Causes of inflation in India At this period, people are not able to control the inflation. It also becomes the reason of poverty in India. Mere holding of cash balances during inflation is unwise since its real value declines.
One of the important causes of price rise is the rise in price of raw materials. When the cash reserves are reduced, banks cannot give loans to the public without difficulty as they have lesser money in their reserves and they have to be very cautious.
The budget of the government reflects a deficit when expenditure exceeds revenue. To reduce the birth rate, family planning facilities are offered only in the city centers and semi-urban areas of India.
For instance, growth of population stimulates aggregate demand. In order to restore the equilibrium the public will reduce the money balances by increasing expenditure on goods and services.
The major determinant of the inflation in regard to the employment generation and growth is depicted by the Phillips curve. Apart from the natural factors and the man-made factors like hoarding that add to the rise in prices or inflation, the government too contributes its bit to the escalation of prices by imposing higher taxes on raw materials and finished products.
Therefore there will be greater circulation of paper money. Above all, speculative businesses flourish during inflation resulting in artificial scarcities and, hence, further rise in prices. Why are prices rising. Though no conclusive evidence can be cited, it can be asserted that following categories of people are affected by inflation differently: Thus the inflation rate during the last one year was As a result, family planning centers with trained workforce should be set up in rural areas to establish this facility at their access.
Note that, in this region, price level begins to rise. But excess of aggregate demand over aggregate supply does not explain persistent rise in prices, year after year.
Meaning of inflation in India Inflation means that money value is falling in the country and price of goods are rising. As a result, the multiplier effect of investment will come into operation resulting in higher national output.
These effects combined with certain external factors discussed in the causal loop diagram results in a growth restraining environment, even if the inflation is low. Then the government has also granted for increase the higher interest rate, which rule controls the inflation.
Keynes who before the Second World War explained that involuntary unemployment and depression were due to the deficiency of aggregate demand, during the war period when price rose very high he explained that inflation was due to excessive aggregate demand.
Finally, production setbacks may result in decreases in output.
With the government nature and hoarders adding their bit to the inflationary trends, is it any surprise then that rise in prices has become a common feature in India.
The borrower now welcomes inflation since he will have to pay less in real terms than when it was borrowed. Compared to the developed economies, the cost may rise up more in India because of inflation. Measurement of Rate of Inflation: India is heavily dependent on the middle east for its energy needs.
It refers to the amount that the commercial banks require to preserve in the appearance of cash or cash equivalents comprising gold or government. These cost-saving-driven technologies have often helped to drive a low inflation rate.
During the seventies, rise in prices of raw materials, especially energy inputs such a hike in crude oil prices made by OPEC resulted in rise in prices of petroleum products.
Thus, it makes the rich richer and the poor poorer. The energies issues regarding the cost of production often increases the value of the final output produced.
From December the inflation rate started dropping to 6. Inflation In India Essays: OverInflation In India Essays, Inflation In India Term Papers, Inflation In India Research Paper, Book Reports. ESSAYS, term and research papers available for UNLIMITED access.
The supply side inflation is a key ingredient for the rising inflation in India. The agricultural scarcity or the damage in transit creates a scarcity causing high inflationary pressures. Similarly, the high cost of labor eventually increases the production cost and leads to a high price for the commodity.
Inflation in India- Causes and Options Essay. INFLATION-CAUSES & OPTIONS Rising inflation is one of the biggest stories of recent weeks and has received a great deal of attention from the media and political parties - Inflation in India- Causes and Options Essay introduction.
At the same time inflation is an economic problem that the average person meets on a daily basis in terms of higher. Inflation is generally means rise in prices, in inflation the price of a tub of goods and services that is envoy of the economy as a whole.
it is a persistence and substantial rise in general level of prices after full employment level of output. Inflation. Meaning: Inflation refers to a situation when the there is an increase in the prices of general goods and services resulting in the overall decline in the purchasing value of money.
During the last one decade prices have soared continuously. words essay on Inflation M Sanjeeta Advertisements: There is hardly a thing or commodity whose price has not gone up in the recent times. Rise in prices has become a common feature in India and the people are reconciled to .An essay on inflation in india