Key causes of inflation in india

INTRODUCTION: The global economy has been shaking due to a lot of economic issues indeed these days. In a bid to tackle economic issues, concerned economic agents must make sure they know the precise causes which is a momentous process. Some of the key problems or challenges being faced in the global economy are as under: 1. High debt, low growth situations in Europe and the U.S. 2. Can the U.S economy create any jobs in the next month (Sep 2011)? Because the Obama administration had failed to create even a single job in the month of Aug 2011. Coming to India, even India has some serious issues to deal with. In India, the following are the main economic questions, as per me: 1. Should the RBI capitalize the plight situations of Europe and the U.S.? 2. Rising economic inflation, is it really hurting economic activities in the India economy? The economic inflation has been a centre of attention here in the Indian economy. The inflation rates have

reached at uncomfortable levels at the moment. Here, arises a major economic question, how does this monetary situation, inflation, is experienced? As per me, Inflation means its causes. After scrutinizing the present economic conditions in the economy, it is awfully understandable that the following factors are the vital ones to cause inflation as far as my knowledge goes: The following are the major & real causes of economic inflation in India: 1. Population on the rise; 2. High economic growth; 3. Lack of agricultural output; 4. Weak INR; & 5. Cost of output heading to north. IN-DEPTH EXPLANATION AS FOLLOWS: Well, the above list has been backed up by some minor causes which are very inter-linked to the above major causes which are as under: 1. Weak Infrastructure and transportation, 2. Climatic conditions, 3. Usage of out-dated technology, 4. Lack of supply of factors of production, etc

Population on the rise The Indian population in the FY 2010 rose at unpalatable rate and still the number is moving to north and making the total number a disturbing one. The number is on the rise and there has been a no sign of halt. Some authentic

info is as under to back the aforementioned statements pertaining to population. 1. In the year 2001, the Indian population was around 1.01billion. 2. In the year 2010-Apr-1, the Indian population was around 1.21billion. In case the population is augmenting and so is the case with the supply of essential commodities proportionately at palatable prices, then that is called as growth. Issues arise only when the supply of essential commodities fail to meet the needed demand at agreeable prices. That is what exactly has been happening in India. Population is a key factor for many economic reasons but it is distracting when it is more than sufficient and is uncontrolled. It is increasing every day as birth rates have gone up and death rates have gone down. Since economic producers are unable to meet the demand comfortably, they do not have any options other than increasing the prices of all concerned economic goods and services and that results in economic inflation. Thus, an increasing trend in population would lead to inflation. High economic growth (EG) Would high economic growth lead to inflation? Technically speaking, yes but not always (meaning it is banked on economic and non-economic factors), economic growth would lead to inflation. My perspective is, imbalance or balance (33.3% each sector) contributions by the economic sectors towards the GDP, with or without an increasing trend of a nations population, & or increasing buying capacity leading to demand for foreign goods

because the nation failing to produce all the basic or essential goods and or comfort / luxurious products in the country, would lead to inflation. India is the 10th largest economy on this planet behind Japan, Germany, Brazil, China and the USA, etc. The economic growth has been heading to north each and every financial year in India, normally, projecting more than a 6% a year. Economic growth is what every productive person wishes for. But an imbalance in the contributions made by the economic sectors in the economy also give a feasible room for inflation. Even if there exists a balance in contribution, that is, 33.3% by each sector, inflation factor would still emerge or rise (if existing) in the economy as no economy on this planet can, strictly speaking, produce all the essential or basic goods and other types of commodities and services in its own economy. That is what has been happening with the Indian economy, too. India in order to meet its basic requirements, it buys some basic goods which is a result of an increase in buying capacity of the economy due to the augmentation in the GDP value, from overseas at inflated prices, sometimes, and as the INRs value is subject to change, inflated products are also bought in to the economy for meeting endogenous demand. Hence proved, economic growth would lead to inflation in any economy. Lack of agricultural output Poor performance in the agricultural and its allied activities continue to be a big worry for the Indian economy, too. This sector has been a worrying one, because it has been failing to meet the total domestic

demand and or failing to generate anticipated GDP contributions. The share of this sector towards the GDP is a meager one, which has been normally under 15% for the past few financial years. Well, sometimes many economists, advisers, etc recommend investing in more money, efforts, energy, etc into the agriculture sector when there is a forecast on inflation in the FY, is a good notion. But even after supplying economic loans and other facilities to farmers, the predicament of unagreeable aggregate output continues to stay active in India every year. And thus, with the population on the rise, the producers are left with only one option, which is to hike the final prices of the essential commodities, which are in short supplies. And this is what exactly been again happening in the economy these days, too. Here, arises one key question: why on earth the slowdown is on and on in the agricultural production? The following are the scientific reasons for that: 1. Climate change. 2. Usage of old tech and methods are on or underway. 3. Lack of reliance on new tech. 4. Lack economic planning and executions made by farmers and other concerned in the agriculture field, too. 5. Lack of finance, etc. There is a need to bolster the agricultural productivity in a bid to make sure food inflation is well under the control of the concerned governments. Please note: food inflation is an integral part of the general inflation.

