Word Inflation on up trend arrow, with financial data visible on the background.

How does inflation affect the global economy?

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Introduction –

Inflation is increasing, along with our income is also increasing, this is a symptom of development, but if inflation is increasing and the purchasing power of people is decreasing accordingly, then it should be considered as an alarm bell. Inflation The government does not use this word for inflation, it uses the word “inflation”, but ordinary people understand this word inflation.

Through this article, we will try to understand it as a part of the life of an ordinary family without considering it as a political issue. Economics This topic has been a very boring subject for most of the people, so we will try to learn it in simple language which can match real life immediately. Therefore, instead of using this word inflation in the whole article, we will look at using this word inflation.

Inflation, what can be this topic for a country, it can be known by looking at the condition of countries like Sri Lanka and Zimbabwe. Therefore, through the attached organization of the International Monetary Fund, this United Nations Organization has kept a guideline for how to control the inflation rate of all the member countries. According to this, all countries try to use these rules strictly, but sometimes due to wrong planning and corruption by some countries, the economic condition worsens.

 What is Inflation ? 

Inflation means that there is a decrease in the purchasing power of the people, there are basically two types of things in it, a basic thing is to stay alive, after that the money left over is the things people spend on it. Inflation is increasing and people’s purchasing power is also increasing, this is a good sign for the economy, but all things do not work together, so we see that the purchasing power does not increase at the rate at which inflation increases, it is inflation. Is.

In the inflation rate, the currency of that country is important, for which things like supply and demand and imports and exports are very important. The Dollar is a currency asset for a country like America, because it is used by the whole world for trade and keeps its accumulation. So the US does not need to publish currency based only on gold and government real estate. In a country like Zimbabwe, the inflation rate had increased manifold in the 1990s, in which this strategy was wrong to publish only as much currency as possible.

Therefore, in order to understand inflation, it is necessary to see on what the origin of that country is determined. If there is more exports in imports and exports, than more foreign exchange will come to India, due to which we should see it as an asset, which increases. If all the factors that result in inflation are turning into a correct proof, then there is no problem, but if there is a small increase in it, then the inflation rate increases more than the prescribed limit.

Inflation & Unemployment  –

Due to increase in unemployment, the purchasing power of the people is less and the demand for things in the market of the people is less, so this is one of the reasons for the decrease in inflation. Decreasing inflation due to unemployment is a negative phenomenon for the economy of any country, so inflation is increasing and the purchasing power of the people is increasing equally, it is a symptom of positive economic development.

In India, 80 percent of the people work in unorganized private small companies, which do not have the protection of inflation, it is demand and supply based. In which companies always hire people on this low salary, whose salary does not increase according to the inflation rate and he works in it. India’s population is our biggest problem because it has more demand for basic goods. Therefore, the bargaining power of people working in a country with more population is less.

Keeping unemployment under control, it is the most important responsibility of the government to increase the inflation rate, according to the market, in which the printing of currency is determined on how much it has to be done every year. In India today, people are dying to get the highest number of government jobs, the reason for this is that the salary given by the rate of inflation is the most important reason. If unemployment is reduced, then the purchasing power of the people increases and inflation also increases, but the extent to which it should increase is monitored by the government commission.

Reason of Inflation –

  • Demand & Supply
  • Import and Export
  • Additional Currency Printing
  • Shortage of Oil & Gas
  •  Agree-culture Production
  •  Increase in Labor cost
  • Government Policies & Regulations
  • Thinking of peoples towards Market

Whether people have purchasing power in the market or not, it is most important that they have to buy the winning things for their survival. Therefore, in such a situation, the government provides food Security to him by making different schemes. When the purchasing power of the people increases, then he starts buying other things, ranging from electronic items to vehicles. If the purchasing power increases even more than this, then he spends more on nutritious food for himself, invests and builds wealth.

Inflation is very dependent on natural things like oil and gas, in which petrol and diesel have a lot of effect, which affects everything in the market. Inflation due to increase in demand is a routine activity of the economy, which is controlled by the government. The government can bring as many notes in the market as it wants, but it does not bring it because inflation can get out of control, so it is printed every year on the basis of a ome report.

