Price Rise In Indian Economy

Presented By: Group O2Harini Valluri

Soman Nahata

Ankit Jangalwa

Gandharv Raj Sethi

Vishwajeet Narayan

Inflation: An OverviewThe term was first recorded in 1838.It has been

derived from the term L. Inflationem  (nom. inflatio ), noun of action from inflare  "blow into, puff up," from in-  "into" + flare  "to blow“.

Introduction

A sustained increase in the general level of prices so that a given amount of money buys less and less.

People on fixed incomes, such as some annuities or income from fixed interest on long-term investments, suffer most when inflation is rising, unless their pensions or incomes are fully indexed to the inflation rate.

Inflation is a rise in consumer prices, increasing the cost of living.

Major Reasons for Inflation

1. Oil Imports

2. Agricultural Production

3. Money Supply in the Economy

4. Government Borrowings and Debt

5. Increase in the cost of Production

Measuring Inflation

Different methods of measuring inflation:

1. Consumer Price Indexes (CPIs)

2. Producer Price Indexes (PPIs)

3. Whole-Sale Price Indexes (WPIs)

4. Commodity Price Indexes

5. GDP Deflator

6. Employment Cost Index

Rate Of Inflation In India

Rate Of Inflation In India: Contd

Counter Intuitive Behavior

In today’s globalized world, where each economy is dependent on others for it’s survival, Indian economy stands out as an irony. When the whole world is trying hard to mitigate the impact of the global financial crisis, India has marched forward with economic growth rate, second only to China.

This peculiar phenomenon can be better understood by a BOT graph which helps in displaying such counter intuitive behaviour effectively.

Behavior Over Time Graph

Stake-Holder Map Of Indian Economy

Common Citizen

Govt/Administration

Traders

Business Community and

Industrialists

Foreign Multinationals

Political Parties Price Rise in India

Stake-Holder Chart

Business Community/Industrialist Pvt. Business Banks

Government/Administration UPA Coalition

Common Citizen Low/Middle Class Citizen Rich/Upper-Middle Citizen

Traders Exporters Importers

Political Parties Congress Bharatiya Janta Party CPI(M)

Foreign Multinationals Foreign Manufacturers Foreign Comp. Outsourcing to India

Identifying the Stakes

Pvt. BusinessDecrease in demand for their products

Indian GovernmentFacing criticism for its policies. Is answerable to the public.

Is primarily responsible for controlling the inflation problem BanksIncreasing inflation having a serious impact on the cost of funds.

Communist Party of India (Marxist)Regional Political party against the government having support from the rural poor citizens.

Low/Middle Class CitizenCommon Man is agitated as he is bearing the brunt of the price rise and finding hard to makings end meet

Foreign Companies Outsourcing to IndiaForeign companies are finding India increasingly expensive and have started searching for cheaper countries like Vietnam.

Rich/Upper-Middle Class CitizenIs relatively indifferent as he can adjust with relative increase in prices.

ExportersGoods becoming less competitive in foreign markets

Congress Increasingly facing criticism as part of the ruling Govt.

ImportersImporters are increasingly profitable as Indian goods are becoming relatively expensive.

Bharatiya Janta PartyChief opposition party agitating against govt. policies

Foreign ManufacturersFinding India as an increasingly lucrative market as the domestic completion is losing it’s price edge.

Stake V/s Power Grid Power

Stake

Formal or Voting Economic Political

Equity Low/Middle Income

Citizen

High/Upper-Middle

Income Citizen

Indian Government

Economic Pvt. Business

Bank

Importers

Exporters

Influencers Foreign Manufacturers

Foreign Companies

outsourcing to India.

Congress

BJP

CPI-M

Analyze Price Rise And Demand Using A Causal Loop

PRICE DEMAND

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Disclaimer: Generally a price-demand loop is a balancing loop. The case mentioned above is a reinforcing loop only to be considered in light of the case mentioned above

Thank You