ESSAY ON INFLATION

ESSAY ON INFLATION

                                  INFLATION

                                                                                                                                (560 words)
OUTLINES:

• INTRODUCTION
• LEADING CAUSES OF INFLATION
• FRAGILE ECONOMIC POLICES
• HOARDING, DISHONEST ATTITUDE OF TRADERS
• STEPS TO CHECK INFLATION
• CONCLUSION

Inflation refers to a continuous, general increase in the price of goods and services. Rise in prices is called inflation. Inflation at very fast rate is Hyper-Inflation, medium is Strato-Inflation and low lever is Creeping inflation. During the recent years the rise has abnormal and it has endangered the stability of our economy nationally and individually. In Pakistan inflation has become an
unending disease to our economy. Once a state is caught in the circle of inflation then it will be difficult for that state to get rid of it.

There are various factors that contribute to the rise in prices. Some are natural factors like unfavorable weather conditions which affect the food production and lead to the shortage of commodities in the market. With more money chasing fewer goods, the prices take to the wings. Besides this natural problem there are man-made problems like hoarding which contribute to the rapid increase in prices. The trading community which senses a shorting of certain commodities, especially the essential commodities, they resort to large scale hoarding. They release the hoarding products after increase in the prices and make a neat margin over
their investment in the hoarded products. They get so much profit but it waters inflation.

The rise of prices in Pakistan can also be attribute to the despicable acts of traders. Their only motive is to get maximum profit and so they try to charge lots of money from the customers as much as possible. This has created a class of people who are becoming richer day by day and the other class is becoming poorer. Hoarding is also playing a bad role in escalation of prices in the commodities

One of the most important reasons for inflation is the deficit budgeting. In order to cover the gap Pakistan has been printing more paper currency because foreign aid and taxes can not cover up the deficit. Therefore there will be greater circulation of paper money. There will be hike in prices of domestic used products as the purchasing power of the people has increased. Wrong taxation policy has also been responsible for the rise in prices. The hike in taxes results in greater desire to avoid taxes. Thus public takes wrong way of not paying taxes and there will be escalation in prices.

Pakistan’s government has been making a great effort to check this inflation. The rate of interests has been increased in order to encourage savings and withdraw of currency. The government is making efforts to increase industrial outputs so that the level of consumption is leveled with that of output. But unfortunately the government has not met
with success in getting rid of inflation.

The rise in prices goes non-stopped, some suggest that there should be demonetization of currency, but the government
thinks that it is an irregular method and will create doubts in the minds of the public about the stability of the government. The rise in the prices of petrol has affected the prices in our country. Pakistan is not producing more than 20% of its total requirement of oil. So we have to import a huge amount of oil every year. Moreover no step has been taken against the traders who are
mainly responsible for unreasonable rise in the prices.