called demand-pull
inflation. On the other hand, cost-push inflation occurs when higher costs lead to
higher prices. The blame often goes to big business firms for high profits and
administered prices and to labor unions which instigate workers to demand wages
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higher than the gains in productivity. In the controversy over profits and wages,
each sides holds the other responsible for the price increase and both try to obtain
the largest possible share of the income of the undertaking. If we look at it from
this perspective, then the increase in profits and wages may actually be a
symptom of inflation rather than a cause of it. The attempts to control wage
increases have been rather vain in the face of inflationary pressures. With the
different standards of living of people, size of families, age of the population and
various other factors, fluctuations in demand arise. Due to this, the price and cost
of living indexes suffer from various limitations even after adjusting for changing
conditions in supply and demand.
Inflation can have positive and negative effects on an economy.
Negative effects of inflation include loss in stability in the real value of
money and other monetary items over time; uncertainty about future inflation may
discourage investment and saving, and high inflation may lead to shortages of
goods if consumers begin hoarding out of concern that prices will increase in the
future.
Positive effects include a mitigation of economic recessions, and debt relief
by reducing the real level of debt.
Most effects of inflation are negative, and can hurt individuals and
companies alike, below are a list of negative and positive effects of inflation:
Negative Effects of Inflation
Hoarding (people will try to get rid of cash before it is devalued, by
hoarding food and other commodities creating shortages of the
hoarded objects).
Distortion of relative prices (usually the prices of goods go higher,
especially the prices of commodities).
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Increased risk - Higher uncertainties (uncertainties in business
always exist, but with inflation risks are very high, because of the
instability of prices).
Income diffusion effect (which is basically an operation of income
redistribution).
Existing creditors will be hurt (because the value of the money they
will receive from their borrowers later will be lower than the money
they gave before).
Fixed income recipients will be hurt (because while inflation
increases, their income doesnt increase, and therefore their income
will have less value over time).
Increased consumption ratio at the early stages of inflation (people
will be consuming more because money is more abundant and its
value is not lowered yet).
Lowers national saving (when there is a high inflation, saving money
would mean watching your cash decrease in value day after day, so
people tend to spend the cash on something else).
Illusions of making profits (companies will think they were making
profits while in reality theyre losing money if they dont take into
consideration the inflation rate when calculating profits).
Causes an increase in tax bracket (people will be taxed a higher
percentage if their income increases following an inflation increase).
Causes mal-investment (in inflation times, the data given about an
investment is often deceptive and unreliable, therefore causing
losses in investments).
Causes business cycles (many companies will have to go out ofbusiness because of the losses they incurred from inflation and its
effects).
Currency debasement (which lowers the value of a currency, and
sometimes cause a new currency to be born).
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Rising prices of imports (if the currency is debased, then its
purchasing power in the international market is lower).
Positive Effects of Inflation
It can benefit the inflators (those responsible for the inflation).
It be benefit early and first recipients of the inflated money (because
the negative effects of inflation are not there yet).
It can benefit the cartels (it benefits big cartels, destroys small
sellers, and can cause price control set by the cartels for their own
benefits).
It might relatively benefit borrowers who will have to pay the same
amount of money they borrowed (+ fixed interests), but the inflationcould be higher than the interests; therefore they will be paying less
money back. (example, you borrowed $1000 in 2005 with a 5% fixed
interest rate and you paid it back in full in 2007, lets suppose the
inflation rate for 2005, 2006 and 2007 has been 15%, you were
charged %5 of interests, but in reality, you were earning %10 of
interests, because 15% (inflation rate) 5% (interests) = %10 profit,
which means you have paid only 70% of the real value in the 3
years.
Note: Banks are aware of this problem, and when inflation rises, their
interest rates might rise as well. So don't take out loans based on this information.
Many economists favor a low steady rate of inflation, low (as opposed to
zero or negative) inflation may reduce the severity of economic
recessions by enabling the labor market to adjust more quickly in a
downturn, and reducing the risk that a liquidity trap prevents monetarypolicy from stabilizing the economy. The task of keeping the rate of
inflation low and stable is usually given to monetary authorities.
Generally, these monetary authorities are the central banks that control
the size of the money supply through the setting of interest rates,
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through open market operations, and through the setting of banking
reserve requirements.
Tobin effect argues that: a moderate level of inflation can increase
investment in an economy leading to faster growth or at least higher
steady state level of income. This is due to the fact that inflation lowers
the return on monetary assets relative to real assets, such as physical
capital. To avoid inflation, investors would switch from holding their
assets as money (or a similar, susceptible to inflation, form) to investing
in real capital projects.
The first three effects are only positive to a few elite, and therefore
might not be considered positive by the general public.
Methods to Control Inflation
A high inflation rate is undesirable because it has negative consequences.
However, the remedy for such inflation depends on the cause. Therefore,
government must diagnose its causes before implementing policies.
Monetary Policy: Inflation is primarily a monetary phenomenon. Hence,
the most logical solution to check inflation is to check the flow of money supply bydevising appropriate monetary policy and carefully implementing such measures.
To control inflation, it is necessary to control total expenditures because under
conditions of full employment, increase in total expenditures will be reflected in a
general rise in prices, that is, inflation. Monetary policy is used to control inflation
and is based on the assumption that a rise in prices is due to excess of monetary
demand for goods and services by the consumers/households e because easy
bank credit is available to them. Monetary policy, thus, pertains to banking and
credit availability of loans to firms and households, interest rates, public debt and
its management, and the monetary standard. Monetary management is aimed at
the commercial banking systems, and through this action, its effects are primarily
felt in the economy as a whole. By directly affecting the volume of cash reserves
of the banks, can regulate the supply of money and credit in the economy, thereby
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influencing the structure of interest rates and the availability of credit. Both these,
factors affect the components of aggregate demand and the flow of expenditure in
the economy.
The central banks monetary management methods, the devices fordecreasing or increasing the supply of money and credit for monetary stability is
called monetary policy. Central banks generally use the three quantitative
measures to control the volume of credit in an economy, namely:
1. Raising bank rates
2. Open market operations and
3. Variable reserve ratio
However, there are various limitations on the effective working of the
quantitative measures of credit control adapted by the central banks and, to that
extent, monetary measures to control inflation are weakened. In fact, in controlling
inflation moderate monetary measures, by themselves, are relatively ineffective.
