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After averaging a growth rate of 8 per cent over the last three years, the economy slowed to just 5.4 per cent in the second quarter.
About Purchasing Managers Index (PMI)
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In India, inflation is primarily measured by two main indices WPI (Wholesale Price Index) and CPI (Consumer Price Index), which measure wholesale and retail-level price changes, respectively.
Type of Inflation | Definition | Key Characteristics |
Based on Rate | ||
Creeping Inflation | Gradual increase in prices at a rate of less than 3% annually. |
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Walking Inflation | Moderate increase in prices, typically 3%–10% annually. |
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Galloping Inflation | Rapid increase in prices, typically between 10%–50%.
Example: Inflation in developing economies during crises. India experienced galloping inflation during 1973 and 1979 oil crises caused a sharp rise in global crude oil prices. |
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Hyperinflation | Extreme inflation with prices rising over 50% per month.
Example: Zimbabwe (2004–2009), Germany (Weimar Republic, 1920s). |
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Based on Causes |
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Demand-Pull Inflation | Inflation caused by excessive demand over supply.
Example: Inflation due to festive season demand. |
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Cost-Push Inflation | Inflation caused by rising production costs.
Example: Rising oil prices leading to increased transportation costs. |
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Structural Inflation | Inflation caused by inefficiencies in the economic structure.
Example: Inflation in developing countries with rigid supply chains. |
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Built-in Inflation | Inflation perpetuated by expectations of future inflation.
Example: Wage hikes in response to expected price increases. |
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Skewflation | Inflation affecting only specific goods or sectors.
Example: Food price inflation while other prices remain stable. |
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Headline Inflation | Measures inflation across all goods and services in an economy.
Example: CPI-based inflation in India. |
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Core Inflation | Inflation excluding volatile items like food and energy.
Example: Used by central banks to set monetary policies. |
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Reflation | Deliberate inflation stimulation by the government to counter deflation.
Example: Government spending after a recession. |
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Stagflation | Simultaneous occurrence of high inflation and stagnant growth.
Example: U.S. in the 1970s. |
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Positive | Negative |
1. Boosts Economic Activity: Moderate inflation encourages spending and investment as money loses value over time.
Example: Moderate inflation (~2%) is a target for many central banks, including the RBI and the US Federal Reserve, to promote economic growth. |
1. Erodes Purchasing Power: High inflation reduces consumers’ ability to buy goods and services.
Example: In 2024, India’s CPI inflation peaked at 6.2%, squeezing household budgets. |
2. Reduces Real Debt Burden: Borrowers benefit as the real value of debt decreases over time.
Example: During inflation, a loan with a fixed interest rate becomes cheaper in real terms. |
2. Reduces Savings Value: Inflation lowers the real returns on savings.
Example: If inflation exceeds fixed deposit returns (e.g., inflation at 7% vs FD at 5%), savings lose value. |
3. Encourages Production: Rising prices incentivize producers to increase output to meet demand.
Example: Increased agricultural production during high food prices to leverage profits. |
3. Income Inequality: Affects lower-income groups disproportionately.
Example: Food inflation in rural India reached over 9% in late 2024, affecting poorer households more. |
4. Benefits Equity Holders: Companies may earn higher profits, benefitting shareholders during inflation.
Example: Commodity companies like oil and gas firms see profit increases when input prices rise. |
4. Higher Interest Rates: Central banks often raise rates to control inflation.
Example: RBI’s repo rate hikes from 4% in 2022 to 6.5% in 2024 raised borrowing costs for businesses and households. |
5. Increases Tax Revenue: Inflation boosts nominal incomes, leading to higher tax collections for the government.
Example: During inflationary periods, income tax collections in India rose by 20% in 2022-23. |
5. Distorts Economic Planning: Unpredictable inflation complicates pricing and long-term business planning. |
Addressing inflation requires a multi-faceted approach, involving both immediate measures to manage demand-pull and cost-push pressures, and long-term structural reforms to enhance supply chain resilience and stabilize currency. A balanced economic policy framework is essential to manage inflation sustainably while promoting growth and investment.
Prime Minister Narendra Modi to chair the fourth National Conference of Chief Secretaries.
Frontier Technology
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The World Health Organization (WHO) published its first-ever Global Status Report on Drowning Prevention at an event in Geneva. The report highlights the significant global burden of drowning as a public health issue.
Switzerland has recently announced the suspension of the Most Favoured Nation (MFN) clause in its Double Tax Avoidance Agreement (DTAA) with India, effective from January 1, 2025.
ISRO achieved a significant milestone with the sea-level hot test of the CE20 cryogenic engine, conducted at the ISRO Propulsion Complex, Mahendragiri, Tamil Nadu.
The World Anti-Doping Agency (WADA) has approved the National Dope Testing Laboratory (NDTL) as an Athlete Passport Management Unit (APMU) to oversee the Athlete Biological Passport (ABP) program.
Google DeepMind has developed GenCast, a machine-learning weather prediction model that outperforms traditional forecasting systems.
Future Integration: Could integrate with physics-based methods, such as physics-informed neural networks, to improve accuracy and efficiency.
India marked a significant milestone in its journey towards a low-carbon economy with the unveiling of the Green Steel Taxonomy at an event, held at Vigyan Bhavan, New Delhi.
The Government of India, through the Ministry of Steel, has initiated several measures to promote green steel production:
Soil, groundwater and surface water in Kanpur Nagar, Kanpur Dehat & Fatehpur have been found to contain heavy metals much above permissible limits.
About the National Green Tribunal (NGT)The National Green Tribunal (NGT) was established under the National Green Tribunal Act, 2010, to ensure the effective and expeditious disposal of cases related to environmental protection and the conservation of forests and other natural resources. Role of NGT in the Kanpur Heavy Metal Contamination Case
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Incidents of Metal Contamination at global level:
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Context: Researchers from the Indraprastha Institute of Information Technology Delhi (IIIT-Delhi) have developed AgeXtend.
Context: India, France, and the UAE have launched “Desert Knight,” a trilateral air combat exercise over the Arabian Sea.
Context: The eCourts Mission Mode Project is under implementation for the Information and Communication Technology (ICT) development of the Indian Judiciary.
Context: The Employees’ Provident Fund Organisation (EPFO) is working towards rolling out a facility that will allow members to withdraw funds from their corpus through an ATM card.
Context: A new study on archaeological sites in Gujarat’s Saurashtra peninsula has questioned the theory that early humans migrated solely along coastal routes.
Context: The Odisha government plans to secure a loan of ₹734.86 crore from the International Fund for Agricultural Development (IFAD) to implement Phase II of PVTGs.
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