The country which have more exports gets the maximum trend, which in a way is the income of the country, through which the economy develops. If the income is more, then in such a situation, the means of generation of the government is by taking tax from the people, which is not so easy to increase. That’s why the government raises this money through debt and through bonds because the government takes a lot of money to run its system, in which the maximum money is spent to pay the salary of the people.

 What is Srilanka Economic Crisis –

According to John Hopkins University, economic inflation in Sri Lanka was 133 percent in the month of March, causing the entire economy to collapse. The corona epidemic has been the biggest reason for Sri Lanka’s inflation crisis. Because tourism business is the main source of income in the economy of Sri Lanka, which has been affected for the last two years. Another important reason for the economic policies of the Sri Lankan government has been the inflation crisis, due to which there have been demonstrations by the people against many political representatives.

One of the important decisions of the government in the economic crisis was a complete ban on chemical fertilizers in the agriculture sector, due to which the Sri Lankan economy has been affected the most. No country has been able to take such a bold decision all over the world, but this decision was taken by the Sri Lankan government, but this policy was canceled after inflation was out of control. Fuel, Food and Medicine This is the biggest problem of inflation in Sri Lanka because these things have gone out of the control of the government and it has been intervened by the International Monetary Fund.

The International Monetary Fund has declared that it is impossible for the Sri Lankan government to provide any assistance without an agreement. From a political point of view, America, China and India want to control the politics of Sri Lanka. The problem is what Sri Lankan citizens want and how to deal with this inflationary crisis. Last month, the US had indicated to the developing countries that this country could face the economic crisis of inflation, whose Sri Lanka is the beginning, economic experts are calling it the domino effect.

Reserve Bank of India & Inflation  –

Reserve Bank of India It is the central bank of India, which decides from time to time what should be the interest rate of all the banks of India, thereby controlling inflation. The inflation rate is kept in the range of 2-6, it is generally trying to keep it at 4 percent. That’s why we have seen above the factors that change inflation, so that if the situation starts going out of control, then it is controlled by the policies by the Reserve Bank.

By the way, how the liquidity of money should remain in the market is determined by the Reserve Bank of India and there is no restriction on the amount of money it wants to bring in the market, but it is kept under control by the government and the Reserve Bank through regulation. . The amount of money that is used for trading in the market is based on how much gold and how much wealth the country has and after 1990 the accumulation of foreign currency is used as the most important asset. Foreign exchange is very important for the country whose export is more and if it is less, there is an economic crisis.

The economic budget of India is mainly based on this foreign exchange and taxation, apart from this, all the expenditure that has to be done is raised through bonds or other debt. It is the job of the Reserve Bank to control the behavior of financial banks, so this bank plays a very important role to keep inflation under control. Whatever economic policy the government brings to control inflation, without the Reserve Bank, this policy cannot be completed by the government.

International Monetary Fund & Inflation  –

The International Monetary Fund was established after the Second World War and it has 189 member countries and America has the largest membership because it is in the IMF as 17 percent of the amount. IMF was established for the purpose of helping developing countries and poor countries, which have to follow the policy of IMF. After 1990, India had made major changes in its economic policies, as a result of which the IMF helped India in the form of debt in the crisis at that time.

Countries like Nigeria, Turkey, Zimbabwe and Sudan are facing the economic crisis of inflation, in which international organizations like IMF play a very important role. No loan or financial assistance is given by IMF without membership and without an agreement. The war between Ukraine and Russia and its resulting rising oil and food prices has put all developing countries in economic crisis.

Due to the closure of the entire economy for 1-2 years due to the Corona epidemic, it has had a great impact on the inflation rate. Therefore, the developing and poor countries have been asked by the IMF to be alert for this. In such a situation, due to more fear in people, people keep buying more of the necessary things, due to which further inflation increases, so how to handle such a situation is provided by the expert team at the global level by the IMF.