On the other hand, drastic monetary measures are not good for the economic
system because they may easily send the economy into a decline.
In a developing economy there is always an increasing need for credit.
Growth requires credit expansion but to check inflation, there is need to contract
credit. In such an encounter, the best course is to resort to credit control,
restricting the flow of credit into the unproductive, inflation-infected sectors and
speculative activities, and diversifying the flow of credit towards the most desirable
needs of productive and growth-inducing sector.
It should be noted that the impression that the rate of spending can be
controlled rigorously by the contraction of credit or money supply is wrong in the
context of modern economic societies. In modern community, tangible, wealth is
typically represented by claims in the form of securities, bonds, etc., or near
moneys, as they are called. Such near moneys are highly liquid assets, and they
are very close to being money. They increase the general liquidity of the
economy. In these circumstances, it is not so simple to control the rate of
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spending or total outlays merely by controlling the quantity of money. Thus, there
is no immediate and direct relationship between money supply and the price level,
as is normally conceived by the traditional quantity theories.
When there is inflation in an economy, monetary restraints can, inconjunction with other measures, play a useful role in controlling inflation.
Fiscal Measures: Fiscal policy is another type of budgetary policy in
relation totaxation, public borrowing, and public expenditure. To curve theeffects
of inflation and changes in the total expenditure, fiscal measures would have to be
implemented which involves an increase in taxation and decrease in government
spending. During inflationary periods the government is supposed to counteract
an increase in private spending. It can be cleared noted that during a period of full
employment inflation, the aggregate demand in relation to the limited supply of
goods and services is reduced to the extent that government expenditures are
shortened.
Along with public expenditure, governments must simultaneously increase
taxes that would effectively reduce private expenditure, in an effect to minimize
inflationary pressures. It is known that when more taxes are imposed, the size of
the disposable income diminishes, also the magnitude of the inflationary gap in
regards to the availability of the supply of goods and services.
In some instances, tax policy has been directed towards restricting demand
without restricting level of production. For example, excise duties or sales tax on
various commodities may take away the buying power from the consumer goods
market without discouraging the level of production. However, some economists
point out that this is not a correct way of combating inflation because it may lead
to a regressive status within the economy.
As a result, this may lead to a further rise in prices of goods and services,
and inflation can spread from one sector of the economy to another and from one
type of goods and services to another.
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Therefore, a reduction in public expenditure, and an increase in taxes
produces a cash surplus in the budget. Keynes, however, suggested a
programme of compulsory savings, such as deferred pay as an anti-inflationary
measure. Deferred pay indicates that the consumer defers a part of his or her
wages by buying savings bonds (which, of course, is a sort of public borrowing),
which are redeemable after a particular period of time, this is sometimes called
forced savings.
Additionally, private savings have a strong disinflationary effect on the
economy and an increase in these is an important measure for controlling
inflation. Government policy should therefore, include devices for increasing
savings. A strong savings drive reduces the spendable income of the consumers,
without any harmful effects of any kind that are associated with higher taxation.
Furthermore, the effects of a large deficit budget, which is mainly
responsible for inflation, can be partially offset by covering the deficit through
public borrowings. It should be noted that it is only government borrowing from
non-bank lenders that has a disinflationary effect. In addition, public debt may be
managed in such a way that the supply of money in the country may be controlled.
The government should avoid paying back any of its past loans during inflationary
periods, in order to prevent an increase in the circulation of money. Anti-
inflationary debt management also includes cancellation of public debt held by the
central bank out of a budgetary surplus.
Fiscal policy by itself may not be very effective in combating inflation;
therefore a combination of fiscal and monetary tools can work together in
achieving the desired outcome.
Direct Measures of Control
Direct controls refer to the regulatory measures undertaken to convert an
open inflation into a repressed one. Such regulatory measures involve the use of
direct control on prices and rationing of scarce goods. The function of price control
is a fix a legal ceiling, beyond which prices of particular goods may not increase.
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When ceiling prices are fixed and enforced, it means prices are not allowed to rise
further and so, inflation is suppressed.
Under price control, producers cannot raise the price beyond a specified
level, even though there may be a pressure of excessive demand forcing it up. Forexample, during wartimes, price control was used to suppress inflation.
In times of the severe scarcity of certain goods, particularly, food grains,
government may have to enforce rationing, along with price control. The main
function of rationing is to divert consumption from those commodities whose
supply needs to be restricted for some special reasons; such as, to make the
commodity more available to a larger number of households.
Therefore, rationing becomes essential when necessities, such as foodgrains, are relatively scarce. Rationing has the effect of limiting the variety of
quantity of goods available for the good cause of price stability and distributive
impartiality. However, according to Keynes, rationing involves a great deal of
waste, both of resources and of employment.
Another control measure that was suggested is the control of wages as it
often becomes necessary in order to stop a wage-price spiral. During galloping
inflation, it may be necessary to apply a wage-profit freeze. Ceilings on wages andprofits keep down disposable income and, therefore the total effective demand for
goods and services.
On the other hand, restrictions on imports may also help to increase
supplies of essential commodities and ease the inflationary pressure. However,
this is possible only to a limited extent, depending upon the balance of payments
situation.
Similarly, exports may also be reduced in an effort to increase the
availability of the domestic supply of essential commodities so that inflation is
eased. But a country with a deficit balance of payments cannot dare to cut exports
and increase imports, because the remedy will be worse than the disease itself.
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In overpopulated countries like India, it is also essential to check the growth
of the population through an effective family planning programme, because this
will help in reducing the increasing pressure on the general demand for goods and
services. Again, the supply of real goods should be increased by producing more.
Without increasing production, inflation just cannot be controlled.
Some economists have even suggested indexing in order to minimise
certain ill-effects of inflation. Indexing refers to monetary corrections through
periodic adjustments in money incomes of the people and in the values of
financial assets such as savings deposits, which are held by them in relation to
the degrees of price rise. Basically, if the annual price were to rise to 20%, the
money incomes and values of financial assets are enhanced by 20%, under the
system of indexing.
