The third wave against the government and the challenge of controlling the tide

- The whole of economics: Dhawal Mehta

Defeat of UPA government

Uncontrolled price hikes overthrow governments. To avoid this, some literary institutes do not talk about cultural (Hindu) nationalism. People have not made an impression on the Hindu nation. We want them to be a happy and prosperous nation. The unbearable price rise against the Government of India is similar to the potential threat of Kovid-2. It may be recalled that the UPA-2 Congress-led government was ousted in the 2014 elections due to a 9-10 per cent price hike.

price rise

The word inflation for price increase seems Congo. It is not clear what caused the inflation. India has adopted a 'flexible inflation targeting' in terms of inflation. The government has accepted the principle that inflation in India will be in the range of 4 to 5 per cent instead of a fixed inflation figure. But last month (in May), the annual retail price hike in India broke the 6 per cent ceiling and reached 7.5 per cent. Roti riots start in the country reaching 9 to 11 percent. In India, the worrying figure on wholesale prices has reached 12.5 per cent. This percentage is the highest in the last twenty years.

Growth vs. Stability

The current price hike has broken its upper 5 per cent ceiling. In the case of inflation, every government is concerned about encouraging lending to companies to develop the country's economy or reducing lending to companies to control inflation. This is called the dilemma of inflation versus growth. Of course, the Modi government still has three years to work, so despite the unbearable price hike, it will not shake the power of the current government. But the price hike could have a detrimental effect on the upcoming state elections. Let's see what happens in UP elections.

Cost-push inflation

The current price hike is not demand driven. On the contrary, market demand has declined in many areas. The main reason behind the current price hike is the decline in production due to Kovid-2. There is a well-known rule in economics that if demand increases but supply does not increase in proportion, prices rise. We all know that during the wave of Kovid-2, the prices of oxygen and Kovid's medicines skyrocketed. The government has imposed heavy taxes on petroleum and its products.

Petrol-diesel prices have reached close to Rs 100. The prices of almost all consumer goods used for the transportation of people and goods will go up further. This is called 'cost-push' price hike. This increase is not 'demand-driven'.

Financial Instability

Remember that India's economic growth was slow a year and a half ago before the Kovid epidemic broke out in India. India's FA of 2030-2021. In the year ended March 31, 2021, India's economic growth rate has been negative at 7.5 per cent. Even after that, the economic growth rate has not increased much. However, why is the Indian stock market throbbing with high prices? In times of recession, stock market prices should go down. There is no denying the possibility that this serious discrepancy between the real economy and the financial economy will burst the stock market bubble at any time.

The imbalance between the real economy and the financial economy does not last long. This situation is called financial instability which does not last long. Bubble bursting brings both factors into harmony.