Impact of Economic Growth and Employment Rate on Inflation Essay

The customary sector has used a mix of policies to control puffiness, and it is likewise held responsible for its creation. The consumer monetary value index (CPI) change magnitude over 11 percent in 1981-82, and over 12 percent in 1990-91. Similarly, sensitive price index (SPI) increased over 15 percent in 1981-82, and over 12 percent in 1990-91. The GDP deflator was also double-digit for several years. puffiness not only affects sectoral allocation and distribution of income but also gene targets poverty. Several supply side and crave side factors could be responsible for this surge in inflation.Inflation can be a result of shocks to the supply of certain food items and to world oil markets. ascension oil prices can pose risk of increase in prices of almost all other commodities of the consumer basket. such(prenominal) supply-side shocks are very volatile and can cause large fluctuations in food and oil prices. The do of this on overall inflation at times can be so excessive that these cannot be countered through demand management, including monetary policy. However, greater emphasis in the recent debate on inflation remained on the demand side factors.The demand side pressures were often considered as an outcome of the September 11, 2001 adventure in the United States of America (USA) and a combination of expansionary monetary and fiscal policies. First, increased domestic demand due to remittances from abroad and liberal demand-management policies outpaced the domestic production, creating a positive out post gap, which in turn put upward pressure on prices. A recently conducted survey by the PIDE on inflation expectations reveals that tidy sum are expecting high inflation together with high unemployment, a decline in growth rate and decreasing currency value.