Essay on Inflation is rising in the country. Give reasons and suggest measures to curb it for Class 10, 12, Mains Exam (UPSC, PSC, SSC)
Inflation is rising in the country. Give reasons and suggest measures to curb it Essay : The change in percentage in the value of the WPI or the Wholesaleprice index is known as inflation. In other words, inflation refers to the rice in the price of the goods and services in a given year. In an economy, this situation arises when there is an imbalance between the demand and the supply ofmoney. Moreover, inflationalso occurs when there is a change in the production or the cost of distribution and an increase in the taxes charged on various products and services. Inflation is known to have a severe impact on consumers. The high prices of essential goods and services make it impossible for consumers to afford them. However, it has been noted that a slight increase inthe inflation rate can be advantageous for the economy as it will encourage people to buy more.
Causes of inflation:
The cost Price Index or CPI aids in measuring inflation. The imbalance between the Gross Domestic Product and the supply of money mainly paves way for inflation. If the overall demand exceeds the aggregate supply, the prices of the goods and services will keep on rising. The various causes of inflation are discussed below as follows:
- Public expenditure: Government expenditure is considered as an integral part of the economy. It is also considered an integral determinant of the overall demand. However, in developing countries government expenditure puts pressure on the economy thereby increasing the aggregate price of the goods and services.
- Population Growth: The total demand for goods and services increases with the increase in the total population of the country. Therefore, the excess demand puts pressure on the economy thereby creating inflation.
- Presence of trade unions: The trade unions in any organization safeguard the interests of the employees. When the price of the goods and services increases the unions pressurize the authority to increase their wage. Thus, the cost of production gets increased which in turn puts pressure on the price of essential commodities.
- Imposition of indirect taxes: Various indirect taxes are imposed by the government such as excise duties, sales tax, VAT, and GST on business. Thus, these indirect taxes raise the total costs for the manufacturers. Moreover, they increase the price of the goods and services to have less impact on their profits.
- Reduction in tax: In many nations, the government intends to reduce the tax rate to gain popularity among the masses. On the contrary, if the production rate fails to increase at a substantial rate, then the increased amount of cash leads to inflation.
Measures to control inflation:
Following are the measures that the Central Bank or the government of a nation can implement to lessen the inflation rate.
- Increased rates of interest results in the demand of the economy to fall thereby leading to lower inflation.
- Controlling the supply of money in an economy can lead to lower inflation rates.
- The long-term costs can be reduced by increasing the competitiveness
- Increased rate of income tax reduces the inflationary pressures, demand, and expenditures.
- Controlling wages and prices can help to lessen the inflationary pressures of the economy.
Conclusion:
The current inflation rate of India is about 6 percent. This implies that India is going on the correct track to bring down the inflation rate. It has also been observed that inflation rates not only affect households but also it affects the effective function of a business. The companies also need to defer the investment plans in order to bring down the inflation rates of an economy.
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