ESSAY 2: Rising prices of essential commodities or inflation is one of the critical economic situations that affects the livelihood of middle class and makes it difficult for them to make both ends meet. The government's policies are falling apart and it has been unable to regulate the prices. What measures need to be taken to keep inflation under control? Or how should the government change its economic policies to achieve the same? Ever came across 1 kg apple for Rs.10? My grandfather tells this tale and it appears made-up to me. Later my father said the prices rose marginally and today apples are more of a delicacy for the lower middle class. I suspect my kids and grandkids would be as partial to them in their time as the BPL population is at this instant. I wonder what changed. The apple still tastes the same. This in layman’s term is Inflation. Decrease in value of money. Almost a third of the India’s population lives on the mere 11 bucks every day. Inflation in such a population? it makes one shudder even to think! Green vegetables, pulses and milk have already disappeared from the poor man's meal . Hundreds of children die every day , culprit : malnutrition. Prices are touching the sky and beyond . Not only is the poor, in fact middle class is also facing up the crisis . The greed of merchants for profiteering is responsible and sponsors are government policies. Indeed! The real reasons are large traders, speculators, hoarders and black marketers of the agricultural business intentionally causing a decrease and increase in the price of things. The government allowing future traders has given a good chance to hoarding. To acquit themselves, Central government blames State government and vice versa. Be it the central or state government, no one wants to draw their attention to hoarding traders because there isn’t any political party that doesn’t love the generous donations. The rise in price levels in an economy over a given period of time can be stated as inflation. We can adopt many effective control measures for inflation of which most of them work by either increasing aggregate supply or decreasing aggregate demand. Inflation is knavish for another reason: can be caused by a numerous issues, especially the ones which one cannot see! For e.g., if government prints too much money, inflation will happen. If foreign investors pull their money out of a country's economy suddenly, inflation would result as a cause of depreciation in the country's currency. Also happens when the key commodity prices rises. Spike in the price of bike or a toaster is unlikely to affect other prices, but a hop in food prices affects the whole economy as every individual needs to eat. Indian economy gets also affected if prices of oil and energy increase because our economy depends on oil. Being profusely interested in management studies, I suggest the following measures: Monetary Measures: Aim at reducing money incomes. Reduce the flow of money from the commercial banks to the public by increasing the interest rates of Banks.
RBI to raise Cash Reserve Ratio (CRR) which in turn would reduce the lending capacity of Commercial banks. The rise in mortgage interest payments will reduce homeowners' real 'effective' disposable income and their ability to spend. Demonetization of currency or issue of new currency could also be an option. Fiscal Measures: Increase domestic consumption by increasing or banning the exports of basic food amenities (pulses, cereals, edible oil) and encouraging imports by lowering duties. Slash unwanted expenditure, increase taxes and savings. Other Measures: Efforts should be made to increase productivity. Fix an upper limit for the prices of essential consumer goods. Rationing aiming at distributing some amount of basic food requirements to individuals but it’s very inconvenient. Spread awareness among people about hoarding, black marketing and encourage people to get riled up and fight for their rights. The plight of common people will not come to an end and this disease (inflation), having symptoms like poverty, suffering and death, will keep on plaguing them. Unless and until government takes stern measures and fight with the people.
Published on Mar 4, 2013
Rising prices of essential commodities or inflation is one of the critical economic situations that affects the livelihood of middle class a...