Essay On The Problem of Rising Prices

Swaroop Rout
Essay
Over the past several years rising prices have become a chronic malady in India's national
life. They have given rise to widespread distress, especially among people who are
already living at the subsistence level and also among those in the fied income group,
vi!., wage earners and the salaried classes.
"ecause of persistent increases in the prices of the necessaries of life, the number of
people living below the poverty line has been steadily increasing. #t one time they
constituted $% percent of our population, but now their number has gone up.
&onstantly rising prices are li'e a fire feeding on itself. #s they erode the incomes of
wage(earners, they give rise to labor unrest. That in turn brings down productivity leading
to further increase in prices. Thus, they establish a vicious circle which it becomes
problematic to brea'. #s the costs of production mount, all schemes of planned economic
development go out of the window and national economy is overta'en by chaos and
thrown out of gear.
)hat is that triggers off an upward movement in prices* #ccording to eperts, in a
growing economy, some increase in prices in inevitable. It is only when such increase
becomes abnormal and persistent that politicians and economists feel obliged to sit up
and ta'e notice. Then they try to pinpoint the causes and begin their search for remedial
measures to bring the situation bac' to normal.
The factors which contribute to price rise can be broadly classified as eternal and
internal. In the contet of the situation as it has developed in India, we have heard it
repeatedly many times that the rise in prices witnessed in the country is in part due to the
impact of global inflation. Obviously, we can not do much about global inflation and the
impact it has on the price situation in India. "ut we can certainly apply our minds to
identifying and controlling or at least mitigating the rigours of the internal factors which
may be aggravating the situation.
The symptoms of the disease are clear enough. "ut before we start thin'ing of the
remedies, we need to form a clear idea of its internal causes also. #ccording to
economists, the main culprit in this contet is inflation. In layman's language, it describes
a situation in which too much money is chasing too few goods. )e are repeatedly told
that money supply in the country has been increasing. This means that the amount of
money circulating in the mar'et has been going up. +aturally enough if it eceeds the
value of goods available in the mar'et, the prices are bound to go up.
This indicates a state of imbalance in the economy which may be due to various factors
e.g., faulty planning with a wrong order of priorities, inade,uate production of goods
most in demand etc. )hen we tal' of production in that contet, we have to ta'e into
account both industrial and agricultural production. The malady may be further
aggravated by unimaginative import and eport policies. If imports are not so oriented as
to fill the gaps in the domestic mar'et and eports are so managed as to widen such gaps,
the results are bound to contribute to prices increasing.
#ll this concerns the way unimaginative state policy can aggravate the situation on the
price front. "ut the story does not end there. There is another class which can and does
play an active role in determining the pattern of price(behavior. They are the
manufacturers and the traders or in other words, the business community. -nfortunately a
ma.ority of the business people in our country are more concerned with profit without
reali!ing that it also carries with it the obligation to serve the community. Such
unscrupulous elements do not let go any opportunity to cash in one the people hardships.
In defiance of of stringent laws against such malpractices, they aniety to get rich
,uic'ly, they create man(made shortages and add to the misery of the people.
/et another factors which acts as a catalytic agent in increasing prices is the ecess
demand created in the mar'et by a fast increasing population and constantly epanding
money supply.
To sum up, some of internal causes which precipitate price increases are ecess money
supply, faulty planning, unrealistic import and eport policies, imbalance in production,
rapacity among traders and ecessive increase in population. 0iven the necessary will
and determination, none of these presents an insuperable problem. The causes of increase
in money supply are well 'nown, vi!., large scale deficit financing over the years,
increase in ban'(credit, the cost of food procurement and subsides etc. Surely India does
not lac' talent which can find the answers of these problem.
Eperience tells us the only impulse to which a ma.ority of the business people in India
respond is fear. #ppeals to their patriotic instincts fall on deaf ears because they seem to
have no such instinct. The only way in which they can be made to behave is strict
enforcement of the laws on the statue boo' to 'eep the prices of essential commodities
under chec' and harsh measures against hoarding and profiteering. They may not be able
to understand the language of reason but they will certainly appreciate determined action.
Simultaneously, steps ill have to be ta'en to increase production, particularly of such
items of mass consumption as may be in short supply. #nother step that is urgently called
for in this contet is the streamlining and strengthening of the public distribution system.
1ast but not least, it has to be remembered that all these measures can be successful only
to the etent we can control population growth so that it is not allowed to ma'e nonsense
of all planning. 0iven the necessary will and determination and with the active co(
operation of people at large, the problem of rising prices can certainly be solved.