Premium Essay

Indian and Chinese Policies to Tackle Inflation

In: Business and Management

Submitted By fatima123456
Words 2383
Pages 10
Indian and Chinese policies to tackle inflation

Abstract:

India and china the two Asian giant, have shown economic growth in last few decades. The expansion of the economy brought high inflation in both countries. Inflation impacts all types of the consumers while rich or poor, it will become a real problem if the countries didn’t adopt policies to decrease the inflation rate. India and china have a very fast economic growth with fast population. The government and the central bank have to work beside to curb the inflation using two main policies are monetary policy and fiscal policy. In the monetary policy the central bank has to manage the many supply in the market and also control and decline the inflation, in terms of fiscal policy the government try to see the tax level to impact in the inflation rate. Monetary policy has more effect than fiscal policy, but also there are challenges implementations of the policies.

Argument 1(monetary policy)

India has faced a hyperinflation in years 2009 to 2011 to unprecedented level. The inflation in India affects the saving of the Indian household which decreased the value of saving in that nation. The monetary authorities are trying to impact the money supply directly without creating deformation in the economy by changes CRR (cash reserve ratio), repo and reverse repo rate. The main objective is to maintain price stability. The RBI (reserve bank of India) trying to control the money supply by using which called contractionary monetary policy that focus in decreasing the money supply, increasing the interest rate, declining in investment expenditure , declining in aggregate demand and then the price level will fall. To make the price fall the Indian central bank selling the securities through OMO (open market operations) also it raises CRR and SLR (Statutory liquidity ratio) and eventually raises bank ratio. This…...

Similar Documents

Premium Essay

Indian Inflation

...Essay on Inflation – a Major Cause of Inequality. Sri Bhabatosh Datta, the famous economist has clearly stated that: “The origin of inflation is often found in the panicky nervousness of unstable governments in olitically unstable communities. Given political stability there is no reason why India should not be able to carry out her future plans without generating serious inflationary pressure on the price level.” The percentage of inflation in regard to price movements and the purchasing power of the rupee need to be evaluated on the basis of wholesale price index (WPI) with 1950-51 as the base year. Unfortunately, the government with the intention of preventing a factual comparison of the purchasing power of rupee, keeps changing the base year every decade, from 1950-51 to 1960-61, later to 1970-71 and finally to 1980-81. Deficit financing in every five year plan and improper planning led to a 40 percent rise in food grains, 45 percent in cereals and over 70 percent rise in pulses during 1961-1966. The country was in the grip of a galloping inflation. This with 1950-51 as the base year. Keeping 1960-61 as the base year, the Fourth five year plan save the price index at an all time high of 331 in September 1974 (with 1961-62-100). This was due to a combination of several factors, the primary being the influx of refugees in large numbers from Bangaldesh and the expenses incurred by the government on them, failure of Kharif crops in 1972-73 and complete failure to take......

Words: 1251 - Pages: 6

Premium Essay

Managing Diversity in Chinese and Indian Organizations: a Qualitative Study

...diversity in Chinese and Indian organizations: a qualitative study Fang Lee Cooke Department of Management, Monash University, Melbourne, Australia, and 16 Debi S. Saini Management Development Institute, Gurgaon, India Abstract Purpose – This paper aims to investigate diversity management (DM) practices in China and India by analyzing formal DM policy (if one exists) adopted by the company and informal DM practices adopted by managers. It also aims to discuss the appropriateness of the US-originated notion of, and approach to, managing diversity in the Indian and Chinese contexts by exploring how local managers make sense of diversity and manage it in a pragmatic way. Design/methodology/approach – The authors adopted a qualitative approach. In particular, through a semi-structured interview design, qualitative data were collected from 16 Chinese and Indian middle and senior managers and four human resources (HR) director of regional headquarters of foreign multinational firms. The data were supplemented by secondary data from a wide range of sources, including government reports and media coverage to extend contextual understanding. Findings – The paper reveals that most Chinese organizations do not see DM as an issue. Where exists, its focus is on conflict avoidance rather than value-addition to the business. In contrast, managing diversity in India is of greater significance for firms, both legally and financially. Compared with their Chinese counterparts, the Indian......

