India’s food production crossed 235 million tonnes during years 2010-11 as per the latest estimates and this is the highest since Independence. The previous highest production, at nearly 233 million tonnes, was achieved in years 2008-09. Agriculture recorded a 5.4% growth in years 2010-11 compared to the 4% growth achieved all these years, according to S Ayyappan, Director-General of the Indian Council of Agricultural Research.

However, inflation reflects overheating: the supply capacity of the economy is simply unable to match the demands on that capacity. Moreover, purchasing power of consumers is increasing and hence demand is accelerating. Minimum Support Prices (MSPs) for agriculture have also been increasing. The MSPs for various varieties of paddy during the years 2009-10 was between ₹ 950-980 per quintal and during the years 2010-11, it increased to ₹ 1000 to 1030 per quintal.

Moreover, for pulses such as Arhar and Moong the MSPs in years 2009-10 was ₹ 2300 and ₹ 2760 respectively, while in years 2010-11, it increased to ₹ 3000 and 3170 respectively. Another major cause of inflation is the increase in the prices of fuel internationally, which is contributing to the overall price inflation. There has been a steady increase in the international prices, with the Indian crude basket priced at $11 3.09 per barrel, as on May 2011. Any change in price of diesel immediately impacts price of food items, since most of them are dependent on transport through several 100 km. Inflation, in short, is “too much money chasing too few goods”. According to analysts, corruption, mafia operations, greed for money by politicians and industrialists, counterfeiting of currency notes etc., also contribute to corruption as they add to the availability of liquidity in different forms, which in turn adds to inflation.

High level of inflation distorts economic performance. It has added pressure on the Central Bank to raise rates despite signs of slow growth in the Indian economy. Thus, high inflation and rising interest rates are crimping domestic demand and slowing down the economy. Inflation also affects investment as higher long-term inflation adversely affects growth and investment. High inflation is pushing up the cost of credit for firms as well as escalating their input costs by inflating their spending on raw materials and wages. Corporate investment is affected by cost escalation of inputs, and inflation is waning the confidence in the economic growth.

Inflation Essay Word Meanings for Simple Understanding

• Output – the material produce or yield, product
• Escalating – to increase something in extent
• Accelerating – to cause faster or greater activity, development, progress, advancement
• Crude – lacking finish, polish, or completeness
• Counterfeiting – made in imitation so as to be passed off fraudulently or deceptively as genuine
• Distort – to give a false, perverted, or disproportionate meaning to, misrepresent
• Crimping – to check, restrain, or inhibit; hinder
• Escalation – increase in intensity, magnitude, etc
• Waning – decreasing in strength, intensity, etc
• Revival – restoration to life, consciousness, vigour strength, etc
• Nefarious – extremely wicked or villainous