India Inflation Essay Example | Topics and Well Written Essays - 500 words

India Inflation - Essay Example High rates of inflation can have serious consequences for the economy in general. Therefore, for governments all over the world, reducing movements of prices to a minimum is seen as a primary economic objective. A wide variety of economic literature deals with the effects of inflation. The most widely discussed outcome of inflation is unemployment. In price-sensitive markets, rising prices result in businesses losing sales and thus reduced turnover. This ultimately affects employment as the firms engage in cutting manpower labor to reduce costs. Additionally rising prices during inflation create unrest amongst labor. Inflation encourages employees to demand higher wages in order to maintain their current living standards. The worst hit during inflation is the fixed income groups like pensioners. An increase in wages during inflation can fuel an additional increase in product prices. This results in a vicious circle of increased wages further increasing prices which in turn would push up the wages again. In economic terms, this 'wage/prices inflationary spiral' can have disastrous effects on any economy. (Worthington & Britton, 1997) Depreciation in the monetary value results in falling purchasing power and wipes out the past savings.