Q:

What is the impact of inflation on the Indian economy?

A:

Quick Answer

Inflation affects the value of currency within individual countries as well as in the global economy, and high inflation rates can negatively impact the everyday quality of life for citizens. The rapid pace of India's economic development has lead to consistently high rates of inflation, which have affected food prices, interest rates and GDP growth.

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Full Answer

In the Indian economy, inflation has been caused by several factors, including increasing national salaries, supply and demand imbalances and high import prices. The increase in average salary has raised the prices of goods, but India's vast income inequality means that the large proportion of Indians who live below the poverty line cannot afford the inflated prices of basic staples. Bad weather, poor crops and insufficient infrastructure have caused food shortages, driving up the price of food supplies for several years in a row. Increases in costly imported goods have also raised the prices of food and other supplies, though costs could be lowered by increasing manufacturing within the country. India's Parliament has raised interest rates in an effort to slow inflation, but many economists think that increasing agricultural production and improving supply within the country is a more long-term solution to the problem of inflation.

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