Impact of Inflation and Interest Rates on Gdp, India

The National Governments experienced moderate success in bringing about economic recovery in the years 1931-1939. It would be inaccurate to say that the policies of the governments were the only contributing factor as they alone were not sufficient enough to tackle the harsh economic climate, but for the most part the National Governments were responsible for a moderately successful economic recovery.

From 2003-2004 to 2006-2007, annual Real Growth Rate increases from 8.4% to 9.7%. Because of the summer’s credit-market crisis, the Indian GDP Growth decrease to 9.0% from 2007 to 2008 and Indian government estimates GDP Growth for 2008-2009 is 7.1%. The decrease of GDP ascribes the global financial crisis which affects India primarily through trade and capital outflows (The World Bank, 2008:16). On trade, exports are possible to weaken and make its contribution to GDP growth may be drop sharply. However, during

There are many factors that affect the real GDP such as interest rates, consumer's confidence in spending and/or asset prices. When it comes to interest rates, the lower the rate the less expensive it is to borrow, which encourages spending. For example, those individuals who have a mortgage to pay will have a lower payment; however, when there is a low to no interest rate, it leaves lenders

By comparing the forecast of Bank of Green in 2006 and the past performance of the economy, it should help us develop future trends. Upon analyzing the data, we first need to figure out the GDP deflator for each quarter in order to find out the inflation rate. To figure out the GDP deflator, we first divide the nominal GDP by the real GDP and then multiply that

For instance, at a personal level I have acknowledged that use of policies inappropriately by relevant stakeholders in the economy in attempts to correct the situation when it first went wrong worsened the situation. For instance, the contractionary monetary policy undertaken by the government to counteract the inflationary effect caused by the increased money supply was not effectuated accordingly and as a result, led to depression due to reduced investments and reduced productivity by industries. In addition, can be determined from the article while the government appeared to be putting measures in place to correct the situation, its action actually worsened the situation in some

The financial crisis of 2008 started off from the United States of America, and eventually expanded its reach to the whole world, displaying the inefficient and improper policy implementation by the US government. However, the US government presented monetary and fiscal policies to ensure the economy move towards the economical developmental track for the country. Such policies have been discussed in the research paper to aid with the understating of the reasons of the financial crisis and the effort the government put in to recover from it.

Hondroyiannis and Papapetrou (2001) found that the domestic market economic activity affects the performance of domestic stock market. Toda and Yamamoto (1995) indicated that stock prices lead nominal income, the exchange rate and the price level, but money supply and interest rate lead the stock price. Abdul Rashid (2008) found that the stock prices Granger-caused by the short run changes in interest rates and stated that the association between the health of the stock market in the sense of a rising share prices and the health of the economy is only a long-run phenomenon. Pethe and Karnik (2000) reported weak causality running from IIP to share price index (Sensex and Nifty) but not the other way round and it held the view that the state of economy affects stock prices. Fama and Gibbon (1982) examined the relationship between inflation, real returns and capital investment and supported Mundell (1963) and Tobin (1965) findings that expected real returns on bills and

In this paper I would like to examine the impact of inflation, interest rate, and the Gross Domestic Product on the economic growth of India. The ability of expanding the production of products and services will be reflected by the economic growth of the country. Economic growth can be defined by the growth in the GDP (Gross Domestic Product) of that country. Inflation factor will be typically balanced by the Nominal Gross Domestic Product (GDP) in order to reflect the real GDP. In macroeconomics interest rate is one of the growth factor. The up and down volatility of the interest rates is directly related with the inflation rates. This study is a contribution to the existing literature on the real growth applied to India’s economy; it will examine the impact of inflation, Interest rate, and Gross Domestic Product on the Economic growth rate (Saymeh & Orabhi, 2013).

Inflation has been a problem for all of the world economies for many years causing a great deal of damage to stakeholders. Inflation is an increase in the general level of prices for goods and services. It is measured as an annual percentage increase. As inflation rises, every dollar you own buys a smaller percentage of a good or service. As a result of inflation, the purchasing power of a unit of currency falls. For example, if the inflation rate is 2%, then a soft drink that costs $1 in a given year will cost $1.02 the next year. As goods and services require more money to purchase, the implicit value of that money falls. (Investopedia)

Since then, the Indian economy has grown rapidly over the past decade, with real GDP growth averaging some 6% annually (wto.org, 2002). Despite external shocks, such as the Asian economic crisis and fluctuations in petroleum prices, which resulted in a slowdown to 4.8% in 1997/98, the economy recovered to grow at over 6% during the two subsequent years (wto.org, 2002).

The objective of this study is to investigate the causality relationship between inflation and unemployment in India. For this purpose we have used the standard econometric model of granger causality. But, before estimating the granger causality we must have check the stationary property of the variables. This is because if the variables are non-stationary then, the granger causality test may give misleading results. To test the stationary property of variables, we have used Phillips and Perron (1988). The result of unit root test is shown the table 2:

Regardless of the negative consequences associated with inflation, a moderate or medium inflation level characterizes a favorable economy. In fact, an inflation rate of between 2% and 3% is termed as very useful to a country’s economy. This is because it encourages people to increase their level of purchase and at the same time increases the level of borrowing in a country due to the low interest rates on borrowed finances. Encouraging people to borrow money at lower interest rates is a

Development of an individual economy passes through different economic phases. Sometimes it is booming and sometimes it suffers from recession. This phenomenon can be viewed as projection of consumption and investment strategies of the individuals and the government of the country. Interest rate, being a major factor of economics, plays a great role in economic activities carried out by nation and the nationalities. A change in interest rates may affect other factors of the economy. For instance, investment strategies of the investors, consumption strategies of the individuals, foreign exchange, imports, exports etc. are affected by the interest rates. An increase in interest rates may decrease the investment, decrease the

Inflation is an important indicator of whether a country 's economy is healthy. Therefore, many countries are trying to reduce the inflation rate of domestic. However, it not only brings drawbacks. Since 2014, the inflation rate of Britain is continuing to rise. (Ferreira,2017, no page given) Inflation is a fall in the purchasing power of money leads to people spend much money on buying cheap goods. The inflation rate is the change in average prices in an economy over a given period of time. (Anderton,2008, page.496) This essay will discuss that the impact of inflation on economic growth. It will be argued that the impact of United Kingdom exits the European Union on inflation and how it is changing.

The study mainly studies the impact of the financial crisis on the fluctuations of the Indian Rupee against the US Dollar and the Indian Stock Market. The investigation has been done on the Foreign Institutional Investment, Interest Rate, Consumer Price Index and the Trade Balance of the country during the time period of 2000-2014. The paper divides its research data into three segments which are Segment 1 for the time period 2000-2004, Segment 2 for the time period of 2005-2009 and Segment 3 for the time period of 2010-2014. In the paper, the methodology adopted was OLS regression modelling with the dependent variable being the exchange rate and the four measures mentioned above were the independent variables. Using the data we found that Trade Balance was highly significant to the Exchange rate while the other variables were insignificant before and after the crisis. The Interest Rate and Consumer Price Index didn’t have any relationship with the Exchange Rate during the financial crisis. Finally the paper talks about the depreciation of the Rupee in 2013 which is the future area of research, the Foreign Investment in India declined considerably in the aftermath of the crisis creating a gradual decline in the Rupee in the later years of the Crisis.