Inflation should not be allowed to undermine purchasing power, overall economic stability

Inflation is a rise in the price of daily and common goods. For example food, clothing, transportation, etc. Due to inflation purchasing power and currency value for a country decreases. It affects every aspect of the economy from consumers buying goods and services, reduces shaving, investment, stock price, and overall country's economic prosperity. It also creates a problem for producers, consumers, policymakers.

Inflation is due to

1. Demand-pull Inflation: - when demand for goods and services succeeds the production capacity

2. Cost-push Inflation: - when overall cost increases like an increase in the cost of wage and cost of raw material then production cost increases results in a rise in the price of goods.

3. Built-in Inflation: - when price rises due to past events for example unplanned demonetization and implementation of GST or taxation results in a rise in the price of goods.

4. Due to covid-19:- World's economy is badly impacted due to covid-19, due to the slowdown and shut down of the economies, inflation increases. Inflation increases with the increase in the contraction of the economy.

As per retail price and industrial production official data report the economic condition is as

1. The rate of inflation is 5.52% in March

2. A rise in the price of imports cost

3. It also increases the cost of living and basic needs.

4. Increased risk of NPA creates the worst condition for the banking sector due to high uncertainty.

5. Economic instability, global economy 5.1% lower in 2020, India facing technical recession.

6. The manufacturing sector and electricity generator shrunk by 3.6%.

7. The price of fuel and food is on the higher side

8. There is a rise in the price of nutritional pulses, edible oil.

9. The demand and supply chain has been disrupted.

10. Poor and marginalized sections suffer mostly because of migration and unemployment, they are not able to feed themselves.

To control inflation we should focus on

1. Revive the economic activities such as Industries, tourism sector, entertainment, etc.

2. Increase demand and supply through maintaining liquidity in the market, for a healthy economic atmosphere.

3. Cut Import duties and give incentives for domestic producers. Provide incentives to revive economic activities and to boost it

4. Create employment by providing good training and skill development programs to the Youth.

5. Center and state collaborate and reduce the taxes.

6. Once after the end of the pandemic government should focus on Free trade which will help to improve the trade relation internationally, this move helps the economy to revive.

7. Government should focus on strengthening international relations.

8. The government policy for Atman Nirvar should be promoted by providing loans to small business houses. Easy norms for the loan will help to boost economic growth and control inflation targets.

9. Increase savings, use surplus budgets, stop repayment of public debt or postpone for sometimes, payment could be deferred.

10. RBI’s monetary policy committee can restructure cash reserve ratio, Statutory Liquidity Ratio, Repo Rate, Reverse Repo Rate through proper planning.

11. Policies should be modified to attract foreign investors. Attractive schemes and reform can help to boost FDI. This will minimize impacts on future fiscal deficits.

12. Government should give a Macro financial package.

13. Government should provide financial support to low-income group people. This will help in increasing participation in the micro-level economy.

14. Stop hoarding.

Conclusion:

By this analysis, we can find inflation should not be allowed to undermine purchasing power because inflation is like a hydra-headed monster that should be fought by using all the weapons at the command of the government.