EVOLUTION OF INDIA’S ANNUAL INFLATION RATE FROM 1991-92 TO 2015-16

EVOLUTION OF INDIA’S ANNUAL INFLATION RATE FROM 1991-92 TO 2015-16

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  2017 NAME - JOYDEEPBHOWMIK ROLL NO - 16MSOM019 SCHOOL OF MANAGEMENT, NIT AGARTALA 4/11/2017 EVOLUTION OF INDIA’S ANNUAL INFLATION RATE FROM 1991-92 TO 2015-16
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  INFLATION:- Increase in Pricewith respect to time can be said as inflation. The term "inflation" originally referred to increases in the amount of money in circulation. However, most economists today use the term "inflation" to refer to a rise in the price level. An increase in the money supply may be called monetary inflation, to distinguish it from rising prices, which may also for clarity be called "price inflation". Economists generally agree that in the long run, inflation is caused by increases in the money supply.
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  INDIAN INFLATION RATEFROM 1991-92 TO 2015-16 Inflation Rate (in %) 1991-92 13.87 1992-93 11.79 1993-94 6.36 1994-95 10.21 1995-96 10.22 1996-97 8.98 1997-98 7.16 1998-99 13.23 1999-00 4.67 2000-01 4.01 2001-02 3.68 2002-03 4.93 2003-04 3.81 2004-05 3.77 2005-06 4.25 2006-07 6.15 2007-08 6.37 2008-09 8.35 2009-10 10.88 2010-11 11.99 2011-12 8.86 2012-13 9.31 2013-14 10.91 2014-15 6.35 2015-16 5.87 0 2 4 6 8 10 12 14 16 1991-92 1996-97 2001-02 2006-07 2011-12 2015-16 INDIAN INFLATION RATE FROM 1991-92 TO 2015-16 INDIAN INFLATION RATE FROM 1991-92 TO 2015-16
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  REASONS FOR HAVINGHIGHEST INFLATION IN 1991-92 Most countries in the world depend on the global economy for a wide variety of things. For India, we depend on West Asia for our oil, South Africa for our gold, US for our technology, South east Asia for vegetable oil etc. To buy these items from the world market, we need US dollars - the global currency of trade. The only way to earn dollars is by selling enough of our stuff in the global economy (exports). Since 1960s, India depended on the Soviet Union for our exports - as we failed to develop good economic relationships with the US and Western Europe. It was a good going for a while (India and the Soviets) until the proverbial sh*t started to hit the fan. In late 1980s, Soviet Union started to crack and by 1991 they were split into 15 nations (Russia, Kazakhstan, Ukraine, etc). Now, India had a major problem because our primary buyer was in turmoil. Exports were down significantly. Dissolution of the Soviet Union Meanwhile, there was this guy Saddam Hussein who had his misadventure into Kuwait in 1990. This led US to war with Iraq in early 1991. Oil fields started to burn and ships found it hard to reach Persian gulf. Iraq and Kuwait were our big suppliers of oil. The war led to destruction of our oil imports and the prices shot up substantially - doubling in a few months. Gulf War and 1990 oil price shock In the late 1980s India's political system was imploding. Prime Minister Rajiv Gandhi was involved in a series of troubles - Bofors scandal, IPKF misadventure ,Shah Bano case that eventually led to his ousting in 1989. What followed were two more terrible leaders who were as unstable as they were incompetent. This had a huge effect on Indian economy that was totally forgotten in the political crisis. in 1991 this stop-gap government crashed. Until Narasimha Rao was sworn as Prime Minister in 1991, Indian economy was left in gross neglect. Thus, 1991 was the year of perfect storm. This triple crisis brought India on its knees. On the one end, our primary buyer is gone. On the other hand, our primary sellers were in war. In the middle, our production was effectively stopped by political crisis. We were running out of dollars to buy essential items like crude oil and food from the rest of the world. This is termed a "Balance of Payments Crisis" - meaning India was not able to balance its accounts - exports were significantly less than imports. Since, we didn't have many dollars, we went and begged the IMF - the pawn shop of the world. They asked us to pledge our gold reserves in return for the interim loan of $3.9 billion (a huge sum for India then) just as the neighborhood moneylenders ask fogir our gold when we want an emergency loan. We took 67 tons of our gold in two planes - one to London and other to Switzerland to get this assistance.
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  REASONS FOR HAVINGLOWEST INFLATION IN 2001-02 In the beginning of the period during 2002-03, India witnessed uptrend in inflation as the prices of oil was increased doubly in that period. Due to drought conditions there was ill effect on agricultural products, which led to the increase in the prices of edible oil & oil seeds. Inflation was 3.3% points up during the fiscal 2002-03 and as per the RBI report unlike preceeding years, this period inflation was dominated by non-food items. The official expenditure of defence also gave up a sudden rose to four times from Rs.16,347 crores to Rs.65000 crores in the budget of 2002-03.
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  2016 INFLATION RATEANALYSIS .. Fig:- Monthly inflation rate in India for year 2016 (Sources : The Statistics Portal) By the given data we can see that in May 2016 there was a highest inflation rate of 6.59% and in Dec 2016 there was a drastic fall with 2.23%, which is very low with comparison to last year Dec 2015. The Demonetization was one of the biggest step of Indian govt. which reduces the inflation rate.
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  FORECASTING Fig:- Inflation Forecastingby IMF up to 2021 At the time of studying I found different data and information through different sources. What I found in my study is that we forecast the Inflation rate but the Govt. policy is most important factor at the time to affect market. The GDP of India at 1990 was 5.53% with the total of $375.89 USD w.r.t Inflation rate of 13.71% The GDP of India for 2021 is forecasted by IMF will be 8.12% with the Inflation rate of 4.9%