What is INFLATION?

The annual percentage increase in the price of goods and services is termed as INFLATION. That means we have to pay inflated price for same good or service in future and you would be able to buy smaller percentage of good or service. Due to this the values of money decreases day by day and our purchasing power also.

Suppose if any good cost 100INR now and assume that we have 4% inflation then we have to pay 100+4=104 INR for same good next year.

In the same way if general level of prices are falling then we say there is DEFLATION.

Prices or inflation are mostly controlled by Demand and Supply. If the demand of particular good or service is more than its supply then people would like to pay more for the same. This cause inflation. Sometimes the company who is producing the goods or giving the service has to increase the cost to maintain the margin.

So is Inflation is bad, as it eats up the value to money? Inflation is sign of growing economy. If economy of any country grows it generate jobs and increases the purchasing power. People like to complain about prices going up, but they often ignore the fact that wages should be rising as well. The lack of inflation may be an indication that the economy is weakening. So the answer of the question is not easy, it depends on the economy as well as your personal situation.

Historic inflation India - CPI inflation

Year	inflation		Year	inflation
2016	5.22 %		2006	5.79 %
2015	5.88 %		2005	4.25 %
2014	6.37 %		2004	3.77 %
2013	10.92 %		2003	3.81 %
2012	9.30 %		2002	4.31 %
2011	8.87 %		2001	3.77 %
2010	12.11 %		2000	4.02 %
2009	10.83 %		1999	4.84 %
2008	8.32 %		1998	13.17 %
2007	6.39 %		1997	7.25 %