The problem of inflation has been haunting India for
quite some time now. Though the term is not new to India, inflation is
causing major problems for the Indian economy. After the
industrialization of 1990, Indian economy opened up which in turn raised
the inflation rate in India. The condition was severe in the early
nineties when inflation rate were in double digits. Supply was less than
demand and people with too much money were chasing too few goods.
Inflation: Causes and Problems
But today the situation has changed significantly. Earlier inflation
was caused due to domestic factors, but today it is due to the global
factors. The main cause of inflation has been the pricing difference
between the producers and the consumers. The high price of foods,
manufacturing products and essential products have further pushed
inflation rate in India. The Gulf war and the soaring prices of crude
oil have further deteriorated the condition. As a result of this, both
the Wholesale price index and the cash reserve ratio touched 6.1% and
5.5% respectively on the same day. Though the Reserve Bank of India has
promised to control inflation rate, and has increased the cash reserve
ratio continuously to curb inflation, but still the results have to be
seen. Rising inflation also discourages the foreign investors to invest
and this can seriously affect the economy.
Steps to Curb Inflation
India must try to reduce the gap between demand and supply and at the
same time must increase its agricultural products. Black marketers and
hoarders should be dealt with firm hands. Production should be raised
and proper steps should be taken to increase the value of Indian rupee
compared to dollar. A higher price of rupee means lower purchase price
of commodities. Steps will not only curb inflation but also will also
help in economic growth.