Indexing also saves the government from public wrath due to severe
inflation persisting over a long period. Critics, however, do not favour indexing, as
it does not cure inflation but rather it encourages living with inflation. Therefore, it
is a highly discretionary method.
In general, monetary and fiscal controls may be used to repress excess
demand but direct controls can be more useful when they are applied to specific
scarcity areas. As a result, anti-inflationary policies should involve varied
programmes and cannot exclusively depend on a particular type of measure only.
Inflation in India
Inflation targeting (IT) has emerged as a significant monetary policy
framework for developing countries like India because of its degree of flexibility.
(Jha, 2004). As India is undergoing sustained financial liberalization and
integration in the financial markets, IT has proved to be an attractive element in
the monetary policy. However, the persistent problem of poverty has been an
impediment to adopt inflation control as an exclusive concern of Indias monetary
policy. Even if the central bank, the Reserve Bank of India (RBI) wants to pursue
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IT, it cannot do so as the short-term interest rate, which is the principal tool used
to affect inflation, does not have a significant impact on the rate of inflation.
The inflation rate in India was recorded at 6.62 percent in January of 2013.
Inflation Rate in India is reported by the Ministry of Commerce and Industry.Historically, from 1969 until 2013, India Inflation Rate averaged 7.8 Percent
reaching an all time high of 34.7 Percent in September of 1974 and a record low
of -11.3 Percent in May of 1976. In India, the wholesale price index (WPI) is the
main measure of inflation. The WPI measures the price of a representative basket
of wholesale goods. In India, wholesale price index is divided into three groups:
Primary Articles (20.1 percent of total weight), Fuel and Power (14.9 percent) and
Manufactured Products (65 percent). Food Articles from the Primary Articles
Group account for 14.3 percent of the total weight. The most important
components of the Manufactured Products Group are Chemicals and Chemical
products (12 percent of the total weight); Basic Metals, Alloys and Metal Products
(10.8 percent); Machinery and Machine Tools (8.9 percent); Textiles (7.3 percent)
and Transport, Equipment and Parts (5.2 percent).
The average inflation of India in 2012 was 9.30 %. In January 2013, CPI
inflation rate was 11.02%.
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Figure 2: Indias Inflation Rate
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Why is solving India's inflation crisis important?
All of us are aware of India's inflation crisis. It is very disappointing, how we
lost our grip on stable 4-to-5 per cent inflation which was prevailing earlier. From
February 2006 onwards, in every single month, the y-o-y CPI-IW inflation hasexceeded the upper bound of 5 per cent.
All of us agree that there is something insidious when 10% inflation
effectively steals 10% of the value of my wallet or fixed income investments. In
India, however, we often hear the argument "Yes, this is bad, but if high inflation is
the way to get to high GDP growth, let's get on with it". It is, then, important to ask:
Why is low inflation valuable?
Nominal contracting is very important: Complex organization of economic life
involves myriad written and unwritten contracts involving households and firms.
The vast majority of these contracts are written in nominal terms, i.e. in rupee
values that are not adjusted for inflation.
Every society needs to adjust all the time, in response to changes in tastes
and technology. When tastes or technology changes, the structure of production
needs to change, which involves renegotiation of (written or unwritten) contracts.
These adjustments are costly. Contracting is costly, and renegotiating contracts is
costly.
It is useful to think of a finite supply of adjustment as being available in the
country. We should devote that full power of adjustment to the beneficial
adjustments associated with changes in tastes and technology. In a place like
India, where GDP doubles every decade, the requirement for adjustment is (in any
case) large.
Inflation is an acid that corrodes all nominal contracts. Two people may
have agreed on a contract two years ago at Rs.100, but that contract is thrown out
of whack because of 10% inflation per annum. That contract has to be
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renegotiated. Bigger values of inflation corrode personal relationships also, given
that there are many financial ties within friends and family.
Contracting is costly: Almost everything that senior managers do is to
arrive at complex deals that create and sustain complex structures of production.This work is continually torn down by high inflation which makes the deals of last
year break down today. Managers are able to build sophisticated edifices of
contractual arrangements under low and stable inflation. These webs of
contracting are harder to build and hold up when the acid rain of inflation is
continually tearing these down.
Inflation messes up information processing: To continue on the theme
of adjustment, the essence of a market economy is adjustments to relative prices,
reflecting changes in tastes and technology. Firms learn about the viability of
alternative investments by watching relative prices change. Inflation messes up
this information processing. It increases the `background noise' by making a large
number of prices change at once. This makes it harder to discern which price
change is fundamentally driven, and merits a response in terms of increased or
decreased production.
Building a sophisticated market economy is all about making long-term
plans. When a firm decides to build an airport or a highway, this involves making
NPVs over the next 20-40 years. This requires having a fair idea about future
inflation. If inflation will fluctuate in the future, then firms will err on the side of
caution when making plans about the future, i.e. investment will be reduced. I will
stress that long-term investment, in projects such as infrastructure or heavy
industry, relies critically not just on a long-term bond market (which, in turn,
critically requires low and stable inflation) but also on the calculations happening
in a spreadsheet about the NPV of the investment project, which involves
projecting all revenues and all expenses for the next 20-40 years (which also
critically requires low and stable inflation).
Impact upon pre-existing nominal savings: For a person at age 60 who
expects to live to age 85 or 95, fixed income investments are absolutely crucial in
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the financial planning of these 25-35 years. These calculations can be destroyed
by a short bout of inflation.
A civilized society is one in which people can make plans for the deep
future, and trust in financial instruments. It is simply cruel on the elderly to inflateaway their nominal assets. The possibility of even one bout of high inflation over
the coming 25-35 years forces people to drop back to other mechanisms of
protecting themselves in old age. What is needed is not just inflation control right
now. What is needed is the environment of mature market economies, where
outbursts of inflation are fully ruled out for decades to come.
