A COMPARATIVE STUDY OF THE IMPACT OF INFLATION AND DEFLATION IN THE INDIAN ECONOMY

This study focuses mainly on the impact of inflation and deflation in India. Inflation is the rate of increases in prices over a given period of time, e.g., one year. Inflation is typically a wider measure, such as the overall increase in prices or the increases in the cost of living in a country. But it can also be more narrowly calculated—for specific goods, such as food, or for services, such as a haircut, for example. Whatever the context, inflation represents how much more expensive the relevant set of goods or services has become over a certain period, most commonly a year. Deflation is generally a decline in the prices of goods and services. Deflation will take place naturally if and when the money supply of an economy is limited. Deflation in an economy indicates deteriorating conditions or situations. As a result, the rate of inflation is increasing. Inflation is a sustained rise in overall price levels. Moderate inflation is associated with economic growth and the development of a country, while high inflation can signal an overheated economy. Deflation is normally linked with significant unemployment and low productivity levels of goods and services. The term "deflation" is often mistaken with "disinflation." While deflation refers to a decrease in the prices of goods and services in an economy, disinflation is when inflation increases at a slower rate.