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Submitted By rohit1550
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“Inflation: Everyone's illusion of wealth”
The Indian Scenario
A talk of inflation is inevitable. The term Inflation is no longer stranger to India and its people. Till the early nineties, Indians even used to two digit inflation rates. But, since the mid nineties, controlling inflation has become the priority for the policy makers.

The current scenario of inflation in India is even worse. The current inflation rate for October 2011 is 9.39% and the average inflation rate for the year 2011 is 9.06%.The concern continues to remain clearly focused on inflation that is just not going away, despite the repeated rate increases. While inflation has been declining in primary products, there has been a small upward movement in recent months, and manufactured product’s WPI (Wholesale Price Index) as well as CPI(Consumer Price Index) shows consistent inflation persistence.
T %

Fig : Monthly inflation rate in 2011

Now what does an inflation mean? What are the causes of the inflation? And how does it affect the common man and the economy as a whole?
In basic terms, Inflation is the sustained increase in the general price level of the goods and services in an economy. It basically decreases the value of the money and the purchasing power of the customers. It is usually measured by the Consumer Price Index (CPI).In India; however, it is measured using the wholesale price index (WPI).
A condition when the prices of the resources and the goods go up due to the decrease in the aggregate supply or the increased rate of taxes, then we are said to have the cost push inflation. This increased value of the goods and services is passed on to the customers that lead to their decreased purchasing power and a higher rate of inflation.
The changing exchange rates also cause inflation. It is estimated that a 4%…...

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