Price Rise And Its Effects Essay

Indian economy is one of the largest economies in the world. It isn’t surprising that India rank 11th in terms of nominal GDP (Gross Domestic Product) and 3rd in terms of PPP(Purchasing Power Parity). But this stupendous growth is accompanied by the emergence of new problems and challenges.

And one of the most grave of them all is that of price rise. There has been widespread uproar regarding the skyrocketing prices of commodities of daily use. Both the government and the citizens have been facing a hard time due to its inability to put a check on the rising inflation rates.


To analyze the causes we need to look at the internal and external factors. External factors include global inflation. For example, if an item is imported to India from some foreign country and its price rises, it automatically results in increased production costs in the Indian market. External factors can’t be controlled but internal factors can be. The economists hold the view that due to unprecedented growth in the purchasing power of the people the supply is unable to meet the demands, hence creating price rise in various sectors. Or in other words too much money is chasing few goods. Sometimes the cause may be natural. For example there is a steep rise in the prices of goods of agricultural sector whenever there are occurrences of droughts and floods which lead to shortage of food grains.

The other factor responsible for price rise is increase in production costs. For example increased wages for the labor will result in increased price of production. Besides these there are other causes such as hoarding. Recently onion prices reached new heights owing to the large scale hoarding creating artificial shortage. Also increased population has also contributed significantly to increased price. More population means more mouths to feed and more mouths to feed means increased consumption which inturn results in price rise (inflation).

A certain amount of price rise is inevitable in a developing economy because as income level rises due to newly created opportunities the demand increases. And since a large proportion of the people do not have basic necessities, so the money is spent rather than saved. This creates a direct pressure on the market to supply more goods. But above a threshold limit the price rise begins to have a negative impact on the economy.

Another reason for inflation is continued negligence of agricultural sector. The Indian economy has emphasized Industrial sector for too long but agricultural sector has been ignored ever since independence. Due to this, the supply of raw materials has not kept pace with the consumption.

The heavy taxation on industries has also added to the increase in inflation as the increased production cost reflects in the final price of the finished products.

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The increase in prices reflects directly in the lives of people. The increased price renders the poor unable to buy the goods of basic use .Indian economic model supports both capitalism and socialism. The increasing prices have a lasting impact on the lives of poor whereas the rich are usually unaffected by inflation. Especially those who have fixed incomes, for example, government employees are hit the hardest by inflation. The government provision of dearness allowances becomes insufficient for the new prices. The exports are also adversely affected resulting in imbalance in the foreign trade.

The rise in prices of goods results in wage-price spiral. Due to increased price, the labor demands higher wage which in turn adds to the cost of goods and thus forming a loop. This can create uncontrolled rise in price. The business planning is also affected by the increased prices due to uncertainty in the costs and prices


The foremost solution to stop price rise is increasing the supply. But sometimes increasing supply is not possible due to factors that can’t be controlled. For example unavailability of raw materials for production due to natural causes like floods. The other solution is to stop money from entering the market. This can be achieved by making people spend money in bonds by increasing the interest rates. Banks may increase the interest rates for loans to restrict the flow of money into the system. The corrupt practices like hoarding must be stopped to maintain a continuous flow of products. The taxation on the industries and imports must be controlled and kept reasonable to keep the final price under radar.

End Note:

Price rise is a serious problem that has to be tackled thoughtfully. The development of nation is restricted by inflation. New and innovative policies need to be implemented to counter this problem.

 Home » Subject » Essay » Petrol price hike and its effects on our day to day life

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Petrol price hike and its effects on our day to day life

Petrol has become an indispensable part of our day-to-day life, and we can’t imagine our life without it. But the petrol prices are sky rocketing, and it is eventually going to affect each and everything that we use in our day to day life. Poor people are already working hard to earn square meal a day and this hike is definitely going to paralyze these already-burdened people. Within three years petrol price has increased 10 times and is still increasing. It is nothing but adding fuel to the fire. Petrol hike directly or indirectly affects all the major sectors like transportation, textiles, auto, FMCG etc, for manufacturing & transportation. This affects the prices of daily essential commodities which are transported on a daily basis. Banking sector is also expected to suffer due to high inflation level.

Increase in fuel price will also increase in food price. This will have a more severe impact on poor people because poor households spend more than half of their income on food and only a tenth on fuel. It is a chain reaction once started will affect all. Increase in petrol price will increase the transportation cost, increase in transportation cost will increase in price of goods, and this increase in price of goods would gradually force the people to loosen their pockets even more, and so on like this, the chain will further propagate. These ups and downs push more people into poverty and leading to a more pathetic situation of those already poor. This has obviously sent shock waves to the common man who is trying hard to make both ends meet. Price hike affects only the low wages or fixed salaried middle class families as compared to higher wages salaried class. The existing middle class is squeezed and many of those striving to attain the middle-class standard find it persistently out of remit will bring no negative impact on government employees as their DAs will be increase accordingly. Rich and corrupted people are least bothered of it. Business class like auto-rickshaw drivers shall transfer the burden to common people so they are also safe. Common people if doing business shall also pass the burden to customers and chain reactions. The community that suffers the most is the common people or “aam aadmi”.

So what are we thinking? For the situation to get worse or are we waiting for such a heroic person who’ll bring us out of this situation. No, we, the people are the one to do something and control the situation. Stop blaming government and think how to solve it. We Indians import oil from different countries. We don’t have enough oil to meet our requirements. So we have to depend on import of oil. If there is increase in international price then we have to bear price hike in India also. Then value of rupee in comparison with dollar is becoming weaker in international market. Increase in number of vehicles also causes hike in petrol prices. So the thing we can do is to reduce oil consumption by using public transport for travelling to routine places like our office, markets etc. Use of high capacity transport system like train, ships instead of trucks and carrier vans. Use of cycles to go to nearby places instead of bikes or cars. Cutting off fuel supply or switching the engine off when traffic is halted for long. Developing alternate sources of energy like solar energy etc. Development of bio-diesel, and government should allocate more funds for developing alternate sources of energy as well as develop high capacity goods and public transport system.  At last but not least I want to say petrol is a natural resource and limited in nature. We have to use it judiciously so that our future generations can also use it, and thus lead to sustainable development. As someone has rightly said,

“Natural resources are not something we inherit from our forefathers but something we borrow from our children”

Priyanka Singh

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