Increasing Inflation and its Impact on Indian Economy

In the past two decades, there have been many instances where the persistent increase in prices of onion, potatoes and other essential food items has led to the falling of the government in the elections; and the party assuring bringing down costs in 100 days had formed the new governments. It is generally agreed that moderate inflation is acceptable. Typically, monetary and fiscal economists opine that an acceptable moderate rate of inflation is desirable as it prevents stagnation, provides an optimistic outlook, helps mobilize resources, and boosts investment and production. In this regard, Tarapore Committee (1997) opined that 3 % inflation in India is acceptable, while Chakravarty. S Committee (1985) finds that an increase in the price of not more than 4per centt is acceptable, whereas Rangarajan. C (2012) regards 2 to 3 % of inflation as acceptable, and 5 % inflation as threshold inflation for India. RBI targeted inflation is 4 % with 2% variation on either side. Hence the acceptable range of inflation in India lies between 2% to 5 %. The continuous increase in prices or inflation causes the heart burn to majority of Indians as the Indian employment structure is tilted towards informal unorganized sector