General Awareness is an important section of most of the competitive exams for employment in the government sector in India including, but not limited to, Banking, SSC, UPSC, Railways Insurance, etc. The article Inflation Types presents the key points related to Inflation, Inflation Types, and the effects of Inflation.

Inflation - Inflation Types:

• Creeping Inflation


• Walking or Trotting Inflation


• Running Inflation


• Hyperinlation or Galloping Inlation or Runway Inflation

Creeping Inflation:

• Price rises at a very small rate (< 3 %)


• It is considered safe and essential for the economy.

Walking or Trotting Inflation:
Price rises at a moderate rate (3 % < Inflation < 10 %) Inflation at this rate is a warning signal for the Economy.
Running Inflation:
Price rises at high rate (10 % < Inflation < 20 %) It affects economy adversely.
Runway Inflation:
Price rise at very high rate (20 % < Inflation < 100 %) This situation brings total collapse of Economy.
Based on Causes:

• Demand Pull Inflation


• Cost-Push Inflation

Demand Pull Inflation: When Inflation arises due to higher demand for goods and services over the limited supply.
Cost-Push Inflation: When Inflation arises due to higher input cost for goods and services over the limited supply.
Example: raw material, wages etc.
Inflation - Important Terms and Definitions:
Delation:

• It is opposite to Inflation.


• Reduction of general level of price in an economy.


• In this price index measured is negative.

Stagflation: When stagnation and inflation coexist in the economy.
Stagnation: low national income growth and high unemployment.
Disinflation: When the rate of Inflation is at a slower rate.
Example: If the Inflation of last month was 4 % and the rate of inflation in the current month is 3 %.
Relation: Deliberate action of government to increase the rate of inflation to redeem the economy from a deflationary situation.
Inflation - Effects of Inflation:
Redistribution of income and wealth:
Due to the effect of inflation, some group of people loses and another group of people gains.
Example:

• In the case of debtors and creditors


• Debtor - gainer Creditor- loser


• In the case of Producers and Consumers


• Producer - gainer Consumer- loser

Effects on Production and Consumption:

• Due to inflation, the demand decreases


• People try to use fewer services and it causes decrease in consumption

Unfavorable Balance of Payments:
Export decreases and import increases from other countries which lead to a decrease in forex reserve.
Measures to control Inflation:

• Credit control:
  It is used by RBI.

• Increase in Direct Taxes:
  Due to the increase in direct taxes, people have less money available to them and low demand from them leads to a lower price.

Price Control:
By fixing maximum price limit by authorities.

• Trade measures:
  Maintain proper supply in the economy by export and import of goods and services.