Twin troubles (The Hindu, GS-3, Economy)

15 Apr Twin troubles (The Hindu, GS-3, Economy)

Context:- inflation quickened to a four-month high

How inflation is measured:-

• Base year:-2012
• developed by The National Statistical Office (NSO), Ministry of Statistics and Programme Implementation
• 3 types, CPI RL, CPI Urban, CPI all
• Monthly basis: for urban, rural, all India.
• Annual: with lag of one month.
• Includes both Goods and services.

Effect of inflation:-

Positive:-

• Helps in the growth
• Increase income
• helps in expansion of business.

Negative

• May lead to hyper inflation, means Burdon on consumer.
• rupees value will slide
• forex reserve will decrease
• export will decrease because foreigner will have to pay more.
• May lead to collapse of economy
• Examples- Recent Greece crises, Venezuela crises
• Will lead to crowding out effect.

What RBI must do

• Increase the bank rate.
• Increase SLR or follow conservative monetary policy.
• government must refrain from spending.

Download Daily Current Affairs of 15 April 2021

Swarn Singh

Plutus IAS Current Affair Team Member