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 base year every decade, from 1950-51 to 1960-61, later to 1970-71 and finally to 1980-81.
Deficit financing in every five year plan and improper planning led to a 40 percent rise in food grains, 45 percent in cereals and over 70 percent rise in pulses during 1961-1966. The country was in the grip of a galloping inflation. This with 1950-51 as the base year.
Keeping 1960-61 as the base year, the Fourth five year plan save the price index at an all time high of 331 in September 1974 (with 1961-62-100). This was due to a combination of several factors, the primary being the influx of refugees in large numbers from Bangaldesh and the expenses incurred by the government on them, failure of Kharif crops in 1972-73 and complete failure to take over the wholesale wheat trade. The declaration of Emergency in June 1975 resulted the arrest of price rise and a steep fall in inflation and prices of commodities.
Unfortunately, political upheavals, callous bureaucracy and an equally callous inflationary budget by the Finance Minster Mr. Charan Singh in 1979 brought all the good work reduced to nil and inflation back to an all time high, and the