Nothing can be more harmful to the common man’s interest and a country’s economy than the continuous rise in the price of commodities. In an underdeveloped economy in the initial years of economic growth, some rise in price is inevitable. But excessive rise in prices adversely affects the economic development of the country. Poor and middle class people suffer great hardships due to the rising prices.

The cause for increase in price in India was that money supply was increased much more than the increase in gross domestic product. Consequently the price level had increased substantially. The printing of new currency to meet the current revenue deficit also leads to increase in prices. Due to increase in the quantity of notes, supply of money increases. If the production does not increase correspondingly, there is a rise in general price level. Consequently price levels rise very high.

The rapid increase in population has had a great impact on rise in prices. Rise in population is invariably followed by rise in demand. Due to fall in production, especially agricultural production, prices have tended to rise. Fall of production results in decrease in supply of goods in the market. It causes inflation.

After every price rise the government employees and organized laborers put up a demand for increase in wages. Mostly the government accepts their demand, but it does not solve the problem. Every increase in wages gives rise to fresh price hike which is definitely far more than increase in wages.

Certain policies of the government also contribute to price hike. Very often railway fares, freight charges, postal charges, prices of steel, iron, coal.. and other goods produced by nationalized industries are increased to generate additional revenue. But it compounds the inflationary pressure on the economy. Bad monsoon, fall in industrial production, devaluation of rupee etc. have also contributed to rise in prices. Flow of black money has also played an important role in aggravating price rise in the country.

Rapid rise in prices adversely affects people having fixed income. Price rise in India has encouraged consumption and moral degradation. It makes it impossible for the salaried class and fixed income groups to lead a life of dignity and is one of the causes of corruption. If the plight of the salaried class is miserable, one can imagine the plight of millions of people who belong to unorganized labour force.

To overcome price hike essential commodities should be distributed at cheap prices through fair price shops. Strong measures should be taken by the government to check hoarding of essential goods. Growth of population should be checked and goods of mass consumption must not be exported.


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