Essay On The Problem of Rising Prices

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 fixed income group, viz., wage earners and the salaried classes.


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Because of persistent increases in the prices of the necessaries of life, the number of people living below the poverty line has been steadily increasing. At one time they constituted 60 percent of our population, but now their number has gone up.

Constantly rising prices are like a fire feeding on itself. As 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 break. As the costs of production mount, all schemes of planned economic development go out of the window and national economy is overtaken by chaos and thrown out of gear.


What is that triggers off an upward movement in prices? According to experts, 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 take notice. Then they try to pinpoint the causes and begin their search for remedial measures to bring the situation back to normal.

The factors which contribute to price rise can be broadly classified as external and internal. In the context 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. But 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. But before we start thinking of the remedies, we need to form a clear idea of its internal causes also. According to economists, the main culprit in this context is inflation. In layman’s language, it describes a situation in which too much money is chasing too few goods. We are repeatedly told that money supply in the country has been increasing. This means that the amount of money circulating in the market has been going up. Naturally enough if it exceeds the value of goods available in the market, 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, inadequate production of goods most in demand etc. When we talk of production in that context, we have to take into account both industrial and agricultural production. The malady may be further aggravated by unimaginative import and export policies. If imports are not so oriented as to fill the gaps in the domestic market and exports are so managed as to widen such gaps, the results are bound to contribute to prices increasing.


All this concerns the way unimaginative state policy can aggravate the situation on the price front. But 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. Unfortunately a majority of the business people in our country are more concerned with profit without realizing 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 anxiety to get rich quickly, they create man-made shortages and add to the misery of the people.

Yet another factors which acts as a catalytic agent in increasing prices is the excess demand created in the market by a fast increasing population and constantly expanding money supply.

To sum up, some of internal causes which precipitate price increases are excess money supply, faulty planning, unrealistic import and export policies, imbalance in production, rapacity among traders and excessive increase in population. Given the necessary will and determination, none of these presents an insuperable problem. The causes of increase in money supply are well known, viz., large scale deficit financing over the years, increase in bank-credit, the cost of food procurement and subsides etc. Surely India does not lack talent which can find the answers of these problem.

Experience tells us the only impulse to which a majority of the business people in India respond is fear. Appeals 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 book to keep the prices of essential commodities under check 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 taken to increase production, particularly of such items of mass consumption as may be in short supply. Another step that is urgently called for in this context is the streamlining and strengthening of the public distribution system. Last but not least, it has to be remembered that all these measures can be successful only to the extent we can control population growth so that it is not allowed to make nonsense of all planning. Given the necessary will and determination and with the active co-operation of people at large, the problem of rising prices can certainly be solved.

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