Words: 8980 - Pages: 36

Premium Essay

Inflation and Government Economic Policies

...| Inflation and Government Economic Policies | M3:A2 | 5/1/2013 | | ECO 201 M3:A2 5/1/13 1. What is inflation? Inflation is an increase in prices for goods and services (What is Inflation?). 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 caused by demand-push or cost-pull. And with quantity, inflation is caused by having too much money in the economy (What Causes Inflation?). Is inflation desirable and what can be done to control inflation in a market economy? Inflation is desirable when it is low, because low inflation represents price stability which is perfect for productive planning and investment. There are many ways to control inflation in a market economy which varies between a Keynesian and monetarist approach. Using a Keynesian approach, the government would get involved by breaking up monopolies, regulating commodity prices, and controlling wage levels, while using a monetarist approach, the government would make changes in policy in order to control the amount of......

Words: 1159 - Pages: 5

Premium Essay

Can Monetary Policy Alone Save the Indian Economy?

...Monetary policy alone cannot save Indian economy Main Limitations of the Monetary Policy adopted by the Reserve Bank of India 1. Huge Budgetary Deficits : RBI makes every possible attempt to control inflation and to balance money supply in the market. However Central Government's huge budgetary deficits have made monetary policy ineffective. Huge budgetary deficits have resulted in excessive monetary growth. 2. Coverage Of Only Commercial Banks : Instruments of monetary policy cover only commercial banks so inflationary pressures caused by banking finance can be controlled by RBI, but in India, inflation also results from deficit financing and scarcity of goods on which RBI may not have any control. 3. Problem Of Management Of Banks And Financial Institutions : The monetary policy can succeed to control inflation and to bring overall development only when the management of banks and Financial institutions are efficient and dedicated. Many officials of banks and financial institutions are corrupt and inefficient which leads to financial scams in this way overall economy is affected. 4. Unorganised Money Market : Presence of unorganised sector of money market is one of the main obstacle in effective working of the monetary policy. As RBI has no power over the unorganised sector of money market, its monetary policy becomes less effective. 5. Less Accountability: At present time, the goals of monetary policy in India, are not set out in specific terms......

Words: 1494 - Pages: 6

Premium Essay

Inflation

...The inflation rate in Singapore was rose to 4.9 percent in February 2013. According to CNBC.Com, the rise was mainly because of more significant increase in private road transport costs as well as food and services inflation were also stronger during the month of February. However, the outlook for 2013 inflation was unchanged at 3.5 to 4.5 percent according to Ministry of Trade and Industry (MTI) and MAS. Both MTI & MAS also reiterated core inflation is likely to average 2 to 3 percent for the whole year. In addition, Nuno Fontes from Trading Economics has said this temporary pick up had been anticipated in the January inflation report due to private road transport cost has climbed by 17.4 percent in February, up from 10.5 percent a month earlier. Discussion A. GDP There are 3 GDP related indicators to study the performance of economy. GDP counts the value of goods and services at the time they are produced. There are two methods of measuring GDP. i. Income Approach: adding up households income i.e. wages, rent, interest and profit ii. Expenditure Approach: GDP = C + I + G + (X-M) The nominal GDP measures the GDP using the value of all the goods and services produced in current prices. Real GDP measures the value of all the goods and services produced in the prices from year to year. • Real GDP = Nominal GDP x 100 GDP Deflator GDP Deflator = (Nominal GDP / Real GDP) x 100 B. Business Cycle Business cycles are dated according to when......

Words: 1041 - Pages: 5

Premium Essay

Inflation

... | |2 |Introduction | | | |3 |Effects of inflation | | | |4 |Causes of inflation | | | |5 |Controlling inflation | | | |6 |Current situation of inflation in India | | | |7 |Extracts of the Reserve Bank of India’s document released on | | | | |July 28, 2008 | | | |8 |Measures to control inflation | | | |9 |Future inflation | | | |10 |10 nations with highest inflation | | | |11 |Media reports | | ...

