inflation :followed
I know everyone of you can see n number of disadvantages of Inflation.
But some ecomonist find a mild level of inflation healthy than Deflation
The rationale behind this thought is that.
-> If there is deflation the value of money will Increase. That mean if you have Rs100 today it will worth more than that in future. Hence nobody will be interested in investing. Rather they will try to have a bigger deposit which will yield them more in the future. Its the mild inflation that will push them for investment rather than just putting it in the bank. I dont think i need to explain the advantage of more investment in the prospect of a contries economy.
->Renegotion of price and wages is easier. Once it a price(or wage) is increased its difficult to decrease it again to the previous value though the conditions of previous value are restored. Like incase of increase in the bus fair. Once the petrol price increases bus faire increases but when petrol price comes down its difficult to get the price of bus faire down.In this case Inflation take care of this automatically.
->It Gives RBI ammunition while supplying money to the market through the banks be setting the minimum interest rate

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