What Is Relation Between Growth And Inflation?
What is Inflation?
Relation between Growth and Inflation
What is growth?
The increase in an economy’s capacity to produce goods and services, compared from one period of time to another is known as Economic Growth. It is measured in nominal terms, inflation, or in real terms, which are adjusted for inflation. Economic growth is generally associated with technological changes. The growth of an economy is thought of not only as an increase in productive capacity but also as an improvement in the quality of life to the people of that economy.
Growth and Inflation in the Indian Economy
1970s-1980s
The growth rate of GDP in India increased from 3.5 % in the 1970s to 5.5 % in the 1980s. This increase in growth has been attributed to both demand …show more content…
The trigger for the crisis was given by the Gulf War in the second half of the 1990s due to which international oil prices soared and led to an increase in India’s import bill. This led to an increase in the doubts that people had about India being able to manage its account pressures. In order to combat these crisis India took a loan from IMF to the tune of $1.8 billion dollars and immediately reduced imports, increased surcharge on petroleum prices, surcharge on interest on bank finances and tightening import licences. In 1991 the rupee got devalued by 18% and the new Budget for 1991/92 cut the fiscal deficit by 2% of GDP. Foreign investments to the tune of 51% were allowed for the first time in a number of industries. Disinvestment of a lot of government equity was undertaken to increase the flow of money in the market. By 1993/94 the GDP was growing at a rate close to …show more content…
The annual rate of WPI inflation was in single digits in June 1995. By March 1996 the annual rate of inflation had fallen to 4.5 per cent, although the average WPI increase for the year was 8.1 per cent. These actions by the Government got the inflation under control and it ceased to be a problem in 1997. But again in 1997 we see a decelerated growth in industrial output & exports. The growth story then on went up and down, faltering in September 1996, recovering in October & then again plunging in the next five months to come. Industrial growth remained sluggish throughout 1997/98 and 1998/99. There was some pick up in the industrial growth in 1999/2000 but it did not last long and eventually fizzled out by the end of
Relation between Growth and Inflation
What is growth?
The increase in an economy’s capacity to produce goods and services, compared from one period of time to another is known as Economic Growth. It is measured in nominal terms, inflation, or in real terms, which are adjusted for inflation. Economic growth is generally associated with technological changes. The growth of an economy is thought of not only as an increase in productive capacity but also as an improvement in the quality of life to the people of that economy.
Growth and Inflation in the Indian Economy
1970s-1980s
The growth rate of GDP in India increased from 3.5 % in the 1970s to 5.5 % in the 1980s. This increase in growth has been attributed to both demand …show more content…
The trigger for the crisis was given by the Gulf War in the second half of the 1990s due to which international oil prices soared and led to an increase in India’s import bill. This led to an increase in the doubts that people had about India being able to manage its account pressures. In order to combat these crisis India took a loan from IMF to the tune of $1.8 billion dollars and immediately reduced imports, increased surcharge on petroleum prices, surcharge on interest on bank finances and tightening import licences. In 1991 the rupee got devalued by 18% and the new Budget for 1991/92 cut the fiscal deficit by 2% of GDP. Foreign investments to the tune of 51% were allowed for the first time in a number of industries. Disinvestment of a lot of government equity was undertaken to increase the flow of money in the market. By 1993/94 the GDP was growing at a rate close to …show more content…
The annual rate of WPI inflation was in single digits in June 1995. By March 1996 the annual rate of inflation had fallen to 4.5 per cent, although the average WPI increase for the year was 8.1 per cent. These actions by the Government got the inflation under control and it ceased to be a problem in 1997. But again in 1997 we see a decelerated growth in industrial output & exports. The growth story then on went up and down, faltering in September 1996, recovering in October & then again plunging in the next five months to come. Industrial growth remained sluggish throughout 1997/98 and 1998/99. There was some pick up in the industrial growth in 1999/2000 but it did not last long and eventually fizzled out by the end of