Inflation in India

In February 2011, India’s Prime Minister stated that getting inflation under control was a matter of urgency (at the time India’s inflation rate was 8.4% with food price inflation at 17%)

The BBC reported this morning that the reserve bank of India has responded by raising the policy lending rate to 8.25% in an attempt to control inflation.

This article typifies the style of case study material seen in OCR AS macroeconomics (F582) exams so it is worth considering what sort of questions we could address from this. If you are a centre where microeconomics is studied first then this article might be worth saving for later on in the year; if you are studying macroeconomics this term then let us consider some questions that may be drawn from this case study.

What is inflation?

How is it measured?

What factors may cause inflation to occur in an economy?

Geoff’s excellent revision note on the topic can be found here (have a go at answering these questions yourself before going straight there!)

An obvious discussion point to look at here might be to consider the consequences of inflation. Declan Curry’s video is a good starting point for a classroom discussion to consider whether inflation is good or bad. How does it affect individual people, both borrowers and savers? What about businesses? Does the government worry about inflation?