Impact upon relationship with banks: In India, banks pay very low
interest rates. While many interest rates have been deregulated, the interest rates
paid by banks are held back by factors such as low competition and financial
repression (i.e. forced purchases of government bonds).
When households expect inflation will be 12%, they will see a 4% interest
rate paid by the bank as yielding -8%. This has many consequences. On one
hand, households and firms expend excessive (wasteful) effort on minimizing their
holdings of low-yield cash. In addition, households tend to shift away from fixed
income contracting with the formal financial system. Both these distortions are
caused by inflation, and exacerbated by flaws in the financial system.
If the financial system were regulated sensibly, then with high inflation we
would immediately get higher nominal interest rates since buyers of 90 day
treasury bills would demand higher interest rates to pay for inflation. This would
reduce the damage caused by high inflation. In India, we suffer from bigger
negative effects because of a faulty financial system.
These may seem to be small things but they actually are fairly large effects.Towards an understanding of the costs of inflation -- II, by Stan Fischer, 1981,
argues that perfectly anticipated 10% inflation induces a cost of 0.3% of GDP on
account of only one factor: excessive efforts by households and firms to hold less
cash.
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The rising prominence of gold: Gold is a barbarous relic; it is the
investment strategy of choice for uneducated people. It is also a vote of no
confidence in fiat money. Our failures in creating a capable central bank, which
delivers sound fiat money, are taking Indian households back to their old ways.
Many decades of progress in getting households to engage with the modern
financial system is being undone in this inflation crisis.
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PUBLIC OPINION: IS INFLATION A MENACE OR A BLESSING?
The perceptions of people regarding inflation are varied. While some
actually think of it as no real threat in peace time, others refer to it as a necessary
price of continuing economic growth. It is probably more difficult to arouse thepeople to the evils of inflation than it is to the hazardous effects of depression and
recession. It has often been called the most spiteful of all taxes, which affect
everyone and especially those with meager incomes. In contrast to this view,
people whose incomes rise faster than prices actually find advantages in
inflationary booms and call it a blessing in disguise. Others feel that inflation is an
illusion and that in the recent years, prices have stabilized. Some contend that for
economic growth and social progress, the price level must rise. To any average
individual, inflation is related to a higher cost of living which in other words is a
money problem. Consumers might not succeed in understanding that their
purchasing power must eventually be restricted by the production and supply of
goods and services and the demand for them. Their cure for inflation might either
be to increase the accessibility of money in some way or to cheapen the money
by boosting prices.
Thus, one view is that inflation is a phenomenon of prosperity and boom.
We all want a higher growth rate, even is it is attainable at the expense of
instability and unemployment in the economy (Buehler, 1959). On the other hand,
if one is to judge by the recent outpouring of articles, books, government reports
and other literature on inflation, then inflation does seem like a potential menace.
In order to solve the problem of mass unemployment and to assure economic
stability, the excess expenditure by consumers and the government must be
increased. As a result, wages must increase. Thus, the existence of some
inconsistency between the goals of price stability and economic growth cannot bedenied. An absolutely stable economy will face stagnation whereas a dynamic and
growing economy is bound to be associated with unemployment of resources,
some imbalances and some local depressions. General ups and downs, with the
risk of at least temporary inflation, are unavoidable in an economy. Furthermore,
the anticipation of future inflation affects savings and speculative activities and
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breeds further inflation. Hedges against inflation are commonly sought in
common stocks, real estate and other various commodities. (Buehler, 1959) A
decent growth rate and reasonable stability must be the only expectation.
Scope and Objectives of the Study
There are various objectives for preparing a detailed project report on
inflation and public attitude towards it. Some of them are listed as below:
1. To understand, using public survey methods, why people are so
concerned and dismayed by inflation, the increase in the price level and
decline in value of money.
2. To try to understand public problems, chaos, purchasing power, livelihood
concerns related to inflation and found a reason behind their dilemma. To
try and understand what real problems people see inflation is causing.
3. To study public attitudes towards inflation thus, helping government policy
makers better understand the reasons why they should (or should not) be
very concerned with controlling inflation, and help the policy makers better
understand issues concerning exchange rate policies.
4. A study of public attitudes towards inflation may also help us learn whetherdifferences across countries in attitudes towards or understandings of
inflation might explain any differences across countries in inflationary
outcome.
5. To find out what things people associate with inflation, what theories they
have about the mechanism of inflation, what their information sets
regarding inflation are, and what their preferences are with regard to
inflationary outcomes
6. The issues studied is the present study includes the importance of inflation
for the standard of living, why people think inflation affects their standard of
living, other concerns besides the standard of living, psychological effects
of inflation, concerns that opportunists use inflation to exploit others, morale
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issues, concerns about political and economic chaos caused by inflation,
and concerns about national prestige and prestige of the currency.
Limitations of the Study
1. The time constraint was one of the major problems.
2. The lack of information sources of the analysis part.
3. Possibility of error in data collection because many of the people may
not give actual answer.
4. There are also issues of selection bias in our answers: we have
responses only from those who chose to answer. The selection bias
issues are perhaps most important with questions about how important
inflation is (people who think inflation is important are more likely to fill
out the questionnaire) and with questions about the extent of public
information (people who know more about inflation are more likely to fill
out the questionnaire).
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CHAPTER 2
RESEARCH METHODOLOGY
The system of collecting data for research projects is known as research
methodology. The data may be collected for either theoretical or practical
research for example management research may be strategically conceptualized
along with operational planning methods and change management.
Some important factors in research methodology include validity of
research data, Ethics and the reliability of measures most of your work is finished
by the time you finish the analysis of your data.
Formulating of research questions along with sampling weather probable or
non-probable is followed by measurement that includes surveys and scaling. This
is followed by research design, which may be either experimental or quasi-
experimental. The last two tags are data analysis and finally writing the research
paper, which is organized carefully into graphs and tables so that only important
relevant data is shown.
Research Steps
1. Study about the views and perceptions of people about inflation
2. Setting of objective
3. Instrument design (questionnaire)
4. Main study
5. Analysis and interpretation
6. Finding
7. Conclusion
8. Suggestion and recommendation
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Research Design
A research design is the arrangements of the condition for collection &
analysis of data.
