Skip to content

Essay On Inflation In India Pdf

Essay on Rising Prices in India

India is faced today with one of the most critical economic situations. At no other time did Indians witness the horriblepheno menon of spiraling prices as they do today, prices are soaring like rackets and each day one finds a rise in pricesof more or less all essential commodities. Inflationary pressures are doing plenty of mischief and the people of middleclass families are finding it a Himalayan task to make both ends meet.In a developing economy, prices usually display an upward trend. But if prices keep rising persistently, they cause greathard ship to the people. They spare neither the rich nor the poor, neither the producers nor the consumer. They make aeconomic activities uncertain and unstable, causing great unrest in the minds of the people.Prices are expressed in terms of money. When the rupee or any other currency buys much less than what it used to,and more is to be paid for practically every item, then the problem of rising prices comes into being. In economicterminology it is known as 'Inflation'. Where the balance between money supply on the one hand and goods andservices on the other is disturbed, a critical problem arises. If money supply increases more than goods and servicesavailable prices will rise.The fixed-income groups like salaried people, wage-earners and pensioners are the most helpless victims of inflation. Asprices rise, their real income gets eroded. The additional dearness allowance which the government sanctions from timeto time proves of no use to them, because their purchasing power actually goes down. Inflation induces businessmen toinvest their money in non productive assets like gold and land whose real worth is not affec ted by rising-prices. Highprices also adversely affect the exports of the country and distort the balance of foreign trade.In a developing economy a certain rise in prices in inevitable for at least three major reasons. First, the programmes oecono mic development generate larger employment and money incomes and these increase the demand for basicconsumer goods and services. The new incomes are not proportionately reflected in saving because a majority of thebeneficiaries have to spend most of the additional money they get on satisfying unfulfilled needs. Secondly, the sameprogrammes of economic development as generate the new money incomes push-up the demand for certain goodswanted also by the consumer, such as agricultural products, fuel, housing materials and the like. A third reason, owhich the first two may be looked upon as special cases, is the large increase in currency in emulation and theoperation of the law of supply and demand. Unless the production of basic consumer goods keeps pace with theincrease in currency that is rendered inevitable by large scale, long term planning, prices are bound to rise even of theproduction of consumer goods is maintained at the old level.Numerous factors can be cited to explain price rise in India First, our economic planning has suffered from seriousdrawback, right from the beginning. During the various Five-Year Plans, while the public expenditure persistentlyincreased, the production targets were never realized. Secondly, this forced the Government to resort to deficit financing.The resulting imbalance inevitably led to infla tion. The Third, major factor responsible for price rise is that due to greatemphasis laid on heavy industries in our Five-Year-Plans, agriculture and consumer goods industries, which produce theitems required by the people, have received insufficient attention. Con sequently, agricultural production has not keptpace with consump tion. Fourthly, in an underdeveloped economy like ours, the first increases in income always tend tobe expended on food articles. In other words, the level of consumption tends to increase with increases in income.The cumulative effect is a growing pressure on prices. Fifthly, there is a tremendous increase in population. About tenmillion new mouths are to be fed every year. Sixthly, there are psychological factors that push up the prices. Continuallyrising prices give rise to rising expectations, with the result that farmers and stockiest tend to hoard more and more

This article discusses the inflation, the current situation, the causes and the means to control inflation in India.

Inflation in India

Inflation refers to the rise in the price of goods and fall in the value of money. Inflation refers to the problem of rising prices.

The problem has been with us for a long time now. The trend of rising prices in India has, in time, aroused dismay, consternation and anger.

It has been witnessed that with the passage of time, the rich have become richer and the poor still poorer. In spite of a bad agricultural year, it is not scarcity that is troubling people so much as the continuing erosion of their purchasing power. Hence, we are nowhere near the goal of an egalitarian society which we had set out to achieve.

Also read:Problem of price rise in India.

Current situation

The current rate of inflation is alarming. The rapidly increasing prices in India has been a topic of discussion at all levels during these days.

Economists and some other people have been attempting scientific analyses to:

  • determine how far the prices have risen,
  • why they have risen,
  • by what methods they can be held in check, and
  • how far those methods can be successfully.

While all this has been going on, people have been patiently suffering, and for all we know, will continue to suffer for a long time.

Causes of Inflation in India

In-spite of the fact that India has witnessed huge economic development in the past 10 years, yet we are not able to control inflation. It is sure that something has gone wrong somewhere. There are many reasons for Inflation in India:

  • There has been a lack of a social awareness in general which has prevented the benefits of planned development from percolating to the lowest levels.
  • There has been an increase in the cost of living.
  • Lack of control and check over government spending.
  • Hoarding of essential commodities by greedy traders.
  • Inadequate mechanism to control and fix the prices of essential commodities in the marketplaces.

The benefits of government spending does not reach the common man. There are inadequate checks in the government-spending.

It would not, however, be correct to place the blame wholly at the door of the government or the trader. The consumer is no less to blame for the state of affairs. Some consumers allow themselves to be robbed for fear of a precarious supply position and consistently adverse price trends. Such practices not only deprive the country of much-needed resources but also serve as bad examples for those whose who cannot afford to pay such high prices.

How to control Inflation in India?

Inflation can be controlled by close collaboration and effort of both the government and consumer.

Higher Interest rates: Monetary policy can have an effect on inflation. At a time when a country witnesses high inflation rates, the Government often increases the interest rates. High interest rate is a mechanism to control inflation.

Suitable Distribution System: Inflation directly effects the life of the common people. In order to reduce the danger of runaway price increases in the future, it is very necessary that a suitable distribution system should be developed.

Proper Checks: There should be a system for proper checks to ensure that traders does not charge excess money for the commodities.

Control Hoarding: Some traders indulge in hoarding of goods. They create artificial demand for the goods and charge high prices for the goods. The government should ensure that such malpractices doesn’t exist in society.

Price Control: The prices of all the essential commodities of daily use , such as rice, wheat, potato, milk, etc should be fixed and controlled. And adequate measures should be taken to ensure smooth supply of these items.

Buy at Fair Price only: Some consumers allow the greedy trader to charge high prices for essential items. They pay very high prices for fear of inadequate supply in future. This practice should strictly discouraged.

Category: National Issues of India