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Essay On Indian People Vs Price Hike PDF
Essay On Indian People Vs Price Hike PDF
Bankers Adda: SBI PO: Essay on "Indian People vs. Price Hike"
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11/20/2014
Bankers Adda: SBI PO: Essay on "Indian People vs. Price Hike"
monopoly and business accession are two faces of the same coin. When a
big giant manufacturer takes over the business of several small enterprises,
the competitions in the market evaporate, precipitating back monopoly into
the market.
Price hike is akin to a viral disease which insidiously affects a larger section
of society and brings infrastructural annihilation. Apart from the direct
conundrums, it leads to a sudden drop in demand due to contained
purchasing capacity of buyers. The drop in demand is counter balanced by
drop in production which means drop in exigencies of variable factors of
production, e.g. labour, raw-material, running cost, etc. The drop in labourrequirement unleashes devastating unemployment and under-employment in
society. The capitalists face another species of problem simultaneously
where the expenditure on fixed factors of production remains equal to the prefall demand situation because the fixed factors cost are levied on
infrastructure, long-run investment, insurance premium, rent, etc. which are
inert to short-run aberrations in total quantity produced. Hence, it bolsters the
increase in Average Total Cost of production. This double faceted situation,
on one hand deteriorate the purchasing capacity of market while on the other
hand it incur loss of capital and thus lead to shut-down of factories in
financial crisis which in turn further aggravate the problem of unemployment
thus lowering further the purchasing capacity.
Trade deficit is yet another implication which is a negative effect of inflation
or the price hike where the domestic market gets dearer. It promotes imports
over exports which results in loss of foreign exchange. Besides, the
difference in imports and exports result in trade deficit. The price hike has a
good effect on an economy at initial level and under a comfortable zone of
2%-3%. It leads to growth in economy by increasing demand. Thus result in
employment opportunities. An economy toils to fend off the exaggeration of
inflation through monetary policies and fiscal policies. The central bank of a
nation is equipped with the tools like bank-rate, cash reserve ratio and bank
security. When the inflation crosses the level of ease to the level of
discomfort, the central bank of a nation, Reserve Bank of India in ours case,
increases the bank rate i.e. Repo Rate, Reverse Repo Rate and Marginal
Standing Facilities. This result in higher interest rate on loans which deter
public from taking loans whereas promote saving to attract higher interest
from the bank. In both the case, the cash is revoked from the market which
helps to resist the fall in real value of currency. The Cash Reserve Ratio is
required to be maintained by the commercial banks to the Reserve Bank of
India which also help in revocation of liquidity from the market. The bond and
securities sold by the Reserve Bank of India to the commercial banks is yet
another apparatus to revoke the liquidity from the market. Besides, the
government levies taxes of different forms to curb the inflation.
Price hike or the inflation is a necessary evil of a growing economy such as
ours which could be tamed through suitable and sustainable measures. The
efforts of economists have formulated several tactics to maintain the inflation
at the zone of comfort. The problem of price hike is a problem faced by
common people; hence it is the infallible duty of the Indian Government and
the Economists to bring it under control whereas it is the duty of the People
to proliferate the technical aspects of inflation among unapprised masses.
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