Inflation

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Major Cause of Inequality.“The origin of inflation is often found in the panicky nervousness of unstable governments in politically unstable communities. Given political stability there is no reason why India should not be able to carry out her future plans without generating serious inflationary pressure on the price level.” Keeping 1960-61 as the base year, the Fourth five year plan save the price index at an all time high of 331 in September 1974 (with 1961-62-100). This was due to a combination of several factors, the primary being the influx of refugees in large numbers from Bangaldesh and the expenses incurred by the government on them, failure of Kharif crops in 1972-73 and complete failure to take over the wholesale wheat trade. The declaration of Emergency in June 1975 resulted the arrest of price rise and a steep fall in inflation and prices of commodities. The 1990’s again saw the economy and inflation rate in doldrums with double digit inflation in 1990-91 and 1991-92. The political considerations in increasing the prices of food grains was one factor, the second being the steep rise in prices of petroleum products in one go. The inflationary pressure was mainly on food grains, vegetables, cereals, sugar and vegetable oils. Due to these factors, the galloping rise in prices continued for the better part upto mid-nineties. Inflation has been defined in the literal sense as related to economic factors as “a progressive increase in the general level of prices brought about by an expansion in demand or the money supply or by autonomous increase in costs or the rate of increase of prices.” Causes of Price Rise:

There cannot be any single cause for price rise of essential commodities continually over the years. Infact, over the years and even from the time of independence, there have been regular inflationary pressure on the economy partly through imbalance in demand and supply. The ever increasing demand has been primarily due to our ever increasing and...
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