Indian Inflation

1259 Words Oct 31st, 2012 6 Pages
Essay on Inflation – a Major Cause of Inequality. Sri Bhabatosh Datta, the famous economist has clearly stated that: “The origin of inflation is often found in the panicky nervousness of unstable governments in olitically unstable communities.
Given political stability there is no reason why India should not be able to carry out her future plans without generating serious inflationary pressure on the price level.”
The percentage of inflation in regard to price movements and the purchasing power of the rupee need to be evaluated on the basis of wholesale price index (WPI) with 1950-51 as the base year. Unfortunately, the government with the intention of preventing a factual comparison of the purchasing power of rupee, keeps changing the
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Mounting government expenditure over the years has also been responsible for inflation. The total expenditure of Central and State government in 1950-51 was about Rs. 750 crores only. This expenditure went upto Rs. 37,000 crores in 1980-81, further up to Rs. 5,80,000 crores in 2000-2001. Much of this has been non-development expenditure implying and increased in large money income in the hands of general public and stoking the fires of inflation. The populist measures of doubling and trebling salaries of government employees without implementing the rest of the recommendations of the Fifth pay commission has put an excessive burden on the exchequer without deriving any benefits from this.
Deficit budgeting is another reason for inflation. Mounting government expenditure financed through deficits directly pushes up money supply consequently pushing up demand. This has been responsible for the inflationary situation in the country with the State governments further adding to the problems through persistent financial indiscipline, reckless expenditures and unauthorized overdrafts.
Black Money:
There is considerable slush money with politicians and Government servants, mainly those dealing with licensing, registration, sales tax, trade tax, income tax etc. this slush money is used in real estates pushing up already high prices, extensive hoarding and black marketing inflation sensitive goods. The role

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