Inflation

Is the percentage increase in the prices of goods and services from the base year. Point to point inflation rate refers to percentage increase in price level in a given week/month this year over the price level in the same week/month last year. It is classified as (i) creeping inflation (upto 2%), (ii) walking inflation (upto 5%), (iii) running inflation (upto 25%) and (iv) galloping or hyper inflation (no upper limit).

Open Inflation

Open inflation exists where government has no control over the price of commodities. Prices and production of commodities is driven by the market not by authorities.

Suppressed Inflation

Suppressed inflation exists where government has control over price and production of commodities and government allow rationing of commodities. If government control is over, prices of commodities rise steeply. There is futuristic concern in suppressed inflation that in future if government will remove control over price of commodities, prices will rise steeply. In suppressed inflation, limited resources are used to produce unnecessary products (like arms, ammunition, war artillery etc) rather than necessary products (i.e. food, medicine, education, road etc). When government controls prices of commodities, people turns to barter system.

Ratchet Inflation

Ratchet inflation arises when demand of some commodities is more than its supply and demand of some commodities is less than its supply. Therefore, the price of commodities do not fall below the certain level due to rigidity of the labour and short term market structure. Even if there is supply more than demand, prices do not fall. Thus in case of ratchet inflation, prices rise but not fall, i.e. inflation moves in one direction only.

Mark-up Inflation

Mark-up inflation exists where sellers fix price of commodity (Maximum Retail Price - MRP) by adding certain profit in the production cost of the commodity. Thus there is fix ratio between purchase and selling prices.