KEY ISSUE OPTIONS
Research
design Descriptive research
Data
Primary data, secondary
data
ResearchSurvey method, literature
review
Research
instrument Questionnaire
Research Design consist of:-
A clear statement of the research problem.
Procedure and technique to be used for gathering
information.
The employees/ people to be studied.
Method to be used in processing and analysis data.
Types of Research Design:-
i. Exploratory study
ii. Diagnostic study
iii. Experimental study
iv. Descriptive study
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But Used Only Descriptive Study;-
A study, which wants to portray the characteristic of a group of individual or
situation, is known as descriptive study.
DATA COLLECTION : This is done either through primary data or secondary
data.
Primary data: - Primary data is data that has not been previously
published, i.e. the data is derived from a new or original research study and
collected at the data.
Secondary data: - Secondary data is data that has previously published,
books previous research reports, newspaper, magazine and journal conte
SAMPLING PROCESS: -
1. Sampling unit: - Sampling unit used in this survey
were simple random sampling. In this method the sampling unit was
chosen randomly amongst the people residing in different parts of India.
2. Sample size: - Sample size was not restricted and
everyone was allowed to answer the questionnaire. We took a sample size
of 120 people who attended the survey.
RESEARCH INSTRUMENT:-
A research instrument is a survey, questionnaire, test, scale, rating, or tool
designed to measure the variables, characteristics, or information of interest, oftena behavioral or psychological characteristic. Research instruments can be helpful
tools to your research study.
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Questionnaire:-A questionnaire is a research instrument consisting of a
series of questions and other prompts for the purpose of gathering information
from respondents.
QUESTIONNAIRE DESIGN
Questionnaires are an inexpensive way to gather data from a potentially
large number of respondents. A well-designed questionnaire that is used
effectively can gather information on both the overall performance of the test
system as well as information on specific components of the system.
Types of questionnaire:
1. Open ended question:- Although open ended questions provide a
superior method of testing than multiple-choice or true-false questions
as they allow little or no guessing, they take longer to construct and are
more difficult to grade. An open-ended question is designed to
encourage a full, meaningful answer using the subject's own knowledgeand/or feelings. It is the opposite of a closed-ended question, which
encourages a short or single-word answer. Open-ended questions also
tend to be more objective and less leading than closed-ended
questions.
2. Close ended question:-A closed-ended question is a form ofquestion
which can normally be answered using a simple "yes" or "no", a specific
simple piece ofinformation, or a selection from multiple choices.
http://en.wikipedia.org/wiki/Researchhttp://en.wikipedia.org/wiki/Questionhttp://en.wikipedia.org/wiki/Questionhttp://en.wikipedia.org/wiki/Answerhttp://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Multiple_choicehttp://en.wikipedia.org/wiki/Multiple_choicehttp://en.wikipedia.org/wiki/Informationhttp://en.wikipedia.org/wiki/Answerhttp://en.wikipedia.org/wiki/Questionhttp://en.wikipedia.org/wiki/Questionhttp://en.wikipedia.org/wiki/Research7/30/2019 public opinion about inflation in india
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Some trainers and instructors view closed questions as "bad", and
open ended ones as good, but that is false. Each has its uses.
1. Leading questions:-A leading question is one that forces or implies a
certain type of answer. It is easy to make this mistake not in the
question, but in the choice of answers. All answers should be equally
likely.
2. Clarity:-This is probably the area that causes the greatest source of
mistakes in questionnaires. But in this Questions must be clearly define,the goal is to eliminate the chance that the question will mean different
things to different people.
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CHAPTER 3
DATA INTERPRETATION AND ANALYSIS
1. Do you think that controlling inflation should be a high
priority for the Indian government?
S.N
o.Opinion
No. of
People
% of
People
1 Yes, strongly agree 60 50%
2 Yes, agree somewhat 53 44%
3 Neutral or no opinion 0 0%
4 No, disagree somewhat 0 0%
5 No, strongly disagree 7 6%
Total 120 100%
50%
44%
0% 0%
6%
Percentage of People
Yes, strongly agree Yes, agree somewhat Neutral or no opinion
No, disagree somewhat No, strongly disagree
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Interpretation: 50% of the people who gave the survey strongly agree that
controlling inflation should be a high priority for the Indian government, 44%
supported them and agreed to some extent. Only a 6% population was of the
opinion that government should give preference to other issues rather than
inflation. The results appear to confirm that most people think that inflation is an
important national policy issue. Public opinion polls have shown that inflation (or
something like inflation) has often been viewed as the most important national
problem.
2. Do you find, when you hear or see news stories about inflation, that
you personally find these stories interesting?
S.No. Opinion No. of People % of People
1 Yes, very interesting 33 28%
2 Yes, somewhat interesting 75 62%
3 No, or no opinion 12 10%
Total 120 100%
28%
62%
10%
Percentage of People
Yes, very interesting Yes, somewhat interesting No, or no opinion
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Interpretation: People report that they are interested in news reports on
inflation: 28% chose very interesting or 62% chose somewhat interesting. This
may be because the word inflation is so much a part of everyday lives; it hasmany associations and connotations to ordinary people. Moreover, because
shopping, and thereby noticing prices, is an everyday activity for ordinary people,
thinking about prices is also a major part of peoples thinking, and the subject
inflation is one of great personal interest for most people. Inflation, when it is
substantial or shows the risk of becoming substantial, is clearly perceived as a
national problem of enormous proportions. This fact is also evident in the constant
attention that inflation is given in the media and in the fundamental role it plays in
many political elections. News about inflation seems to have serious
consequences for outcomes of elections (Cartwright and De Lorme, 1985; Parker,
1986; Golden and Poterba, 1980; Cuzan and Bundrick, 1992). Only 11% public
gave no opinion on the question.
3. Do you have worries that if inflation raises too high, then something
really bad might happen?
S.No. Opinion No. of People % of People
1 Yes, very much 47 39%
2 Yes, somewhat 40 33%
3 No, or no opinion 33 28%
Total 120 100%
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Interpretation: Majority of the people (39%) were of the opinion that they
have the fear that inflation may cause something bad in their life. 33% agreed to
some extent while 28% were neutral. The impression that people are worried
about the effects of inflation on their standard of living is supported by these
responses.