Weak INR

Weak Indian Rupee is another cause for inflation here in India. She, imports more than exports, owing to a lot of monetary reasons which also contribute towards a fall in the value of the INR. The national currency plays a vital role in determining the final value of goods and services that have been imported. Since most currencies in the globe are subject to twist, the INR is also not spared. Thus, at the international market, in case the value of INR slides, the final costs would be higher indeed. In India, around 676 commodities are chosen to calculate inflation figures.. Since, India is not independent entirely, it has to import some essential commodities to make sure the economic and non economic activities run properly in the economy. Thus, the INR is a key thing which also determines the final prices of goods and services imported. The buying capacity of INR is sliding at the foreign market and thus, the final prices have been increasing which mean inflated goods. The INR has fallen more than a 10% this financial year, 2011, against the greenback. .

Cost of output heading to north As the cost of production of food stuff such as: wheat, rice, onion, lemon, sugar, milk, cookies, etc and non food stuff like pencils, pens, books, etc have been moving forward and forward, the final prices of those goods are also higher. Well, take the following reasons seriously as they are going to show the impact of a change in the factors of productions costs on the end goods and services: 1. Population is increasing all the time; the demand for the land is also rising. And thus, the cost of rent or land is always in the increasing sector and continues to move up, only, in that sector. Therefore, the land being the primary factor plays a crucial role in the fixation of the final prices of any manufactured product. Here, the population is again a major factor. 2. Cost of labor is also stepping up every time and so as are the final prices of commodities and services, related. This is the impact of higher transfer earnings. Producers would always wish to keep their important factor, workers, in the production for a longer period of time. And in a bid to do so, the producers also have to satisfy the basic demands of them which are in the form of money. And such costs are also incurred in the cost of production.

3. The rise in profit margins makes final costs more. 4. Increase in the cost of marketing has risen due to a stiff competition in the economy these days. Increase in the borrowing costs also contribute to a rise in the final prices. In India, the RBI has increased its key rates for a 12th time in just a period of 18 months, lately. This is done to tame the economic inflation. At the moment, the RBIs repo rate stands at 8.25%. But the borrowing costs are higher these days here. Banks lending rates are at more than 8% per annum. Thus, the credit facility is costlier and this again has made producers to halt production to some extent, cut production to some extent, etc and thus, the supply factor is also shaken to an unimaginable extent, indeed. Thus, the economic actions of the RBI have made it possible to hike the final prices as well.

CONCLUSION: After scrutinizing the authentic causes of the economic inflation in India, it is quite understandable that the causes are not beyond the control or out of reach. That is, taming of inflation factor is attainable persistently, only if the following statement of mine is satisfied: At least adequate number of economic agents or stakeholders concerned with the Indian economy need to be productive, in the best possible manner, persistently, passionately, and patiently. And I admit that this is one of the close-to-impossible things to occur in the mentioned way. A high rate of inflation in India is inevitable for many years to come.

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Indias structural problem of food inflation!

The problem of inflation is becoming high day by day. people are facing price rise in almost everything possible from shelter to food and from petrol to bread. Further, notwithstanding little moderation, the price of food inflation has revised persistently increased for almost a year, reflecting the huge gap in the supply and demand mismatches in various commodities. Apart from protein sources, vegetables and oilseeds also show such pattern. Giving the change in consumption pattern as well as yet inappropriate supply responses, food cost inflation is now becoming rising structural in the nature

Quality of Indian Population is quite bad. A relatively higher percentage of Indian population lacks social responsibility due to which lack of education, corruption and several other issues adversely affecting the economy are being experienced along with the india's structural problem of food inflation

Huge loss to the nation caused by several scams. It has been depicted that the national political scams have paved way to the huge loss bear by the common people these years. The average

man under the burden of inflation due to more scams has to pay higher income tax to compensate the loss. The problem of price rise and the indian structural problem also arises due to these scams and issues. student Food inflation in India is due to low productivity and improper storage. Therefore government must first create proper store houses for the existing produce and then focus on increasing the productivity to tackle the food inflation. Merely hiking the interest rates does not seem to be a good long term option to me. please share your views on this