Inflation as economic phenomena may be described as the continuous upward rise of prices in all parts of the economy. Inflation is thought of mainly as a monetary issue, where in fact it has a large social impact on the people and business in an economy. In simple words, inflation means “Rising Prices”. This can be defined as when the existing currency buys much less than what it used to and more amount is to be paid for the same. India is facing this critical economic problem of rising prices in the current economic situation.
It is important to determine the causes of inflation before we analyze on the the issue of its impact on people. The popular view of economists is that inflation is caused by the interaction of the supply of money with output and interest rates. Infact inflation is directly related to the phenomena of demand and supply. Prices rise in case of high demands and low supply. The population is increasing rapidly but the production of our resources like food grains is not increasing in the same proportion.
The lack of proper distribution of resources is another reason of hike in prices at some places. Other causes of inflation includes the programmes of economic development generate larger employment and money incomes and this increase the demand for basic consumer goods and services. Another reason of rising prices is that there has been very heavy direct and indirect taxation on the public. In a developing country like ours, this adds to the inflationary pressure for number of reasons. Heavy taxes on industrial products are ultimately passed on to the customers, thus increasing their cost of living.
The rise in prices also occurs because of external factors like the impact of global inflation affects the national inflation. There are various other reasons directly or indirectly related to rising prices. Immidiate measures must be taken by the government to control the rise in prices.
The impact of rising prices on the people at large has been huge. The poorer section of the society have been the worst sufferers. With the limited disposable income and rising prices the poor society is unable to fulfill their basic need and are going more below poverty line. Moreover people who live below the proverty line have been driven to hunger and destruction. The middle class people also face lots of problem due to rising prices. These class actually has a fixed income. But with rise in prices their incomes are not increasing proportionately.