Inflation is a term that means the general increase in the prices of the goods and services compared to a specific and standard purchasing power of the people. The most common indicator of the inflation is CPI known as “Consumer price Index”, which figures out the consumer prices. The second is the GDP Deflator. This interprets the domestic economy of the country as a whole. The Indian Inflation is analyzed with the help of the graphs and tables. As can be seen in the graphs that the rippling of inflation is because of the destabilization and the inflation could be high. This happens in the case of an unpredictable economy such as India. The wholesale price index, the main inflation estimate of India, rose 7.25% in June, less than expected and the smallest increase since January after a fall in the prices of some petroleum products prices rose 7.55% in May (Gulati & Saini, 2013).
Companies desire decrease prices to be to the third largest economy in Asia grew by 5.3% of GDP in start of the year of 2012 interest, the lowest rate in nine years. The rupiah and the stock markets were flat after an initial jolt, traders calculated that 4.9%, inflation. This was high to increase the rate cut at the Reserve Bank of India (RBI by its acronym in English) in its policy meeting on July 31. The inflation expectation remains high, and the outlook is cautious due to the performance of the monsoon and its impact on food prices, plus the imminent and expected increases in fuel prices. Entrenched inflation is more persistent economic problem of India and implies that the country's interest rates are higher than in most other major economies.
The main reason that had increased the inflation rate of India is the unstable economy. It is a well-known fact that the Indian economy is a center of attention for the foreign investors and appeared to be quite perspective. However, if we analyze the development and realities of this country than the economy of India is considered unstable and that is the main factor for the rise in inflation. “The inflation rate of India as reported in July 2010 was 11.25%. Taking the period of 1970-2012 the mean inflation of India remained around 8% and then increased to a historical 35% as can be seen in the graphs. The rural sectors and the unstable agricultural areas truly have a negative impact on the development of economy in India”. Despite of the fact that the Indian’s have a strong industrial sector; the inflation rate is still growing. Another factor that has increased the inflation rate of India is the poverty level (Pal, 2013). The significant portion of the Indian population lives under poverty and the inflation rate of 2009 have a dramatic effect on their living. When the inflation is rising, this also indicates that the cost of living also increased and thus standard of living goes down. The prices of gas, cooking, food items etc. have increased around 21% in 2008 in India.
Most of the Indian populace is living below or under the poverty line. Thus, Inflation acts as “A poor Man’s Tax”. This impact is multiplied when the prices of the food rises, as the food signifies a major chunk of the expenditure of the poverty group of India (Pal, 2013). The increased inflation in the period of 2002-2012 has critically damaged all the major spheres of the life of the Indians. The political condition of the country robustly depends upon the situation of the economy. Researchers have analyzed that the increased prices of the inflation and food had affected the industry and the government, “India’s 2006-2012 Economic Survey” report suggests that there is a double-digit increase in the food prices and this virus is spreading in the various other sectors as well.
The Deputy Governor of The India’s Reserve Bank expressed his optimism that in March 2010 there is an imminent ease in the CPI inflation. This is because of the declining food and ill prices. Thus, to conclude the rising inflation will have a political as well as an economical implication for the government of India and the election within the year (Pal, 2013).
The current situation of India’s rate of unemployment is crucial and very threatening. According to the recent news of Economy, the unemployment rate of India has reached its peak since the last 4 years and the rate of unemployment is found out be 10.8 % in 2010 as can be seen in the figure above. The situation for the rate of unemployment of Indian economy is becoming crucial and it is understood. According to the statistics as shown in the table, this rate of unemployment has never been so high before in the Indian economic history. It has been noted down by the analysts that the development of the economy of India, nearly 65% of the Indians were employed in the sphere of agriculture. After that, the situation has changed dramatically. The agriculture sector of India has been stagnated rapidly. This is because of the swift development in the industries and the globalization (Pal, 2013).
Around 65% of the labor force of India is self-employed and many of whom remain poor. Around 25% are casual workers and not able to get proper jobs and remain unpaid for several days. About 10% of the employees are regular and in which the two fifths are employed in the government sector. Every year the labor force of India grows a noting factor by 2.5% and thus the employment in increasing only at around 2.3%. This situation is understood and this is the reason for a significant unemployment. This huge unemployment is a major problem for the Indian government to overcome. The unemployment rate in India is generally known as chronic unemployment. In 2010, the situation of unemployment in India became critical. The major problem is the unorganized sector of India. More than 90% of this labor force lies in the unorganized sector. The other sector do not only provide with the social sector but also the other advantages of employment in the organized sector. The agricultural workers from the bulk of the unorganized sector comes from the rural areas, in the Urban portion, the sub contract and the contracts are well as migratory and the agricultural laborers make up most of the unorganized labor force (Hasan, et al., 2012). It should be noted that a situation on the working place and the government’s inability have led to the fulfillment of the workplace demands (Pal, 2013). The analysts have predicted that the 2020 unemployment rates of India would reach to 30% if this over growing population were not controlled. Thus, the situation of the unemployment in India could be critical. The economic growth with the constant rise of the unemployment rate could not be called as a reliable and stable factor of the prosperous economic future of the country. As expected, former chief economist of the International Monetary Fund adopted a tough stance on cost in Asia's third largest country, but did not describe the direction of the upcoming changes in interest rates and it plans to reduce liquidity adjusting the measures implemented to stabilize the rupee as soon as market conditions permit (Blanchflower, 2007). In spite of an financial arrangement that originated just 4.4% in the June, its feeblest growth rate in four years, government determined to arouse the interest rate in India for very first time in almost two years, in line with similar decisions in Indonesia and Brazil whose local currency has also been affected by heavy capital outflows in recent months (Pal, 2013).
The rate of inflation measured by the wholesale price index (WIPE, for its acronym in English) in India rose to a six-month 6.1% and (CPI) at 9.52 percent. What is equally worrying is that inflation at the retail level, as measured by the CPI, has been high for several years, placing inflation expectations to high levels and affecting consumer confidence and business (Patra, Khundrakpam & George, 2013). Although growth rates of India are less sensitive to changes in interest rates than in some other countries, Indian voters are very sensitive to inflation, and several major elections will be held at the level of the states in the coming months and a general election in May. The federal bonds Indian rupee and stocks extended losses after the central bank's decision.
Blanchflower, D. G. (2007). Is Unemployment More Costly than Inflation? NBER Working Paper, 13505.
Gulati, A., & Saini, S. (2013). Taming Food Inflation in India.
Hasan, R., Mitra, D., Ranjan, P., & Ahsan, R. N. (2012). Trade liberalization and unemployment: Theory and evidence from India. Journal of Development Economics, 97, 269–280. doi:10.1016/j.jdeveco.2011.04.002
Pal, A. (2013). India in Global Recession and the Matter of Concerns. FLEET CARD, 28.
Patra, M. D., Khundrakpam, J. K., & George, A. T. (2013). Post-Global Crisis Inflation Dynamics in India: What has changed?