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Inflation in India
Inflation as an economic phenomena may be described as the continuous upward spiral of prices in all parts of the economy. This can be described as a boost to the economy, but, if it is not properly handled we may be burdened with rising prices which may prove detrimental to economic growth. The economic situation in a country can be analyzed under the following heads of production and distribution.
When we talk of production we are considering the fields of agriculture and industry. In the agricultural arena, the productive process involves all farmer’s activities in the fields together with the working of co-operatives for providing of facilities like better seeds, fertilizers etc., and last but not the least the facility of proper marketing by the co – operatives to enable the farmer to get the return for his labour which should be reasonable enough an amount for him to be able to look after his domestic needs and responsibilities.
This is desirable to enable the Indian farmer to progress. This seems to be quite logical and simple, but does it really benefit the farmer, how does it aggravate or remedy the process of inflation. In its effort to help the farmer, the Government buys the grain from him, and we have huge warehouses stacked with grain which is expected to feed the Public Distribution System. For this, experience has shown that, the lengthy distribution system has often resulted in a lot of wastage of food grains, while the Government on its part, is trying to fix a high price for the farmer’s grain and send food for the common man. Here again prices are fixed by the Government and steadily keep increasing resulting in aggravation of the inflationary process. If the farmers are provided facilities of better seeds, implements and marketing facilities, production would improve and the market forces of supply and demand would automatically fix appropriate prices.
In the same way, in the industrial sector, also, the Government can help to finance Projects which are found to be socially and economically beneficial, and there are fewer loans not paid back to banks. Thus even in the industrial sector it is important to have the national interest uppermost in the minds of the authorities. It is not uncommon to see large Projects worth crores of rupees going halfway and then being abandoned. If it was not a useful Project for the Nation, why was it ever started, and colossal sums of money wasted in it? The same trend has aggravated the upward spiral of the ogre of inflation, ever since the advent of industrialization in free India.
In the politically independent India we have seen great industrialists like the Tatas and the Birlas who have without fail combined industrial progress with rational utilization of their profits for the benefits of the people. We can be sure that, if their examples were followed for our guidance all the help in the form of Capital goods and money loans from the IMF and the World Bank would, in the span of half a century see India at a much better economic position than we are in, to day. As the number of rules and regulations increase there is less participation of market forces and prices continue to be fixed at higher and higher levels, with each passing year. Unless we learn to spread out our gains over a large number of people the inflationary trend will continue to be fuelled.
Every time we have the national budget raising any petrol or diesel prices, we see gradually all prices receive an impetus to rise, and inflationary trend just continues unabated. Hence, in the industrial sphere also we see how artificial fixation of prices leads to further inflation.
In India the importance of small scale industries cannot be ignored. In this area also we see that though, co – operatives are prominent and do a lot of good to the village artisan, but, once again, the marketing which is done by the co – operative, it is of great benefit but, once again the worker still does not get a proper share of the gains. The artificial fixation of prices in no manner ensures the gain for the workers because of the inflationary trend fuelled by fixation of prices rather than the sharing of profits by a larger number of people.
In essence, we have seen that, though India has progressed with the passage of time, this progress made does not compare favourably with other countries like Japan who managed to bounce back on the International Economic scene. Inflationary trends are essential when we have just started to invest in capital goods from foreign markets, and are just building up the infrastructure of roads, railways and dams etc., but that phase soon after a few decades should get over, when the industry starts using their machines to the optimum capacity, and the transport system facilitates trading activity even to the remotes part of the country, and the poverty line includes lesser people with each passing day..
At the individual level also as citizens of India we can help in curbing this process for example, when we buy anything do we insist on taking a receipt for it? I daresay most of us do not, because, not taking a receipt helps the shopkeeper to save his income tax, and the customer saves the sales tax. Hence the system is today flourishing because each one of us, yes, each one of us is contributing to the very existence of ‘Black Money’ and this in turn restricts the spread of benefits of progress to the poorer classes, hence a major part of the Indian population continues to live in abject poverty, with a total lack of facilities, education, and have, hardly any chances of progress. Prices must come down by the play of market forces and not in the form of depression leading to increase of unemployment and poverty.
India Economy 2010 Overview -
In order to keep the economic growth during the time of worst recession, Federal authorities in India has announced the stimulus packages to prop-up the economic growth. To finance the stimulus packages, Indian Government has raised over $100 billion over the last four quarters in a way to finance the stimulus package. Country’s Public debt, according to the latest data has zoomed to over 50% of the total GDP and India’s Central bank, Reserve Bank of India has started printing new currency notes.
Central Government Debt

in Rs. Crores (10 Million) Q3 2008 Q3 2009 % of GDP

Public Debt (Sum of 1 and 2) 2,099,286.23 2,505,450.74 50.71%
1. External Debt 237,351.77 294,941.67
2. Internal Debt 1,861,934.46 2,210,509.07