 Effect of Inflation on Economy –

  • Due to inflation, the currency of the country keeps devaluing in relation to the foreign currency, due to which our cost of import increases.
  • The prices of goods keep on increasing and the Rupee keeps on losing its value, due to which the cash money we have with us reduces the purchasing power of this money.
  • International debt is expensive, due to which the inflation of the country increases further.
  • The most important reason for increasing inflation is that the import is less and the import is more, today the country which is developed in technology is self-sufficient.
  • Due to some political reason, people get scared and buy more things than their needs and deposit it, which increases inflation.
  • If the purchasing power does not increase at the rate at which inflation is increasing, then it can be said to be a symptom of negative inflation.
  • Along with inflation, purchasing power is also increasing, these are positive signs of increasing inflation. Rising prices of natural things like oil and gas are a symptom of rising inflation.
  • When the interest rates of the bank are increased by RBI, it is done to reduce inflation.
  • Corruption is the most important reason for increasing inflation, due to which the money which should be used in the interest of the country is stolen through corruption, which increases inflation.

Inflation & Government Policies  –

For a person doing a private job, inflation is like a modern running machine, which sweats from the body after running, but the person is running in one place. Inflation is like this for a working person, every year there is a five percent increase in salary and five percent inflation kills that earning. This means that the salary would have increased to be visible in the next year, but its purchasing power is less. The number of people working in such an unorganized sector is the highest in India, so the social condition of the people in India does not improve.

Inflation, in a way, we can say that we give tax to the government, but it is not understood by any ordinary person. The government keeps trying to keep the purchasing power of the people efficient by printing extra money every year. Keeping inflation under control is an important task of the government of all countries, otherwise the whole country may be ruined. Therefore, to monitor this, the policy is made from time to time by the government by forming a committee in collaboration with the Reserve Bank of India and the Ministry of Finance.

Talking about India, we spend more on exports, in which we spend the most money on buying things related to oil and electronic devices like semi-conductors. Most of the budget of the Government of India has to be spent on salary. Talking about income, how much is the accumulation of foreign exchange? It is very important for the country whose Economic system is exported. Controlling unemployment, controlling demand and supply, the government has to control many such things.

Critical Analysis of Indian Economy & Inflation –

Globalization has made every country dependent on each other today, due to which no one country can run its economy on its own in today’s situation. Nevertheless, we saw the ideological war between Russia and America through the Cold War, in which the model of democracy was to be established around the world. America has won this war in the first phase, but now in the second phase, it has been their strategy to make other countries financially dependent on America.

In 1990, India has changed its economic policy, China and India started development together, but today China is beating America’s economy. The reason why India is falling behind in economic development from China is that people who have an influence on the business sector, they say not to pay tax, so they keep looking for different avenues of tax evasion. The benefit of tax benefit is done for the development of the common and poor people, this is the second reason for tax evasion, so inflation is increasing in India but the purchasing power of the people is not increasing.

We are far behind China and America in terms of an amendment, due to which our imports are more and exports are less, so our economy is dependent on other countries in terms of technology. Economic inequality is our important reason, in which some people have a lot of money, on the other hand, there is a very large class who do not have much money apart from living life. That’s why the most money is spent on basic things. That’s why our growth rate is not showing this correct data, it shows an average in which minority Amir people develop.

Conclusion –

Many things are the reason for inflation, so if inflation is increasing in the right amount, then it is a good sign for the economy, but if it increases more than it is a matter of concern. If inflation goes to a lower level, that is also not a good sign for the economy as it indicates unemployment, which can lead to unrest in the society. Therefore, it is the responsibility of the government that it is in the right quantity, so it is trying to keep it between 2-6 percent.

Normally 4 percent inflation is kept an ideal rate every year, for which we have seen in this article that import export, demand-supply, and international rates of oil and gas have to be seen. How much foreign exchange is stored with the country, it is very important to keep inflation under control. According to the figures of 2021, the Government of India keeps 29 lakh crore notes in the market and this figure keeps increasing every year around 15 percent, which tries to keep the purchasing power of the people stable.

Amir person is amir, it is because a person doing business is more capable than a salaried person to avoid this cycle of tax benefits and inflation. Therefore, a person doing business makes better progress than a person doing business. Here we have tried to know inflation in very simple language, which depends on the economic, political and behavior of the people. Therefore, if we want to progress in life, then it is necessary to understand how we have to deal with taxes and inflation.

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