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Inflation BY AYUSSH SANGHI Impact of Inflation Part 4.7
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Impact of Inflation on Investments In case of unexpected inflation occuring on a regular basis, the degree of risk associated with investments in the economy increases. The increased risk factor creates uncertainty in the minds of investors and they become reluctant to invest in long - term capital nstruments. . As a result the level of investment falls and the prospects for long term economic growth is lessened.
Impact of Inflation on Investments . Rise in price level would eventually erode the volume of investments in real terms in India. Inflation also leads to rise in interest rates as interest rates move in tandem to keep abreast of inflation to put a curb on rise in demand for loans from banks. to keep abreast of intatest rates as interest rates . As we know, as the interest rate rises, investments fall.
Impact of Inflation on Black Money Inflation is p Inflation is perceived as a problem. .Hence it breeds: corruption, black-marketing and speculation and is responsible for generation of black money
Impact of Inflation on Balance of Payments Inflation makes exports costlier. Due to the same it may impact: balance of payments and . exchange rate adversely.
Impact of Inflation on Fiscal Deficit on on Fiscal Deficit Rise in interest rates due to inflation can also make borrowing by the government costly and thereby raise fiscal deficit.