Words: 13670 - Pages: 55

Premium Essay

Effect of Chinese Dumping in Indian Markets

...------------------------------------------------- As a wide range of cheap Chinese products flooded the Indian market, some local industries were adversely affected, while others benefitted by using these products as raw materials. Discuss the advantages and disadvantages of allowing Chinese products into India. Providing trade data, give examples of industries that benefit and those that are affected by Chinese imports. How can the Indian industries that are threatened by cheap Chinese imports deal with the threat? Introduction It is never less than a challenge to attempt to understand the cultural factors which influence a nation’s conduct in the international arena. When that nation is China and the subject of introspection is its relations with India, such an endeavour can at best be fraught with far too many variables. The two have had the longest uninterrupted existence as nations. Their combined size and population makes them the largest geographical and human resource mass on the planet. India and China have had cultural, religious and trade links going back centuries in history. They also came into being as nation states almost simultaneously in this century, They also share a past of colonial and imperialist subjugation from which freedom had to be won with a major struggle, Paradoxically enough, the two countries fought a war with each other over disputed frontiers. That conflict episode, the continuing border dispute between the two countries and China’s......

Words: 3110 - Pages: 13

Premium Essay

Chinese One Child Policy

...Helen McCarthy Chinese officials have begun launching pilot programs in five provinces that will ease the country's one-child policy. Sources differ in the details, but it is expected that this shift in policy will be expanded in the coming years, USA Today reported that . China has recognized for decades that its population numbers have taxed its lands resources. China is the world's largest and most populous country. After a population build up, the country experienced a famine in 1962 that caused a reported 30 million deaths. Since that time China has experimented with policies to control births and since the 1970's has instituted a one child policy. The one child policy relies on a mix of incentives and penalties to control birth rates. Individuals suffer fines, social ostracizement. Reports of more forceful control measures, such as forced confinement and sterilization leaked out onto the Internet. The policy has been highly criticized, however since about 1979 the law has prevented 250 -300 million births, saving China from a population explosion the nation would have difficulty supporting. Unchecked growth appears unsustainable. Yet human rights activists have been aware of high numbers of illegal, but common, gender-based abortions. An April, 2009 study published in the British Medical Journal found China has 32 million more boys than girls under the age of 20. The scarcity of females is just one significant issue facing China. A decreased......

Words: 589 - Pages: 3

Premium Essay

Inflation Targeting Policy India [

...The inflation targeting policy is mainly decided by RBI and Government targeted at “Inflation target” by mainly controlling the interest rates. A control over the Interest rates helps curbing the inflation in the long run. Inflation acts as a deflator in GDP thus it needs to be kept under a certain range. To spur up the GDP to the targeted levels we need to lower the interest rates so as to increase the economic activity and boosting the health of the economy. But doing that at the same time would lead to increase in consumer spending thus increasing the inflation. Thus there arises a seeming tradeoff between growth and inflation. In the current scenario of our country there are various factors that would suggest that this policy must be adopted. Inflation has been one of the major reason for the decline in the GDP Growth of our country since 2011. And inflation rate in India has been floating around 12-14% till 2012 which is significantly high as compared to the healthy rate of 2-5%. Looking at the current reforms in the country, the lowering of the crude oil prices and boom in the world economy indicates that economic growth is already on the rise. The same is indicated by the BSE and BSE Sensex markers. Various sectors such as infrastructure are already being supported by the government and recent policies to attract more FDI will help in reaching the targeted GDP growth rates. This would also mean that there will be a rise in overall employment and per capita......

