Rising Prices in India
Indian economy is one of the largest economies in the world. It isn’t surprising that India rank 11th in terms of nominal GDP (Gross Domestic Product) and 3rdin terms of PPP(Purchasing Power Parity). But this stupendous growth is accompanied by the emergence of new problems and challenges.
And one of the most grave of them all is that of price rise. There has been widespread uproar regarding the skyrocketing prices of commodities of daily use. Both the government and the citizens have been facing a hard time due to its inability to put a check on the rising inflation rates.
To analyze the causes we need to look at the internal and external factors. External factors include global inflation. For example, if an item is imported to India from some foreign country and its price rises, it automatically results in increased production costs in the Indian market. External factors can’t be controlled but internal factors can be. The economists hold the view that due to unprecedented growth in the purchasing power of the people the supply is unable to meet the demands, hence creating price rise in various sectors. Or in other words too much money is chasing few goods. Sometimes the cause may be natural. For example there is a steep rise in the prices of goods of agricultural sector whenever there are occurrences of droughts and floods which lead to shortage of food grains.
The other factor responsible for price rise is increase in production costs. For example increased wages for the labor will result in increased price of production. Besides these there are other causes such as hoarding. Recently onion prices reached new heights owing to the large scale hoarding creating artificial shortage. Also increased population has also contributed significantly to increased price. More population means more mouths to feed and more mouths to feed means increased consumption which inturn results in price rise (inflation).
A certain amount of price rise is inevitable in a developing economy because as income level rises due to newly created opportunities the demand increases. And since a large proportion of the people do not have basic necessities, so the money is spent rather than saved. This creates a direct pressure on the market to supply more goods. But above a threshold limit the price rise begins to have a negative impact on the economy.