Essay On Inflation In India

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

Rising inflation is the big cause of concern for the country and its economic growth. The sufferers are mainly the taxpaying individuals while the government merely offers regular assurances like attempts are being made to bring the situation under control. An analytical observation makes us understand that such economic slowdown and pathetic condition is caused due to the government’s apathy.  The Indian government follows the easy way of borrowing rather than managing the own resources which could have helped the country to move ahead with constant progress. The bad economic planning therefore causes inflation. 


The highly disturbing element which is a big cause of concern for the country is the unexpected fiscal slippage due to constant rise in inflation. It therefore has direct causal relation with the casual approach and apathy from the government’s side which could take firm step to control inflation with any timely initiative. This situation is highly frustrating for the country and hinders its progress. The successive governments though have hardly taken any concrete step to manage the fiscal indiscipline. Its role in increasing inflation can’t be ruled out. 


Although the government often cites various reasons for such worse financial condition that inflation keeps increasing because of the lower-than-expected cash surplus at the very start of the financial year or that National Small Savings Fund (NSSF) witnessed revenue shortfall. A few arguments might prove true but some are baseless because most often the fiscal deficit calculations themselves had proved wrong hence there can’t be a guarantee whether the analysis would be of any worth or not. 


The crucial factors of mismanagement and vested political interests besides the preferences of the party welfare of ruling politicians rather than keeping the national interests under consideration are main prerequisites. They cause budget deficits for that no appropriate initiatives are taken to ensure financial health of the nation is prioritized upon the nonsense decisions.   


The fact is undeniable that inflation has also caused due to the improper cash management and several such decisions that have been taken without keeping in view the interests of general masses. Arguments are often given by the respective governments but most of them prove wrong when economic analysts judge them. Static interest rates of different types of savings schemes which government offers besides the increased funds gathering through taxes or other sources though should rather proliferate for the stable inflation. 


Constant increase in the inflation is only due to inexperienced financial planning and wrong decisions taken to support particular section of the society. The vested interests are more problematic then the economic reasons that often create brouhaha which the countrymen see in the form of an increased inflation not to be controlled so easily.  


Often the borrowing programmes of the respective governments create the surprising scenes in the markets. When the market expectation varies too much then fluctuation become a common scenario. Its affect on the benchmark 10-year Government Securities has also been felt. It is one major reason that inflation rate jumped from 7.93 per cent to 8.55 per cent in the recent years. Such situations are definitely pathetic one for that strong and forceful measure had to be applied. 


The factors like Prime Lending Rates (PLRs) by the Indian banks concerned and the Reserve Bank of India announcing interest rates from 3.50 per cent to 4 per cent recently was some of the newer steps for effective Monetary Policy to be applied in the coming fiscal years. Such steps are definitely genuine and make it possible for the country to sustain its economy from smaller levels. Unfortunately though some gaps widened due to ineffective economic planning and failure of the government to boost the morale hence the results are not so much appealing yet. Proper economic solution would turn Indian economy more sustainable but it still faces worst situation because of ineffective planning.  


The headline inflation has been leaving panicking impact on the country but the government has literally failed to apply an effective measure. Acceleration continues that is uncontrollable due to lack of proper measure. Previous records for the weekly food inflations reaching up to 9.41 per cent and the constant increase in the fuel prices witnessed recently at 14.69 per cent inflation are all typical situations that had showed how the government failed to control worst financial situation. Ironically the government instead declared such situation unmanageable instead of applying timely initiatives. 


A close analysis of the whole situation makes you understand each and everything with more clarity. You come to know of government's apathy towards the masses that brings such inflation. Steps could have been taken to make the system more transparent and focusing at the small savings schemes. The step could also be started through attractive financial decisions by the government authorities. Keeping in consideration international pressures, local needs and initiatives that could help it control inflation, the government could stop worse situation.  


Slowdown of the main consumer economies of India especially Europe and the USA have resultant impact on country’s escalated inflation. It too is a sort of international cause for that local measure could have been searched to avoid facing such difficult phases especially many external pressures if the preparation could be from the local level to counter numerous such worst situations. 


It is true that economic doldrums which India has been facing today is very much due to the immature decisions taken by its successive government which often failed to deal with internal and external pressures to ensure inflation is brought under control. Perhaps it is the main reason that people’s trust and confidence on governments have literally slowed down with such apathies they face. 


The present example can be Indian economy failing to grow at its budgeted GDP growth estimate of 9% for current fiscal for that its preparations hardly had any objective mechanism. Even to this day the food inflation continues to be nearby 9% mark that is not a good sign for the economic health of the country. 


For such topics of Basic understanding on the subject matter which will keep you motivated to crack  GD & PI at CAT 2011, NMAT, XAT, SNAP  and forthcoming  exams Feb.MAT2012, ATMA, MHCET 2012, CMAT 2012 along with various other state specific MBA entrance tests. This would also be useful for WAT, Extempore speaking, Essays.

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