Social Scientist. v 3, no. 30-31 (Jan-Feb 1975) p. 57.


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R RADHAKRISHNA ATUL SARMA

Distributional Effects of the Current Inflation

A mild dose of inflation, it is claimed, stimulates capital formation in developing countries. Even so,the inflationary process that has been afflicting the Indian economy particularly since 1967-68 has assumed proportions far in excess of anything mild or moderate.In the last two years a runaway inflation asserted itself and the rapidity of its pace put policy-makers on the defensive, forcing them to take certain desperate steps in recent months. Behind the counter-inflation measures lurk an implicit assumption that price rise hurts the rich and the poor alike. It is the purpose of this article to examine the impact of inflation on the different classes and the distributional distortion it has engendered.

The incidence of price intensity on the different income classes is put in the perspective of the price movements for ten commodity groups during 1951-74. The data used and the methodology adopted for this study are discussed in the appended technical note.

Price Movements

Generally speaking, both for the rural and the urban population, agro-based commodities such as cereals, pulses and edible oils constitute the mass consumption commodity groups. The movement in prices of these commodity groups is an indication of the impact of inflation on the consumers. Weighted price indices for ten commodity groups with base



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