Inflation Targeted

Nowadays the much more talked word Inflation is making the centre stage in recent newspaper.What is Inflation mean?.Why the Finance Ministry and RBI worrying over the soaring of inflation?.Is it like the Inflation is big gaint(Goliath)?.Let me come to the point,Inflation defined as the increase of general level prices in the goods and services.Inflation is intrinically linked with the money where the money chasing to few goods.Around one year back,cement and milk products were soaring up,so Finance Ministry banned to export the cement and milk products.This is clear view that whenever the demand for the products rises,supply of money is also geared up.By how much do the prices go up? At what rate do the prices do up?.The rate at which the prices of everything go up is called the "rate of inflation".

In 2005-2006,the price of an product is Rs.100 and in the 2007-2008,the price of same product becomes Rs.105.Then the rate of inflation is 5%.If the RBI's interest rate is lower than the inflation rate,then the economy growth will be negative.Therefore the banks will not able to give the desired returns.This means that more amount of money has been pumped out towards the services and products.In controlling the inflation,RBI plays the vital role by tightening the interest rate and hike in the repo rate. By this approach, money flows on the demand goods decreased.The rate charged by RBI for its Repo operations is approximately 8% and Reverse Repo rate is approximately 6.00%.When RBI lends money to bankers against approved securities for meeting their day to day requirements or to fill short term gap.It takes approved securities as security and lends money.This approach will slow down the economic growth of our country because the demanded goods were restricted.

Recently Inflation in India targeting approximately 12% because of the global action(mainly on increase in crude oil price).Partly effect done by using the credit card,loan contracts,future and options in Commodies market becomes mushrooming and lifts the inflation higher.In near future,Inflation in India headed towards 15%.The Government has the power to reduce the partly effecting issues.By doing this alone,inflation wont go down.This alarm to wake people to investment more in various sector like insurance,mutual fund,fixed deposit,ULIP,pension fund,bond market.By this inflation will reduced to some extent.These few ways to keep down the inflation.