What is Inflation?

Inflation may be defined as a situation in which too many people purchase too few goods. The purchasing power of the money goes down and the prices not only of luxury goods but of many essential commodities such as rice, wheat, cloth, vegetable oil, sugar, etc. also starts to rise, causing immense sufferings and distress to all sections of the people.

It refers to a situation where there is a sustained demand for essential goods and services, and the the quantity of goods available for public consumption fall far short of the demands.

The supply of consumer goods being limited, it is not possible to cope with the highly increased demand. This gap between demand and supply leads to inflation (or price rise).

Problems:

In India, Inflation has particularly affected the middle class people with fixed incomes and wage-earners of all kinds of categories. They practically lost a huge chunk of their earnings under the inflationary conditions of the market.

• There is no sign anywhere of prices being reduced.
• Scarcity of goods still prevails in an acute form keeping prices at a very high level.
• The government has now withdrawn control from many goods and is steadily pursuing a policy of decontrol. But decontrolling measures have failed to yield any good result and have actually been followed in many cases by a further rise in prices.
• It has even been necessary to re-impose control on some commodities and tighten the control on others.

The problem is, indeed, a baffling one and no effective remedy is in sight even now.

Government Initiatives

It must be said to the credit of the Indian government that it took various measures to stop this evil and mitigate the sufferings of people.

Public Distribution System (Fair Price Shops): The most important of them was the Public Distribution System (PDS) or rationing of some essential goods needed for daily consumption.

It sought to distribute essential goods through Public Distribution Shops ( also Fair Price Shops, Ration Shops) at subsidized rates, so that the poor-people might get a limited quantity of them at a fair price.

The system, in spite of its many defects, worked fairly well and conferred some real benefits on the public. But it failed to keep down prices at a reasonable level and combat the evils associated with inflation and shortage of goods. In many cases it resulted only in black-marketing of goods and provided a paradise for all anti-social elements in the society.