4. If you answered yes to the above, what are you worried might
happen?
The most common answers concerned fears of depression and/or dramatic
drop in overall standard of living:
Millions like me, will be forced into poverty perhaps into a sort of
depression.
If inflation rises too high, more people will be forced to seek assistance,
e.g., welfare,
food stamps, charity, etc.
We wouldnt be able to afford anything. Our wages wouldnt be high
enough.
Iwill not be able to live within my weekly paycheck.
There will be more homeless and starving people.
39%
33%
28%
Percentage of People
Yes, very much Yes, somewhat No, or no opinion
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Inflation would have a strong impact on an individuals pocket book and on
ones standard of living.
It would badly affect my life and lifestyle.
A few reported fears of political instability:
1. Political Nightmare 2. Riot 3. Big incidents
Hyperinflation can cause governments to fall and individuals savings may
be lost causing chaos throughout the land.
Political chaos, loot, murder, dacoity, may rise.
A few reported general fears of damage to the economy:
High inflation affects all aspects of business and investing. It is unhealthy
for business,
Failures will result.
If too high the economy would collapse.
A financial collapse, followed by a depression.
A few spoke of changes in the income distribution:
Increase in people with high levels of income. Decrease in number of
people in Middle-class levels of income. Increase in number of people in poverty
levels ofincome.
That the gap between the rich and the poor will become so great that there
will no longer be a middle income group or even the potential of one.
There always remains worry that all the needs would not be fulfilled. Prices
will grow, Richer getting richer and poor getting poorer. The gap between the two
will increase
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5. When you go to the store and see that prices are higher, do you
sometimes feel a little angry at someone?
S.No. Opinion No. of People % of People
1 Yes, often 40 33%
2 Yes, sometimes 60 50%
3 Never 20 17%
Total 120 100%
Interpretation: Peopletend to be angry at someone when they see prices
rise. 33% reported feeling angry often, and an additional 50% reported feeling
angry sometimes.
6. [If you said yes above] Who do you tend to feel angry at and why?
There was little agreement on the answer to this question that who
they are angry at. The government was mentioned by 38 respondents,
manufacturers by 15 respondents, store owners by 5, business in general
by 6, wholesalers by 4, the congress party by 40. Also mentioned were
33%
50%
17%
Percentage of People
Yes, often Yes, sometimes Never
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institutions, economists, retailers, distributors, middlemen, conglomerates,
big money people, store employees (for wage demands), my employer
(for not increasing my salary), and myself (for being ignorant of matters).
7. Do you agree that preventing high inflation is an important
national priority, as important as preventing drug abuse or
preventing deterioration in the quality of our schools?
S.No. Opinion No. of People % of People
1 Yes, strongly agree 52 44%
2 Yes, agree somewhat 27 22%
3 No opinion/ Neutral 8 6%
4 No, disagree somewhat 20 17%
5 No, strongly disagree 13 11%
Total 120 100%
44%
22%
6%
17%
11%
Percentage of People
Yes, strongly agree Yes, agree somewhat No opinion/Neutral
No, disagree somewhat No, strongly disagree
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Interpretation: This question shows some indication of the magnitude of
the public concern with inflation; with about majority of the public choosing 1
(44%) and agree somewhat (22%), one might say that the problem of high
inflation appears to be viewed by the public as on par with the drug problem or the
problems of our schools.
8. Which of the following comes closer to your biggest gripe about
inflation:
22%
61%
17%
Percentage of People
Inflation causes a lot of inconveniences: I find it harder to comparison shop,
I feel I haveto avoid holding too much cash, etc.
Inflation hurts my real buying power, it makes me poorer.
Other
Opinion No. of People % of People
Inflation causes a lot of inconveniences: I
find it harder to comparison shop, I feel I have to
avoid holding too much cash, etc.
27 22%
Inflation hurts my real buying power, it
makes me poorer.73 61%
Other 20 17%
Total 120 100%
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Interpretation: Majority of the general public (61%) chose 2, that inflation
hurts real buying power. Consistent with this popular impression that inflation
hurts standards of living; the general public tends to see inflation as hurting most
people power.The public was much more fixated on the supposed direct effects ofinflation on the standard of living, and relatively indifferent to the inconveniences
of inflation.
9. What percent of the population do you think is hurt when there is
sudden, unexpected, high inflation?
S.No. Opinion No. of People % of People
1 100% 2 1%
2 85% 6 5%
3 80% 83 70%
4 75% 24 20%
5 60% 5 4%
Total 120 100%
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Interpretation: On taking out the mean value of the responses gathered,
80% of the population was found to be affected by sudden, unexpected, high rise
in prices. 70% people were of the opinion that 80% population of the county is
affected by inflation.
10. Do you agree with the following statement? When I see
projections about how many times more a college education will
cost, or how many times more the costs of living will be in coming
decades, I feel a sense of uneasiness; these inflation projectionsreally make me worry that my own income will not rise as much as
such costs will.
1%
5%
70%
20%
4%
% of People who gave thier views on
% of population affected by inflation
1 2 3 4 5
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S.No. Opinion No. of People % of People
1 Yes, Strongly agree 48 40%
2 Yes, Agree somewhat 33 28%
3 No opinion/ Neutral 18 15%
4 No, Disagree somewhat 19 16%
5 No, Strongly disagree 2 1%
Total 120 100%
Interpretation: People do not tend to see inflation as a process that
naturally tends to affect wages and salaries as well as goods prices. Majority of
40%
28%
15%
16%
1%
% of People
Yes,Strongly agree Yes, Agree somewhat
No opinion/Neutral No, Disagree somewhat
No, Strongly disagree
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the people (40%) has a fear that their income will not rise as much as the costs on
college education, living etc. will rise. 28% respondents also feel quite similar.
11.Do you agree with the following statement? I think that if my pay
went up I would feel more satisfaction in my job, more sense of
fulfillment, even if prices went up just as much.
