Inflation Rate

Assignment On India’s Trend of Economic Growth and Employment (Since the year 1980 to2010) Submitted to DR. TAPAS KUMAR PAL Presented By * ARNABI BOSE (Roll- 1) * DIPA DAS (Roll- 10) * PURNAMRITA MALLICK (Roll- 3) * SWATI AGARWAL (Roll- 25) * TISTA BISWAS (Roll- 26) (MHROM 1st semester, Calcutta University) CHART SHOWING DATA OF NOMINAL & REAL GDP, GROWTH RATE, INFLATION & DEFLATION RATE AND EMPLOYMENT (PUBLIC & PRIVATE SECTOR) IN INDIA SINCE 1980 TO 2010 Year| NominalGDP(Rs. )| NominalGDP Growth Rate(%)| RealGDP(Rs. | RealGDP Growth Rate(%)| Deflator| InflationRate(%)| Public Sector(million)| PrivateSector(million)| Total Employment(million)| EmploymentRate(%)| 1980-81| 1368. 38| 19. 51| 7985. 06| 7. 21| 17. 14| 11. 51| 15. 48| 7. 40| 22. 88| 2. 3| 1981-82| 1602. 13| 17. 08| 8434. 26| 5. 63| 18. 99| 10. 79| 16. 28| 7. 53| 23. 81| 4. 06| 1982-83| 1789. 85| 11. 72| 8680. 91| 2. 92| 20. 62| 8. 58| 16. 75| 7. 39| 24. 14| 1. 38| 1983-84| 2093. 56| 16. 97| 9362. 69| 7. 85| 22. 36| 8. 43| 17. 22| 7. 36| 24. 58| 1. 82| 1984-85| 2351. 13| 12. 30| 9733. 57| 3. 96| 24. 15| 8. 00| 17. 58| 7. 43| 25. 01| 1. 4| 1985-86| 2627. 17| 11. 74| 10138. 66| 4. 16| 25. 91| 7. 28| 17. 68| 7. 37| 25. 05| 1. 71| 1986-87| 2929. 24| 11. 48| 10576. 12| 4. 31| 27. 69| 6. 86| 18. 24| 7. 39| 25. 63| 2. 31| 1987-88| 3320. 68| 13. 36| 10949. 92| 3. 53| 30. 32| 9. 49| 18. 32| 7. 39| 25. 71| 0. 31| 1988-89| 3962. 95| 19. 34| 12062. 43| 10. 16| 32. 85| 8. 34| 18. 51| 7. 45| 25. 96| 0. 97| 1989-90| 4565. 40| 15. 20| 12802. 28| 6. 13| 35. 66| 8. 55| 18. 77| 7. 58| 26. 35| 1. 50| 1990-91| 5318. 13| 16. 49| 13478. 89| 5. 29| 39. 45| 10. 62| 19. 06| 7. 68| 26. 74| 1. 48| 1991-92| 6135. 28| 15. 37| 13671. 71| 1. 3| 44. 87| 13. 73| 19. 21| 7. 85| 27. 06| 1. 19| 1992-93| 7037. 23| 14. 70| 14405. 03| 5. 36| 48. 85| 8. 87| 19. 33| 7. 85| 27. 18| 0. 44| 1993-94| 8197. 61| 16. 49| 15223. 43| 5. 68| 53. 85| 10. 23| 19. 45| 7. 93| 27. 38| 0. 73| 1994-95| 9553. 85| 16. 54| 16196. 94| 6. 39| 58. 98| 9. 52| 19. 47| 8. 06| 27. 53| 0. 54| 1995-96| 11185. 86| 17. 08| 17377. 40| 7. 29| 64. 37| 9. 13| 19. 43| 8. 51| 27. 94| 1. 48| 1996-97| 13017. 88| 16. 38| 18763. 19| 7. 97| 69. 38| 7. 78| 19. 56| 8. 69| 28. 25| 1. 10| 1997-98| 14476. 13| 11. 20| 19570. 31| 4. 30| 73. 97| 6. 61| 19. 42| 8. 75| 28. 17| 0. 8| Year| NominalGDP(billion)| NominalGDP Growth Rate(%)| RealGDP(billion)| RealGDP Growth Rate(%)| Deflator(%)| InflationRate(%)| Public Sector(million)| PrivateSector(million)| Total Employment(million)| EmploymentRate(%)| 1998-99| 16687. 39| 15. 28| 20878. 27| 6. 68| 79. 93| 8. 05| 19. 41| 8. 70| 28. 11| 0. 21| 1999-00| 18472. 73| 10. 70| 22462. 76| 7. 59| 82. 24| 2. 89| 19. 31| 8. 65| 27. 96| 0. 53| 2000-01| 19919. 82| 7. 83| 23427. 74| 4. 30| 85. 03| 3. 39| 19. 14| 8. 65| 27. 79| 0. 60| 2001-02| 21677. 45| 8. 82| 24720. 52| 5. 52| 87. 69| 3. 12| 18. 77| 8. 43| 27. 20| 2. 12| 2002-03| 23382. 00| 7. 86| 25706. 0| 3. 99| 90. 95| 3. 71| 18. 58| 8. 44| 27. 02| 0. 66| 2003-04| 26222. 16| 12 . 15| 27778. 13| 8. 06| 94. 39| 3. 78| 18. 20| 8. 25| 26. 45| 2. 10| 2004-05| 29714. 64| 13. 32| 29714. 64| 6. 97| 100| 5. 94| 18. 01| 8. 45| 26. 46| 0. 03| 2005-06| 33905. 03| 14. 10| 32530. 73| 9. 48| 104. 32| 4. 32| 18. 19| 8. 77| 26. 96| 1. 88| 2006-07| 39532. 76| 16. 60| 35643. 63| 9. 57| 110. 91| 6. 31| 18. 00| 9. 24| 27. 24| 1. 03| 2007-08| 45820. 86| 15. 91| 38966. 36| 9. 32| 117. 59| 6. 02| 17. 67| 9. 88| 27. 55| 1. 13| 2008-09| 53035. 67| 15. 75| 41586. 76| 6. 72| 127. 53| 8. 45| 17. 80| 10. 38| 28. 18| 2. 28| 2009-10| 60914. 5| 14. 86| 45076. 37| 8. 39| 135. 13| 5. 96| 17. 86| 10. 85| 28. 71| 1. 88| * INTRODUCTION: * What is GDP? Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living GDP = private consumption + gross investment + government spending + (exports ? imports) * Nominal GDP is GDP evaluate d at current market prices. Therefore, nominal GDP will include all of the changes in market prices that have occurred during the current year due to inflation or deflation. In order to abstract from changes in the overall price level, another measure of GDP called real GDP is often used. Real GDP is GDP evaluated at the market prices of some base year. For example, if 1990 were chosen as the base year, then real GDP for 1995 is calculated by taking the quantities of all goods and services purchased in 1995 and multiplying them by their 1990 prices. * Inflation is defined as a rise in the overall price level, and deflation is defined as a fall in the overall price level. The inflation rate is one of the most important economic forces consistently weighing on the value of a nation's currency. Low Inflation Causes Growth: It is argued that low inflation can contribute to a higher rate of growth in the long term. This is because low inflation helps promote stability, confidence, and se curity and therefore encourages investment. This investment helps promote long term economic growth. If an economy has periods of high and volatile inflation rates, then rates of economic growth tend to be lower. * High Inflation and Low Growth: It is possible that an economy can experience low growth and high inflation this can occur if there is cost push inflation.Cost push inflation could be caused by rising oil prices. It increases costs for firms and reduces disposable income. Therefore, there is lower growth, whilst high inflation. * What is the relationship between inflation unemployment and Real GDP? During peak periods of the business cycle when the economy is experiencing rapid growth in real GDP, employment will increase as businesses seek workers to produce a higher output. If real GDP grows too quickly, however, it can cause price inflation as firms are forced to bid against one another or increasingly scarce workers. In contrast during trough periods of the business cy cle the economy is experiencing declines in real GDP, and employment rates are low. This is classic Neo-Keynesian economic theory. * Workings: 1. Calculation for Deflator: (Nominal GDP/Real GDP)*100 2. Calculation for Inflation Rate: {(Current Year’s GDP Deflator – Previous Year’s GDP Deflator) / Previous Year’s GDP Deflator}* 100 3. Calculation for Growth Rate: {(Current Year Growth Rate-Previous Year Growth Rate)/Previous Year Growth Rate}*100 4. Calculation for Employment Rate: (Current Year Employment Rate-Previous Year Employment Rate)/Previous Year Employment Rate}*100 # We have calculated nominal GDP and Real GDP at the Factor Cost. * The average inflation rate with a 5-years interval is calculated below: The average inflation rate of year 1980-85 is: (11. 51+10. 79+8. 58+8. 53+8)/5=9. 48 The average inflation rate of year 1985-90 is: (7. 28+6. 86+9. 49+8. 34+8. 55)/5=8. 10 The average inflation rate of year 1990-95 is: (10. 62+13. 73+8. 87+10. 23+ 9. 52)/5=10. 59 The average inflation rate of year 1995-2000 is: (9. 13+7. 78+6. 61+8. 05+2. 89)/5=6. 89 The average inflation rate of year 2000-05 is: 3. 39+3. 12+3. 71+3. 78+5. 94)/5=3. 98 The average inflation rate of year 2005-10 is: (4. 32+6. 31+6. 02+8. 45+5. 96)/5=6. 21 * The average Employment Rate with a 5-years interval is calculated below: The average employment rate of year 1980-85: (2. 3+4. 06+1. 38+1. 82+1. 74)/5=2. 26 The average employment rate of year 1985-90: (1. 71+2. 31+0. 31+0. 97+1. 50)/5=1. 36 The average employment rate of year 1990-95: (1. 48+1. 19+0. 44+0. 73+0. 54)/5=0. 87 The average employment rate of year 1995-2000: (1. 48+1. 10+0. 28+0. 21+0. 53)/5=0. 72 The average employment rate of year 2000-05: (0. 60+2. 12+0. 66+2. 10+0. 03)/5=1. 0 The average employment rate of year 2005-10: (1. 88+1. 03+1. 13+2. 28+1. 88)/5=1. 64 * The average Real GDP Growth rate with a 5-years interval is calculated below: The average real GDP growth rate of year 1980-85 is: ( 7. 21+5. 63+2. 92+7. 