Purchasing Power
Purchasing power is the value of a currency
expressed in terms of the amount of goods or services that one unit of money
can buy. Price increases purchasing power declines and vice versa.
The
population growth rate in India is high as 1.7 per 1000. Large population leads
to increasing demand, but supply was not equal to the demand. So, the normal
price level will be going an higher. So it affect purchasing power, especially
in rural population.
Even
though there has been a constant growth in the GDP and growth opportunities in
the Indian economy, there have been steady increase in the prices of essential
goods. The continuous rise in the prices erodes the purchasing power and
adversely affect the poor people.
When
demand for goods increases, the price of goods increases then the purchasing
power is affected.
When the price increases the purchasing power decreases
and finally the value of currency decreases.
The
production and supply of goods decline, the price of goods increases, then the
purchasing power is affected.
There exists a huge economic disparity in the
Indian economy. The proportion of income and assets owned by top 10% of Indian
goes on increasing. This has led to an increase in the poverty level in the
society. Generally purchasing power is affected by poverty and unequal
distribution of wealth also
A concept related to purchasing power is purchasing price parity
(PPP). PPP is an economic theory that estimates the amount that needs to be
adjusted to the price of an item.
can be used to compare countries
income levels and other relevant economic data concerning the cost of living,
or possible rates of inflation and deflation. Recently, India became the third
largest economy in terms of PPP. China became the largest economy, pushing the
US to the second position.
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