Shweta Suri

Economic inflation is on everybody’s mind, and everybody is worried about the escalating economic recession. Government and RBI, are taking up measures on a continuous basis to carve off economic inflation level. The growth rate of the Indian economy is constantly declining while the prices of products and services are skyrocketing. But have you ever thought what Economic inflation is all about? How is it affecting you and the economy as a whole? What does a common man understand from the term economic inflation? All that you need to know about economic inflation, is here, just read on!

Let’s take a simple example to have better insight about economic inflation. A movie ticket of balcony class in one of the big cinema halls in Delhi in the year 1985 was just worth Rs 15. But in present times if one wishes to get himself entertained he has to pay a sum of Rs 125 for the same balcony class ticket. A rise of over 800 percent, in a time interval of almost 23 years, this is what exactly inflation is. The price of everything is spooking-up and eating up your money like anything. A thing that you can buy with a 20 rupee note around a decade back is now not feasible even with a 100 rupee note.

You might have heard your parents saying, after their return from the market or when they are preparing for the monthly household budget, that the prices are constantly rising. The prices they used to pay during their times are no more the same story now. The economic inflation in a common man terminology really turns your worth of money into ashes.

Economic inflation is an fiscal phenomenon, and it is defined as a rise in the price level of goods and services over a period of time. It is basically a decline in the real value of money that consumers are now left with less purchasing power as compared to what they had some years back. Economists are of the view that a high rate of economic inflation may be attributed to excessive flow of money in the market. Economic inflation in an economy can be measured in terms of inflation rate, which is the percentage change in the price index over a time period. Suppose the price of a music CD at a shopping store cost Rs 100 today and after a year if the same music CD is available at a price of Rs 110, then we can say the rate of economic inflation would be 10 percent.

Economic inflation may put some adverse affects on the economic conditions of a country. For example, a high rate of inflation in a country may lead to shortages in the availability of goods and services as people may start hoarding up the stock in the hope that the prices will go up in future. Economic inflation may widen up the income gap between the people of fixed income group and those who have variable income. Uncertainties on the part of consumers may develop some negative sentiments and that would automatically discourage savings and investments.

The rate of economic inflation for the last week of October, 2008 in India is around 11 percent, and it has given a big relief to the government that is putting its best to pull down the economic inflation level from the highs of 13 percent few months back.