Tanmarkets

# INFLATION RATE

हिंदी में पढ़े

Inflation is general increase in price level of goods & services over some period of time(generally,it is discussed in years) and the percentage change in this price level is called Inflation rate.
Let say,price of sugar was ₹30 one year back and for now,it is ₹33, than inflation is of ₹3 & the inflation rate is 10%.
You must have heard from your parents or nay other elder that when they were of your of your age ,they used to get only ₹5 to go and enjoy the mela(fair) but now if you would go to fair, you would probably take ₹500;why;because prices of rides in fair, clothes and other commodities have increased very much over time and this is what we call as inflation.
NOTE:One thing to note is that the inflation is an overall picture of price-rise in a country,this is more like a representative number and somewhat like an average.Scene for individual commodities can be different ie. price of any particular commodity may have even reduced also or increased by different rate.
Inflation decreases the commodity or service buying capacity of the curency as prices of goods increse but value of money does not .Taking an example,three years back ,the price of maggie was ₹10 but now it is of ₹12 and you can not buy it for that ₹10 papermoney.
That's why ,to protect your money from inflation , you are adviced to make investment.Money kept in the locker will get you nothing,it's value will decrease but if you invest somewhere,you can convert your those ₹10 to ₹12 easily or even more in three years(though some risk are there, you have to understand them.

### CAUSES

Inflation means rise in price & it can occur by that every factor which increases the price of any commodity like tax reduction,hoarding,increased public spending etc.Generally,causes of inflation are divided in two categories:
1)cost-push        2)demand-pull
First we will see them and than we will dive in some more & study some more real factors which will make you understand it more.

#### 1)Cost-Push Inflation

This is also called supply side inflation and occur when there is shortage in supply and the demand is enough to increase the prices .It can be caused due to any of following reasons like:
Hoarding
increased cost of production etc

#### 1)Demand-Pull Inflation

It is more prevalent type of inflation than cost-push. When Aggregate Demand(AD) of economy rises and it outpaces the Aggregate Supply(AS) , it is called Demand-Pull Inflation

Now to understand the causes of inflation more,we will discuss some major of them here:
##### 1)Hoarding
When you will study causes of inflation,you will see this word very less but hoarding can also lead to increse in prices.Hoarding is the stock piling of any commodity and artificially creating it,s shortage in market & than selling them when prices increase due to shortage.Most probably you may remember the hike in onion prices in our country,Hoarders also contribute to such type of price rises,though this activity is wrong.
##### 2)Money Supply
Incresed money supply in economy,circulation of money increase,people have more money to spend and this positive attitude of buying results in increased demand .
NOTE: When government spends more money than the total tax collection or government revenue, govt.resorts to deficit financing and to overcome it, govt. either prints more money or devalues /debase (to decrease the value of currency with respect to other currencies) the currency.
Remember that money supply is not always the factor of inflation.To know more click here.
##### 3)Tax Reduction
If government taxes less , it is directly putting extra money in customers pocket,which can now increase the positive buying sentiment and can increase the dmand.
This is also called Discretionary Fiscal Policy.
Foreign Trade can also impact the inflation.Our total production of country should be enough to fulfill domestic as well as foreign demand.If the economy fails in it, it results in inflation.