chapter  7
14 Pages

Prices, Inflation, and Money Supply

ByS. K. Ray

Hand in hand with the price spiral move the curves of inflation and money supply, or vice versa. In modern development-economics, no other problem has assumed greater importance than the triumvirate rise of prices, inflation and money supply. The delay in fulfilment of investment plans being equivalent to a lengthening of the gestation period of investment, the check to inflation was weakened. In India however the growth rate of money supply has gone up sharply over the years when the increase in national income has shown a downward trend. The drive against smuggling and black money was also launched, and the drive had an effect on the parallel economy, at least for the time being, run by speculators, hoarders, smugglers and profiteers. The forces of black market, black money and smuggling at this stage again started marshalling their forces, and becoming gradually more effective.