1. PRESENTATION ON UNION BUDGET AND MANAGING INFLATION By: ShivaniKakria MeghnaMahajan AnshitaKashyap KhushbooChauhan Sandeepkaur

2. Meaning Inflation means a persistent increase in the level of consumers prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.

3. Introduction to budget 2011-2012 Budget has tried to bring transparency in all the sectors of economy . Along with this the our finance minister has thrown light on inflation rate of our country Budget aimed at achieving fast paced recovery with the GDP which was 8.5% in 2010-2011 while breaching the 9% mark in FY2012.

5. Extremely high inflation

6. Moderate inflation

11. Demand side factors Rise in Public expenditure - expenditure incurred by govt. - Aggregate demand is greater than aggregate supply -India’s PE IN 2011-2012:-12,57,729cr which is increased by 13.4% to estimated PE in 2010-2011.

12. CAUSES Deficit financing - Expenditure is more than Income. - India’s deficit financing in 2011- 4.6% of GDP Which is less than as compared to last year 5.5% - The fiscal deficit situation had become manageable in the current fiscal year due to the successful 3G spectrum auction, divestment and strong GDP growth leading to buoyant tax revenues.

14. Increase in Money supply Irving fisher’s quantity of money explains- “Increase in money supply with proportionate increase in output lead to rise in PRICE and fall in money VALUE”

17. BLACK MARKET & CORRUPTION It is unearned income by public servants . Excess demand lead to inflation Acc. To Transparency International for corruption . India ranks 74

18. OTHER FACTORS Growth in population Growth in private expenditure Increase in Export Money reduction in direct taxes

19. SUPPLY SIDE FACTORS CAUSING INFLATION Industrial disputes Natural calamities Artificial scarcity Increase in export

20. Impact high oil price (Petrol prices increased by 23.14%) Fuel and power(increased by 9.48%) Fluctuating agricultural growth. Food inflation(9.52%) .

25. Effects Of Inflation

27. Effect on economic growth

29. NEGATIVE EFFECTS Decrease in real value of money Discourage investment and savings May lead to shortage of goods due to HOARDING Rise in poverty Less return to investors Illusions of making profits by the businessmen Rising prices of imports due to currency debasement Fixed income recipients will be hurt

30. POSITIVE EFFECTS It will benefit the business cartels Inflation  Currency Devaluation  Better Margins for Exporters “Economists favor a low steady rate of inflation, low (as opposed to zero or negative) because they relate inflation directly with growth of economy.” - PranabMukherjee

31. MethodstoMeasure Inflation. Consumer Price Index (CPI) Wholesale Price Index (WPI)

32. Current CPI/WPI – Last Calculated CPI/WPI Last Calculated CPI/WPI Inflation Rate 100 = 150 - 140 140 Inflation Rate =7.12% = 100

33. TYPES OF MEASURES TO CONTROL INFLATION MONETARY MEASURES FISCAL MEASURES OTHER MEASURES

35. Bank Rate

36. Repo Rate

37. Reverse Repo Rate

39. INFLATION vis-à-vis Economic Rates Source: International Monetary Fund- World Economic Outlook, www.finmin.nic.in

40. FISCAL MEASURES REDUCTION IN UNNECESSARY EXPENDITURE INCREASE IN TAXES: INCREASE IN SAVING SURPLUS BUDGETS PUBLIC DEBT

44. Rs 250 on economic class

47. Decrease in transportation costs that are intrinsically built into the price of every product that we use.

48. In health area include a hike in the deduction limit for health insurance. An increase in the limit will help in widening the base and increasing the penetration of health insurance among the masses. TO INVESTOR

49. EFFECT OF INFLATION ON DIFFERENT SECTORS IN BUDGET 2011: AVIATION SECTOR : Due to the introduction of service tax on domestic and international tickets. Other challenge for this sector is rising fuel prices and shortage of manpower. HOSPITALITY :Due to the introduction of service tax on hotel accomodation . TEXTILE INDUSTRY :mandatory excise on branded garments which will give the negative effect. HEALTH : This area includes health checkups and private hospitals become expensive.

51. Thank you