S.No. Opinion No. of People % of People
1 Yes, Strongly agree 34 28%
2 Yes, Agree somewhat 25 21%
3 No opinion/Neutral 13 11%
4 No, Disagree somewhat 17 14%
5 No, Strongly disagree 31 26%
Total 120 100%
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Interpretation: The publics answers here are spread all over the range
from 1 to 5, but one might say that the fact that about half of the public who
picked 1 or 2 reveals some perceived benefits of inflation, rather than costs. But
connected with this feeling there may be some perception that the apparent
satisfaction is illusory or the result of tricks:
Inflation is like a narcotic. For a while it puts us in a high mood, glorifies
the world, and helps us forget our problems, but an awakening follows inevitably.
(Karl Schiller, 1970).
This leads us into a consideration of the possibility that there is some
concern among the public that inflation is a sort of deception, or that it facilitates
deception by some people.
28%
21%11%
14%
26%
% of People
Yes, Strongly agree Yes, Agree somewhat No opinion/Neutral
No, Disagree somewhat No, Strongly disagree
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12. Do you agree with the following statement? When a country has
too high an inflation rate, society loses its cohesion and feeling for
the common good.
S. No. Opinion No. of People % of People
1 Yes, Strongly agree 55 46%
2 Yes, Agree somewhat 26 22%
3 No opinion/ Neutral 20 17%
4 No, Disagree somewhat 15 12%
5 No, Strongly disagree 4 3%
Total 120 100%
46%
22%
17%
12%
3%
% of People
Yes, Strongly agree Yes, Agree somewhat
No opinion/Neutral No, Disagree somewhat
No, Strongly disagree
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Interpretation: According to majority of the people who chose option 1
(46%) and option 2 (22%), the social atmosphere created by inflation is a selfish
one and harmful to national morale
13. What effect do you think that a strongly and steadily inflationary
national policy would have on the nations feeling of morale and
sense of shared social purpose?
S.No. Opinion No. of People % of People
1 Very harmful 86 72%
2 Mildly harmful 24 20%
3 Neutral 0 0%
4 Mildly beneficial 10 8%
5 Very beneficial 0 0%
Total 120 100%
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Interpretation: Of the 120 respondents to this question, 72% chose 1, 20%
chose 2, none chose 3, 8% chose 4, and none chose 5, this is because
opportunists use inflation to take advantage of others.
14.Do you agree with the following statement? If inflation in a
country rises out of control it can lead to economic and political
chaos.
72%
20%
0%
8%
0%
% of People
Very harmful Mildly harmful Neutral
Mildly beneficial Very beneficial
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S.No. Opinion No. of People % of People
1 Yes, Strongly agree 62 52%
2 Yes, Agree somewhat 37 31%
3 No Opinion/ Neutral 8 6%
4 No, Disagree somewhat 10 9%
5 No, Strongly disagree 3 3%
Total 120 100%
Interpretation: There is a lot of agreement with this statement, suggesting
that this concern about inflation is a major one .A majority of respondents chose 1
51%
31%
6%
9%
3%
% of People
Yes, Strongly agree Yes, Agree somewhat
No Opinion/ Neutral No, Disagree somewhat
No, Strongly disagree
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or 2. It is because public really thinks that the line of causality runs only frominflation to the chaos.
15.Do you agree with the following statement? When a country has
too high an inflation rate, it can lose international prestige.
S.No. Opinion No. of People % of People
1 Yes, Strongly agree 44 37%
2 Yes, Agree somewhat 35 29%
3 No opinion/ Neutral 14 12%
4 No, Disagree somewhat 19 16%
5 No, Strongly disagree 8 6%
Total 120 100%
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Interpretation: There appears to be a strong belief that prestige loss is at
stake with high inflation. 37% respondents strongly supported this notion while
only 6% were against this thinking.
37%
29%
12%
16%
6%
% of People
Yes, Strongly agree Yes, Agree somewhat
No opinion/ Neutral No, Disagree somewhat
No, Strongly disagree
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CHAPTER 4
SUMMARY AND CONCLUSION
To summarize the main perceived costs of inflation briefly, the concerns
people mention first regarding inflation are that it hurts their standard of living.
There also appear to be popular notions that inflation harms the standard of living
by inhibiting economic growth, through some unspecified systemic factors.Otherconcerns are that the social atmosphere created by inflation is selfish and harmful
to national morale, that high inflation can cause political chaos or anarchy, and
that inflation and decline of currency value are harmful to national prestige.
Peoples concern for their national prestige is tied up with their feelings of self-
esteem, and their trust in their national institutions.
The public was much more fixated on the supposed direct effects of
inflation on the standard of living, and relatively indifferent to the inconveniences
of inflation.
This study confirms the high concern of people about inflation.
The impression that people are worried about the effects of inflation on
their standards of living is further supported by their responses to questions 3 and
4.
In answering question, whether they are worried that something really bad
might happen if inflation rises too high, majority said yes very much or yes
somewhat. What is striking is the dramatic nature of some of the answers to the
following question, about just what bad might happen. The most common answers
concerned fears of depression and/or dramatic drop in overall standard of living,afew reported fears of political instability while others reported general fears of
damage to the economy.
While people appear to be in great disagreement why inflation occurs, they
do tend nonetheless to be angry at someone when they see prices rise: in answer
to question 5, 33% reported feeling angry often, and an additional 50% reported
feeling angry sometimes. There was little agreement on the answer to the next
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question, question 6, on who they are angry at. There was little agreement on the
answer to this question that who they are angry at. The government was
mentioned by 38 respondents, manufacturers by 15 respondents, store owners by
5, business in general by 6, wholesalers by 4, the congress party by 40. Also
mentioned were institutions, economists, retailers, distributors, middlemen,
conglomerates, big money people, store employees (for wage demands), my
employer (for not increasing my salary), and myself (for being ignorant of
matters).
Question 7 shows some indication of the magnitude of the public concern
with inflation; with about majority of the public choosing 1 (44%) and agree
somewhat (22%), one might say that the problem of high inflation appears to be
viewed by the public as on par with the drug problem or the problems of our
schools. People also considered quiet a big number of populations (80%) to be
affected by inflation.