Words: 614 - Pages: 3

Free Essay

Indian Starch Sector V/S Chinese Starch Sector

...titled ' Comprehensive Analysis of Indian Starch & Starch Derivatives Sector ' a deep tabular and a brief theoretical analysis was presented of last 10 Years' Data to understand the scope and potential of Indian Starch & Starch Derivatives Sector. Now, in this report, we will present a deep theoretical argument based on the study of Chinese Starch & Starch Derivatives Sector over last two decades to understand the tremendous growth opportunity Indian Starch & Starch Derivatives Sector provides in the coming decade. It is worthwhile to note here that Indian Sector is almost a replica of Chinese Sector and Indian Sector, as at 2010, is at a stage where Chinese Sector was there in 1992. Over the time period between 1992-2009, Chinese Starch & Starch Derivatives Sector has grown more than 10 times and Indian Starch & Starch Derivatives Sector is bound to replicate such growth in the span of coming 10 years. We will also include in our analysis the consumption-trend of Sugar vis-a-vis Starch in China as well as India as Starch-based sweetners form 50 % of the marketsize of Chinese Starch & Starch Derivatives Sector whereas use of Starch-based sweetners as a substitute to sugar is only now catching up fast in India. We will also discuss briefly in this report the valuation aspect of Chinese and Indian sector at macro level and micro level to understand the gross undervaluation of Indian sector vis-a-vis China and a certain rerating expected of Indian Sector to correct this......

Words: 4820 - Pages: 20

Premium Essay

Chinese Policy Current Event

...the stimulus plans that were rolled out during the financial crisis have been boosting China’s economy, fueling the price growth in the Chinese housing market: this is one of the key reasons why China did not suffer significant loss during the financial crisis in 2009. Having learnt from the Asian Financial Crisis in 1997, the Chinese government has already begun to take actions to deal with the overheated housing market. At the end of last year, the Chinese government, central and local, imposed additional sales tax on homes sold within five years of purchase and raised the down payment requirements for families buying a second house or more with bank loans. The Chinese Central Bank had also raised the deposit reserve requirement ratio for banks for the second time in last month. Going forward, if the housing price growth persists, the Central Bank will need to take more drastic measures to control this growth, and reduce speculations. The article points out that the biggest real estate problem in China currently is access to affordable housing. The recent increase in housing prices has outpaced wage growth dramatically. This is an area of concern for the current government. In his speech at the Meeting Marking the 30th Anniversary of Reform and Opening Up in 2008, Hu Jintao had emphasized the importance of social equality, where all Chinese people can live in a xiaokang society (reading). The overheated housing market has had opposite effect, making it more difficult for......

Words: 582 - Pages: 3

Free Essay

Policies Used to Tackle Illicit Drug Markets.

...Tyuleubekov Sabyrzhan Policies used to tackle illicit drug markets. In this essay, I want to define how the problem of illicit drug market is tackled by the governments one by one and jointly. I will try to determine which policies are the best in preventing illicit drug market and what policies international community regarding that problem uses. There are 4 types of illegal markets defined by Jens Beckert and Frank Wehinger, and the one I want to focus on is of type 1 (“illegality due to the outlawing of specific products”[1]). Free sale of hard drugs (excluding alcohol and nicotine) is prohibited everywhere and of soft drugs is prohibited almost everywhere. However, the global illicit drug market is huge and it has big impact on international community because of drug trafficking, drug-related crimes and the number of people involved in producing, transporting and selling drugs. States and international communities are making efforts to eradicate drugs from the society spending substantial parts of their budgets. As to international community’s efforts, the United Nations is the prime organization that “controls” drug flows around the globe. Since 1912 Hague Opium Convention, the international community decided to focus on supply side of the global drug market. They decided to allocate all resources on battling the supply side, because they thought that once they control supply side they would prevent drug use and abuse. Such supply-centric policies are......

