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Old December 22nd, 2006, 02:25 AM
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chitrala chitrala is offline
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Re: Inflation ... makes no sense.

Quote:
Originally Posted by tantric_yogi
I got no idea what you two writing. May be even you two dont know what you writing.

All I ask is last year loaf of Brittania bread cost Rs. 1.80 and today cost 2.40 and government say inflation is 4% ............
Tantu ji, Just take a look at your Salary statement over last year.... how much increase do you find there.
inflation is not an unidimensional concept... It depends upon a lot of thing.. It is calculated over a base year( marked 100)... mainly on two separate indices viz. Consumer price index and wholesale price index which in layman (LLKC like me) terms is if you get say X amount of goods for rupees 100 in base year you would get that for Rs. 104 in current year then inflation would be 4%.({104-100/100}*100 = 4)

It is calculated over a basket of goods... what you are talking about are individual goods. Sharp rise or fall in prices reflect the state of that particular industry. rise in bread prices may occur due to government policies or poor wheat production etc.
Inflation also indiacates the value of money.... Since it takes more money to get the same amount of goods so there is a decline in value of money.

What Hurry was saying about broad money or M3 is not solely related to money printing. RBI controls the money supply in market (M3) through various measures : saving Bonds, rate of interest are some of them.

Again, once you are a member of IMF, you can't print notes on your whim, you need The Fund's permission for that because more money in market means more income to citizens consequently more purchasing power and rise in demand corrospondingly rise in prices (decline in value of money).. which will inturn affect Balance of Payment and your foreign exchange rates. *** IMF depreciates the value of currency on printing more notes***

What we are witnessing in India can't be branded a fake growth.. yes there is certain amount of staged up euphoria.. but some real growth is taking place too. We have fared quite well against Dollar In last few years ( Some of that could be ascribed to US govt's goofed up measures)... But rupee in general has strengthened its position... our forex reserve has crossed $100 billion quite a while ago and that is not propoganda alone.

What is to be noted is that there is a marked shift in govt's policies... it doesnt believe in idle money or savings anymore.. investment (productive) and enterprise is appreciated now.
Many of the indices are showing healthy signs for economy.. though agriculture sector still sucks. So it is still wrong to say that govt falsely claims inflation to be 5.2% when goods are much costlier. There are so many factors responsible for everything happens in the economy that you can't pinpoint one single factor and draw conclusions upon that.
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Last edited by chitrala; December 22nd, 2006 at 02:28 AM.
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