Thursday, November 18, 2004

Amogh's new purse

Nice to know that india has retained its position as the world's fourth largest economy after US. China, japan according to world bank report. Good for amogh that he has brought a new purse so that he could spend the money in style till the inflation crawls in. Well since i mentioned inflation I'ld like to tell its effect on economy. It has a three fold effect. First inflation has an immediate effect on interest rates. Inflation reduces the purchasing power of every rupee earned. It leads to an increase in interest rates. Secondly it has an impact on the exchange rate of the country. Exchange rate depends on the inflationary trends prevailing in the economy. Thirdly inflation and economic growth are inversely proportional. Any way we dont have to worry about that till the second phase of globalisation. Lets hope india goes upto first position as worlds largest economy.

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