Finally, inflation can discourage saving and encourage consumption. It thus
is perceived as an attack on certain moral virtues -- a strong work ethic, deferred
gratification -- that support a healthy economy. Thus, it can be concluded that
majority of the people think about inflation seriously and want to get rid of it.
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CHAPTER 5
RECOMENDATIONS AND SUGGESTIONS
1. The survey would help policymakers frame national policy for curinginflation.
2. New tax policies can be planned to overcome the tax burden that give
rise to inflation.
3. Government should take inflation as a national problem and do
something to achieve a balance between wages and rising prices of
commodities and services.
4. Budgets must be planned in an economical way.
5. Economists must be consulted to find out remedies for inflation.
6. Public emotions must not be put at stake.
Besides these, further studies on a broad level must be conducted to know overall
feelings of the public about inflation so that an eminent system can be developed
to curb the menace of inflation.
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CHAPTER 6
REFERECNES
1. Buehler, Alfred G. (1959), The Problem of Inflation, Annals of the
American Academy of Political and Social Science, Vol. 326, Inflation,
pp. 1-10.
2. Cartwright, Phillip A. and DeLorme, Charles D. Jr., The
UnemploymentInflation Voter Utility Relationship in the Business
Cycle: Some Evidence, Southern Economic Journal, 51(3): 898905
3. Chandhok, H. L. (1978). Wholesale price statistics India 19471978
Economic and Scientific Research Foundation, both volumes.
4. Cuzan, Alfred G. and Charles M. Bundrick, Selected Fiscal and
Economic Effects on Presidential Elections, Presidential Studies
Quarterly, 22(1): 127134, 1992.
5. Gemeinschaft zum Schutz der deutschen Sparer, Zitate zur
Stabilittspolitik, Bonn, December 1990, p. 21 (our translation). Schiller
was German Economics Minister 1966 and Finance Minister 19712,
and was architect of the Stabilittsgesetz (stabilization law) 1967.
6. Golden, David G. and James M. Poterba, The Price of Popularity: The
Political Business Cycle Reconsidered, American Journal of Political
Science, December 1980, pp. 696714.
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7. Labour Bureau (2009): Report of the Index Review Committee,
Technical report, New Delhi, available at
http://labourbureau.nic.in/Index_ RevComRep_ 082009.pdf
8. Parker, Glenn R., Economic Partisan Advantages in Congressional
Contests: 19381978, Public Opinion Quarterly, 50: 387401, 1986.
9. Patnaik, Prabhat (1975), Current Inflation in India, Vol. 3, No. 6/7,
Inflationary Crisis Special Number, pp. 22-42.
10.www.inflation.eu.com
11.www.tradeeconomics.com, Ministry of Commerce and Industry.
http://labourbureau.nic.in/Index_%20RevComRep_%20082009.pdfhttp://www.inflation.eu.com/http://www.inflation.eu.com/http://www.tradeeconomics.com/http://www.tradeeconomics.com/http://www.tradeeconomics.com/http://www.inflation.eu.com/http://labourbureau.nic.in/Index_%20RevComRep_%20082009.pdf7/30/2019 public opinion about inflation in india
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QUESTIONNARE
1. Do you think that controlling inflation should be a high priority for the
Indian government?
Yes, strongly agree
Yes, agree somewhat
Neutral or no opinion
No, disagree somewhat
No, strongly disagree
2. Do you find when you hear or see news stories about inflation, that you
personally find these stories interesting?
Yes, very interesting
Yes, somewhat interesting
No, or no opinion
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3. Do you have worries that if inflation raises too high, then something
really bad might happen?
Yes, very much
Yes, somewhat
No, or no opinion
4. If you answered yes to the above, what are you worried might happen?
5. When you go to the store and see that prices are higher, do you
sometimes feel a little angry at someone?
Yes, often
Yes, sometimes
Never
6. [If you said yes above] Who do you tend to feel angry at and why?
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7. Do you agree that preventing high inflation is an important national
priority, as important as preventing drug abuse or preventing
deterioration in the quality of our schools?
8. Which of the following comes closer to your biggest gripe about
inflation:
Yes, strongly agree
Yes, agree somewhat
No opinion/ Neutral
No, disagree somewhat
No, strongly disagree
9. What percent of the population do you think is hurt when there is sudden,
unexpected, high inflation?
Inflation causes a lot of inconveniences: I find it harder to comparison shop, I feel I have to
avoid holding too much cash, etc.
Inflation hurts my real buying power, it makes me poorer.
Other
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10. Do you agree with the following statement? When I see projections
about how many times more a college education will cost, or how many
times more the costs of living will be in coming decades, I feel a sense of
uneasiness; these inflation projections really make me worry that my own
income will not rise as much as such costs will.
Yes,Strongly agree
Yes, Agree somewhat
No opinion/ Neutral
No, Disagree somewhat
No, Strongly disagree
11. Do you agree with the following statement? I think that if my pay went
up I would feel more satisfaction in my job, more sense of fulfillment, even if
prices went up just as much.
Yes, Strongly agree
Yes, Agree somewhat
No opinion/Neutral
No, Disagree somewhat
No, Strongly disagree
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12. Do you agree with the following statement? When a country has too
high an inflation rate, society loses its cohesion and feeling for the common
good.
Yes, Strongly agree
Yes, Agree somewhat
No opinion/ Neutral
No, Disagree somewhat
No, Strongly disagree
13. What effect do you think that a strongly and steadily inflationary national
policy would have on the nations feeling of morale and sense of shared
social purpose?
Very harmful
Mildly harmful
Neutral
Mildly beneficial
Very beneficial
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14. Do you agree with the following statement? If inflation in a country
rises out of control it can lead to economic and political chaos.
Yes, Strongly agree
Yes, Agree somewhat
No Opinion/ Neutral
No, Disagree somewhat
No, Strongly disagree
15. Do you agree with the following statement? When a country has too
high an inflation rate, it can lose international prestige.
Yes, Strongly agree
Yes, Agree somewhat
No opinion/ Neutral
No, Disagree somewhat
No, Strongly disagree
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