Inflation has a significant impact on the Indian economy. The rise in prices of goods and services leads to a decline in the purchasing power of the consumers and businesses. This inflationary pressure can cause a slowdown in economic activity, adversely affecting GDP growth. Some of the key impacts of inflation on the Indian economy are:

• Increased cost of living leading to a decline in consumer spending, affecting businesses and economic growth.
• Reduced foreign investment due to rising inflation rates, leading to a decrease in foreign exchange reserves.
• Inflation can reduce the value of the Indian rupee, affecting the purchasing power of Indian consumers and businesses.
• Inflation also leads to an increase in interest rates, making borrowing expensive for businesses and consumers.

The primary cause of inflation in the Indian economy is the increase in demand for goods and services without an adequate increase in supply. This increase in demand could be due to factors such as increased consumer spending, population growth, and government spending. Other causes of inflation include rising input costs and supply chain disruptions. Governments implement monetary and fiscal policies to control inflation rates and maintain economic stability.