85+3. 96)/5=5. 51 The average real GDP growth rate of year 1985-90 is: (4. 16+4. 31+3. 53+10. 16+6. 13)/5=5. 65 The average real GDP growth rate of year 1990-95 is: (5. 29+1. 43+5. 36+5. 68+6. 39)/5=4. 83 The average real GDP growth rate of year 1995-2000 is: (7. 29+7. 97+4. 30+6. 68+7. 59)/5=6. 76 The average real GDP growth rate of year 2000-05 is: (4. 30+5. 52+3. 99+8. 06+6. 7)/5=5. 76 The average real GDP growth rate of year 2005-10 is: (9. 48+9. 57+9. 32+6. 72+8. 39)/5=8. 69 * Conclusion: As we can see the average real GDP growth rate from 1980-85 is 5. 51 and the average inflation rate of year 1980-85 is 9. 48 as well as the average real GDP growth rate of year 1985-90 is 5. 65 and the average inflation rate of year 1985-90 is 8. 10. So, it can be observed that, when the real GDP growth rates increased in the next consecutive years, the inflation rate has been decreased. Again, average real GDP growth rate of year 1990-95 is 4. 83 and average inflation rat e of year 1990-95 is 10. 9. Here with respect to the year 1985-90, the real GDP growth rate is decreasing and the inflation rate is increasing. Further, average real GDP growth rate of year 1995-2000 is 6. 76 and the average inflation rate of year 1995-2000 is 6. 89. Here again, with respect to the year 1990-95, the real GDP growth rate is increasing and the inflation rate is decreasing. Again, average real GDP growth rate of year 2000-05 is 5. 76 and average inflation rate of year 2000-05 is 3. 98. Here with respect to the year 1995-2000, the real GDP growth rate is decreasing and the inflation rate is also decreasing.And, average real GDP growth rate of year 2005-10 is 8. 69 and average inflation rate of year 2005-10 is 6. 21. Here with respect to the year 2000-05, the real GDP growth rate is increasing and the inflation rate is also increasing. THEREFORE, FROM THE ABOVE COMPARISONS, GOING WITH THE MAJORITY, WE CAN CONCLUDE THAT IN INDIA, SINCE THE YEAR 1980-2010, REAL GDP GROWTH RATE AND INFLATION RATE ARE INVERSELY RELATED, AS FOR 3 CASES WE CAN SEE WHEN REAL GDP GROWTH RATES HAVE INCREASED, INFLATION RATES HAVE DECREAS AND VICE VERSA †¦Now, as per our assignment, we have to compare India’s Trend of Economic Growth with Employment (Since the year 1980 to2010). As we can see the average real GDP growth rate from 1980-85 is 5. 51 and the average employment rate of year 1980-85 is 2. 26 as well as the average real GDP growth rate of year 1985-90 is 5. 65 and the average employment rate of year 1985-90 is 1. 36. So, it can be observed that, when the real GDP growth rates increased in the next consecutive years, the employment rate has decreased. Again, average real GDP growth rate of year 1990-95 is 4. 83 and average employment rate of year 1990-95 is 0. 7. Here with respect to the year 1985-90, the real GDP growth rate is decreasing and the employment rate is also decreasing. Further, average real GDP growth rate of year 1995-2000 is 6. 76 and the average employment rate of year 1995-2000 is 0. 72. Here again, with respect to the year 1990-95, the real GDP growth rate is increasing and the employment rate is decreasing. Again, average real GDP growth rate of year 2000-05 is 5. 76 and average employment rate of year 2000-05 is 1. 10. Here with respect to the year 1995-2000, the real GDP growth rate is decreasing and the employment rate is increasing.And, average real GDP growth rate of year 2005-10 is 8. 69 and average employment rate of year 2005-10 is 1. 64. Here with respect to the year 2000-05, the real GDP growth rate is increasing and the employment rate is also increasing. THEREFORE, FROM THE ABOVE COMPARISONS, GOING WITH THE MAJORITY, WE CAN CONCLUDE THAT IN INDIA, SINCE THE YEAR 1980-2010, REAL GDP GROWTH RATE AND EMPLOYMENT RATE ARE INVERSELY RELATED, AS FOR 3 CASES WE CAN SEE WHEN REAL GDP GROWTH RATES HAVE INCREASED, EMPLOYMENT RATES HAVE DECREAS AND VICE VERSA †¦