Words: 3772 - Pages: 16

Free Essay

Policy Brief for Giant Chinese Salamander

...April 3, 2017 Policy Brief on Chinese Giant Salamander An article on the National Geographic website called: 4 Foot Salamander arrives in London as Face of New Conservation effort grabbed my attention and my selection to discuss the threats that face Chinese Giant Salamander. This memo includes information from the article: Development of the Chinese giant salamander Andrias davidianus farming industry in Shaanxi Province, China: conservation threats and opportunities. The Chinese Giant Salamander, the largest amphibian, is classified as critically endangered by the IUCN red list (IUCN 2012). Since the 1950s, the species population has dropped significantly. Its main threat is overexploitation for human consumption. The Chinese Giant Salamander farming industry adds increased threat including infectious disease and loss of genetic integrity (Murphy et al. 2000). ​The Chinese Giant Salamander is one of three living species in the family, Cryptobranchidae, which is over 170 million years old. The Chinese Giant Salamander is especially important for conservation because this amphibian has one of the longest family lineages alive today. The Chinese Giant Salamander is considered a delicacy in China. Although the Chinese Giant Salamander farming industry is only about a decade old, it is extremely detrimental to the species. It has an estimated population decline of more than 80% in three generations with a generation time of approximately 15 years (Gang et...

Words: 666 - Pages: 3

Premium Essay

A Study of Impact of Rbi Policy Rates on Inflation

... A Study of Impact of RBI policy rates on inflation *Prof. Pallavi Ingale Introduction The Reserve Bank of India (RBI) is the Indian central bank. The RBI’s most important goal is to maintain monetary stability - moderate and stable inflation in India. The RBI uses monetary policy to maintain price stability and an adequate flow of credit. Rates which the Indian central bank uses for this are the bank rate, repo rate, reverse repo rate and the cash reserve ratio. The Reserve Bank of India (RBI) raised repo and reverse repo rates 13 times in previous year. RBI also deregulated savings bank deposit rate with immediate effect. This step was taken to arrest rising inflation in Asia's third largest economy. But this RBI's decision to hike short-term lending and borrowing rates could lead to higher interest rates and impact the growth momentum of the economy. An Indian company has postponed expansion plans and review future profitability projections after the Reserve Bank of India raised key interest rates. The central bank also revised the GDP growth rate for FY11-12 to 7.6% from the earlier 8%, while the projection of WPI inflation has been kept unchanged at 7% for March 2012. Reserve Bank of India (RBI) The Reserve Bank of India was inaugurated as on April 1 1935. Originally, the Reserve Bank was constituted as a shareholders’ bank based on the model leading foreign central banks on that time. The bank ‘s fully paid share capital was Rs. 5 Crores divided into shares of Rs. 100......

Words: 3452 - Pages: 14

Premium Essay

Impact of Monetary Policy on Inflation

...Interest rate and commercial bank profitability in Pakistan 5 Determinants of Corporate dividend payout policy 6 Effects of Free Cash flow on profitability of firms 7 Determinant of dividend payout ratio: A study of Pakistani fertilizer sector 8 Fundamentals and stock returns in Pakistan 9 Effects of mergers and acquisition in banking sector of Pakistan 10 Impact of Privatization of banks on profitability 11 Can risk aversion indicators anticipate financial crises? 12 Cash flow and capital spending relationship: evidence from automobile sector 13 Impact of Privatization on profitability and efficiency of banks in Pakistan 14 To study the relationship between price earning ratio and return on investment 15 A test of price earning ratio to predict future growths 16 Factors affect on the dividend payout ratio (sugar industry) 17 Impact of macro-economic variables on stock sector of Pakistan 18 Relationship between Cash flow and investment spending in textile industry 19 Impact of taxation on firm’s dividend payout/ratio 20 Share price volatility explicatedmeasured by fundamentals 21 Stock price and economic variables ( Interest rate, inflation and GDP) 22 Determinants of P/E Ratio 23 Impact of capital structure on profitability 24 Impact of interest rate changes on bank’s profitability 25 Relationship of stock market returns and rate of inflation 26 Dividend policy and stock price volatility 27 Determinants of capital structure in case of Pharmaceutical......

Words: 789 - Pages: 4