Current Inflationary trends in India – Causes, Concern and Cures by Agnelo Menezes

By inflation we mean a general rise in prices. To be more correct, inflation is a persistent rise in the general price level rather than a once-for-all rise in it. On the other hand, deflation represents persistently falling prices. Inflation or persistently rising prices is a major problem in India today. When price level rises due to inflation the value of money falls. When there is a persistent rise in price level, the people need more and more money to buy goods and services.

To enable the people to meet their daily needs of consumption of goods and services when their prices are rising, their incomes must rise if they have to maintain their standard of living. For government employees, their dearness allowance is increased. Wages and salaries employed in the organised private sector are also raised, though after some time- lag.

But people with fixed incomes and those who are self-employed are unable to raise their prices and suffer a lot due to inflation. The poor suffer the most from persistent rise in prices, especially of food-grains and other essential items.

Rate of inflation during the seventies and eighties was very high as compared to the rates of inflation experienced earlier during previous periods. In India, in recent years, 2010-11, 2011-12 and 2012-13, rate of inflation as measured by consumer price index (CPI) has been in double digit figures. Prior to Jan. 2013, even WPI inflation was quite high which compelled Reserve Bank of India to adopt tight monetary policy.

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