Indian Inflation

First of all, if the government decides to cut current public expenditure, it will lead to a reduced quantity and quality of public goods and service. For example, closing NHS direct call centres down which results in lower living standard. Moreover as the spending

India’s economy is the fourth largest GDP in terms of purchasing power parity (Gupta and Gupta, 2008:68).

living.” (Purvis 116). Because of this, the issue of inflation not only caused the rise of numerous,

-Some causes included the economic policies of President Jackson. By Jackson issuing the Specie Circular, simply removed the federal treasury as a dumping ground for the depreciating paper. Some of the causes were that local private banks called pet banks were printing money without any printing regulations which led to inflation. The effects were that many businesses failed, farmers lost their land, and there was a high surplus of unemployed

What are the causes of inflation? Inflation has a variety of possible causes, but they are between the Keynesian and monetarist theories, ranging between demand-pull, cost-push, built-in inflation, and the quantity model. With demand-pull, inflation is caused by aggregate demand being more than supply. With cost-push, inflation is caused when manufacturers and businesses raise prices due to shortages in order to balance increases in production costs. With built-in inflation, inflation occurs due to prior increases in prices

The United States inflation rates are a problem, if the government were to control them then the United States would flourish from a “B+” economy to a “A” economy. In the United States (September, 2015) consumer prices went up 1.5%,

India’s economy is one that appears to be on the brink of a major recession. Their central bank has made bad choices over the last number of years. This has lead to a low growth within the country and a high inflation rate. They changed their political leadership to someone who was more open to change and reform, but this has not come about. India reformed its tax system, which they believed would be the key to success in the country. This in fact caused the opposite. The economy slowed down sharply. They banned the sale of cows in India due to religions reason and this stopped the growth of agriculture as this was a huge export for the country. India has about 12 million new young people enter its job market each year and finding jobs for this vast quality of people is a hinderance for the country and yet another driving factor for lower growth. India expects the initial impact of their tax reform to be over and now they will see a stabilization of their economy. It is believed their economy will now grow in small increments due to this stabilization.

Deficit spending generates the creation of wealth transfers from future taxpayers to future government shareholders. In the near future our children and future generations will have a portion of their personal earned incomes moved through higher tax rates compared to those who carry Treasury notes. Government debt causes our children to loose more rights and freedom. Deficit spending is very underhanded because it causes people o believe they are gaining something for nothing. In actuality, their personal wealth is reduced and gives the illusion that their money was covered by taxation. Information involving the overall cost is not even stated in the tax bill itself. Politicians tend to support deficit spending because it rewards special-interest groups and enlarges the state’s control of its private sector (Gwartney et al. 110). Without proper laws and restraints, legislators will drive up budget deficits and spend funds excessively (Gwartney et al. 110). When the government’s allocation of money exceeds its total revenue, a budget deficit occurs.

When a government’s spending exceeds its revenues causing or deepening a deficit it is called deficit spending. Deficit spending is only one of numerous tools used to help manage the economy. Deficit spending is presumed to stimulate consumer demand by helping the consumer to obtain more money to spend, in turn, the demand of product will rise. There are advantages and disadvantages to deficit spending that we will discuss further below.

The purchasing power parity hypothesis implies that an increase in inflation in one country relative to another will over a long period of time

Federal government budget constraint is defined by G = T + △B + △H. G defined government expenditures, T is taxes financing, △B is debt, and △H is inflation. When G = T + △B + △H; G – T = △B + △H, if G – T ﹥ 0, because government expenditures bigger than taxes revenue which the federal government budget deficit, it is also caused inflation when the government not budget to expand. When G – T ≤ 0, because government expenditures less than the tax revenue. If △B is not an available option then the government has to raise △H, it will cause inflation.

Concern for Government: When the inflation rate is higher than expected, they need to spend more to buy the materials build hospital, infrastructure, education etc

The factors that typically contribute to a government budget deficit are: slower economic growth than trading partners, high government spending, high unemployment rates or a combination of all these factors. In order for the government to make up for the deficit

The inflation tempo were laughable at 600% per century, it is 1-1.5% per annum, capping at the highest 10% per annum.

There has been a long standing controversy among the economist about the validity of PPP (Purchasing Power Parity) in the long run. The parity reveals that prices in two different economies should be identical to each other when they expressed in terms of the same currency. It is a central building block in the monetary models of exchange rate determination. One of the most common practices, to test the validity of PPP is through unit root test of real exchange rate. In this paper unit root test has been done based on the data on Bangladesh and its major trading partner India, to see whether exchange rate has unit root or not. It has been found out that the PPP holds i.e. real exchange is not trend stationary in the