Introduction – The problem of rising prices

The problem of the rising prices is a worldwide phenomenon. In the post-World War II period, in most of the countries of the world prices have gone up very much. It was expected that after the World War II the effects of inflation and the boom, economy shall subside and the prices shall come down and stabilize. Unfortunately, it has not happened. Countries like India that have started their development in the post-World War II period, have been very much affected by this phenomenon. In this country, it has now become a chronic feature and it has also become difficult for the Government to hold the price-line. Prices of essential commodities as well as luxury goods have gone very high. The prices of some of the essential commodities have risen ten-fold. This phenomenon has to be checked if proper development is to take place and people have to be given real relief. Unless it is done. the practice of giving increased dearness allowance, interim relief etc. shall be ineffective and meaningless.

Reasons for rise in prices in India

There are various factors responsible for price rise in the country. The basic thing is that India is a developing country and in a developing economy, prices are bound to go up. With the development of the country and improvement in the purchasing capacity of the people, the prices go up. This has also happened in India. But apart from the developing economy, several other factors are also responsible for rise in prices.

Inflation and planning

As a results of different Five Year Plans, a lot of money has come into circulation. Crores of rupees that were borrowed from different developed countries of the world. have gone into circulation in India. The money was spent in the name of planning. This has, no doubt, improved the purchasing capacity of the citizens; added to their income and brought about different types of development. But on the other hand, it has also caused inflation, resulting in rise in the prices of essential commodities as well as other types of goods. Really speaking, the plans in India have not been properly implemented. The development has been unbalanced and so has been the economic growth. All this has led to the concentration of the money into the hands of a few whose inevitable result is rise in the prices.

Large scale deficit financing and black money

In order to meet the growing cost of planning and development projects. India resorted deficit financing. Till the time of the devaluation of the Indian Rupee, most of the budgets of the Government of India were deficit budgets. The inevitable result to deficit financing is inflation and rise in the prices and this is what we see in the country.

In the post-World War II period, tax evasion and earning through clandestine means has become the order of the day. This has led to amassing of secret wealth, which is termed as black money. This black money keeps on circulating in the market and affects the prices without the knowledge of the economists and the Governments. Its natural outcome is price rise. This has happened in India to a very great extent. Black money in India is playing a very pertinent role in bringing about the rise in prices that has adversely affected the people of the fixed income group.

When too much of money purchases very few things, it has an adverse effect on the economy resulting into price rise and this is happening in India more then before. Because of black money, there has been increase in consumption. There has also been defective credit policy. The Government has failed to check effectively the rise in the prices and hold the price line. As a result of all this India has become a rich country where poor people live. It has happened because the wealth has been concentrated into a few hands. Natural resources have not been properly utilized. All this has resulted into rise in prices.

Increase in population

Since independence, because of Five Year Plans and other measures, the rate of mortality has gone down. Population has increased by leaps and bounds. Increase in population has adversely affected the purchasing power of the ordinary people. On the other hand, few things are available while the purchasers are many. The law of demand and supply has its own play and the result is rise in price-line.

Ways and means to check rising prices

The rise in the prices has adversely affected the people of the fixed income group. They fixed it difficult to meet there necessities. It is so because they neither have ways and means to have extra income nor it is possible for them to amass black money. On the other hand, because of black money, rich people are able to do things as they desire and purchase whatever they want. This also made it impossible for people of fixed income groups to get all the things that they desire. Because of money and the rising prices traders and businessmen have resorted to black marketing. Short supply and greater demand has encouraged it. All this has resulted into a unbalanced economy.

A part form the political, economic and social factors, the factors of natural calamities have also contributed to the rising prices. Famine, drought, scarcity and international situation fraught with the possibilities of war also contributed to it. Ways and means to check the rising prices-This unhealthy economic phenomenon of rising prices has to be curbed and checked. Unless it is done, the economy of the country shall continue to be disturbed. It can be effectively met with the help of following measures

(a) Proper planning and balanced economic growth-Planning has to be made proper so that the economic growth takes place in a balanced manner. For this, effective planning on socialistic lines has to be done.

(b) Checking the price-line-The Government has to evolve a policy in order to check the rising prices and hold the price-line.

(c) Control over black money and demonetization-The circulation of black money has to be controlled. This can be done by checking tax evasion. For this, very effective measures have to be taken. Government should not hesitate in demonetizing the currency and particularly the currency notes of high denomination so that prices may be kept under control. (d) Control over population-In order to check the free play of the law of demand and supply, the population has also to be kept under control. Birth rate has to be regulated and balanced.

Elaborate and scientific policy

Rise in prices cannot be checked by piece-mean measures. It can be checked only when effective and elaborate policy is drawn in this respect. In drawing up the policy and its implementation not only the Government agency but also the leaders of the public opinion have to play their part. Then only the problem of the price rise can be solved.

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