Dean Martin.C, Asst Professor in Commerce,
PG Dept of Commerce & Management Studies,
St. Thomas’ College, Thrissur
In simple terms inflation, or price rise is caused by too much money chasing too few goods, or, demand being more than supply. The free play of the twin market forces of demand and supply determine the price of any commodity or service. In a mixed economy like India, Government is also an important player in the market. Hence to search for the causes of inflation, becomes somewhat complex. The last couple of months witnessed a sudden and almost a run-away type of food inflation. The way the price of vegetables and other food items soared, it created doubts in the minds of the common people and the economists alike. Winter is generally the time when fruits & vegetables are at the lowest prices. This was not so this year. The prices were way above the expected normal. This happened in spite of the normal monsoon and average inflation in other sectors. It was the other way round this time. Inflation in the food sector spilled to other sectors causing the rise in overall inflation.
The government and RBI are working on the lines of monetary regulations like change in the interest rates, CRR etc. But looking at the way the food prices are stuck at the higher side, don’t these monetary measures appear just temporary remedies? There are certain deeper, grass root causes which have to be actually tackled. India has come a long way in case of food grain productivity. There was a time when our Balance of payments, account was always weighed down by food grain imports and the debts incurred for these essential imports. It is not so anymore. We are self reliant now. In case of sugar, global prices are determined by the amount of India’s sugar production! States like Punjab, Haryana... [continues]
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