What is Inflation, is it Good for the Economy or Bad?

 

Definition of Inflation

 

Inflation refers to the steady increase in the prices of goods and services in the market. In the case of inflation, the price of currency decreases because consumers have to pay more for buying goods in the market. Meaning, 'Inflation; There is such a condition of the market in which the consumer takes the bag to the rupee market and brings vegetables in his hand.

 

Inflation Impact on Economy

 

After studying various years of data, it has come to notice that low and controlled inflation; Motivates entrepreneurs to invest more because goods and services are more expensive and cost more than they cost. But if the entrepreneurs do not re-invest this profit and spend it on luxury goods, the economy will not benefit; because new jobs will not be created in the absence of new investment; Due to this, resources will not be utilized properly.

 

Negative effects of inflation

 

Since the real income of the people is reduced due to inflation, due to which their savings are reduced, investment is reduced due to which the production is reduced which further reduces the export and the balance of payments becomes the opposite. Thus the entire economy is negatively affected due to high inflation.

 

What is the effect of the weaker section of society?

 

Inflation is a disadvantage for a section of the society that receives a steady income such as daily wage labourers, pensioners, salaried etc. as their purchasing power declines as the real value of the currency decreases. Like, with the help of 100 rupees, these people used to buy 3 kg potatoes earlier, now after inflation, they will be able to buy only 1 or 2 kg.

 

Influence of different people on inflation

 

Serial Number	Affected Class or Area	Effect
1.	Consumer	The loss
2.	Indebted to	Benefit
3.	The lender	The loss
4.	Public savings	Lack
5.	Public Expenditure	Growth
6.	Export	Lack
7.	Taxation	Growth
8.	Manufacturer	Benefit
9.	Cultivator	Benefit
10.	Entrepreneur	Benefit
11.	Fixed income group	The loss
12.	Pensioner	The loss

 

 

If we talk about the Indian economy, economists believe that if the rate of inflation is between 3% to 5% then it is beneficial for the economy because it gives a boost to the manufacturing sector in the country, due to which, employment Creation takes place and a positive cycle develops the entire economy. Thus, it can be said that whether inflation is beneficial to the economy depends on what its rate is; If this rate is too high then it is harmful to the economy.