Text by : Parivash Nadeem, Rawalpindi
Inflation is the rate at which prices of selective goods and services increase over a period of time resulting the decrease in purchasing power of a nation’s currency. As the prices increase the money buys less and so living standard of people decrease. It is also explained in a way that inflation occurs when the government prints out too much money that it loses its value. It affects the entire economy.
It has always been believed that poor and illiterate people are affected more by the inflation since it is the worst of all taxes. On the other hand, rich and sophisticated people are not much harmed by the inflation because they have rest of the options available for example they have finance to invest in other businesses and property, can find a suitable job for themselves and can extend their existing business further. People solely dependent on the pensions or having a fixed income job face a lot of problems coping with the inflation.
There are basically three types of inflation,Creepy inflation: It is the type where rate of inflation does not increase than the production growth.
Galloping inflation: Opposite to Creepy inflation because inflation rate increases than the production growth.
Hyperinflation: It’s the type where prices increase highly as the currency loses its value. It’s the condition often known as “out of control situation”.
Inflation is basically caused because of many reasons out of which one is “Demand-pull inflation” and the -other is “Cost-push inflation”.
Demand pull inflation is a situation when demand for products increase but the supply does not. Secondly, when gross domestic product (what people earn and consume within one country) rises and brings unemployment with itself. While Cost push inflation is a term that describes when the cost of important goods and services like lifesaving drugs increase and there’s no alternative.
Inflation can occur due to many other reasons like national debt because when the debt increases the government can pay it back through two ways, Firstly by applying taxes and secondly, by printing more money to pay off the debt. Exchange rates also cause inflation like if the currency of Pakistan gets less valuable then this will make foreign goods more expensive for Pakistan.
Sometimes inflation is good for the people when mild because when people expect inflation to be coming, they spend now rather than later knowing the price of this certain good will be increased soon. This helps in economic growth.
Inflation affects the people having fixed income where the nominal income remains same but the actual value of income decreases. Due to inflation people take more loans to meet their day by day expenses and they start using their savings if any to bear expenses. Purchasing power of wages decrease and a big amount of money can then be able to buy a few goods and services.
Due to inflation people prefer buying alternate and potential products than the actual and real product. The buying structure changes since people are more inclined towards buying cheaper products. Inflation increases the prices and makes economy less efficient.
Inflation with itself brings other negativities in the society as well like thefts, robberies, snatching, street crimes, people start giving more importance to money than the humans. It increases the suicide rate. Nowadays when the rates of everything be it fuel, food, taxes, fee, and rents have increased to an unbearable level, people have become impatient and wrong-doings have been encouraged. People who do not have their own transports used to travel through taxis now have complaints that the fares have increased due to the increased fuel rates. The government has given subsidies on several goods and services yet they’re barely affordable. People having fixed income like pensioners, interest and rent earners are more likely to look up for part time jobs to meet expenses. One of the reasons of high inflation rate in Pakistan is the overpopulation. Population of Pakistan was 197 million in 2017.
Things which need to be done to make people capable of fighting against inflation are going to be discussed. Unlike China Pakistan can not make the policy to kill the third child of any family being a resident of Pakistan since we are a Muslim country so we should guide people especially in rural areas by setting up the clinics in order to control extending population.
More and more employment opportunities should be provided to people so they can fight back inflation. Technical and mechanical training centers and courses must be established so even the illiterate sample of the country gets some skills and compete in the changing economy. Education should be made mainstream and at least the fee structure should be reduced so to educate more areas of the nation to make them capable of earning a good amount. Steps should be taken to make nation specialized in making best goods and services instead of relying completely on imports, a push must be given to our exports to earn a good amount and avoid taking debts like in Pakistan we have a strong agriculture system and have suitable weather to maintain it so more opportunities, technology and machinery should be provided to rural areas where peasants can perform agriculture related tasks meeting international standards. Saving policies and methods should be encouraged among people like by issuing prize bonds.
Besides the above, what else that can be done to control inflation are that the government should set wages ceiling it’s that they should manage wages and prices, it is done by state income policy.
Secondly, the government should stimulate market competition that can be done by discouraging monopolies (only one seller specialized in making a specific and rare product), it is done through antimonopoly regulations.
Thirdly, Fiscal and Monetary policies should be made like central banks should set up required interest rates.
If suitable methodologies attempted then inflation that’s the cruelest of all taxes can be controlled at the grass root level.