Inflation is creating havoc in common man’s life today. The reason for inflation is quoted to be oil price rise in the international market which is an exogenous factor on which the government has no control. But there are a few reasons of our own too. Basically, the present inflation, which is driven by the prices of food grains, pulses, vegetables and fruits, is not a demand-driven inflation, but is the result of the failure of the government policy on the agricultural front to raise output. It is the supply constraint that has fuelled inflation. Overwhelmed by the GDP growth rates driven by high growth in industry and services, the government neglected agriculture; evident from the fact that public investment in agriculture stagnated at 0.4 per cent of the GDP. Also since the cost of production in agriculture is increasing, there is a need to increase the minimum support price for farmers. Recently, there has been a diversion of certain food grains towards the manufacture of bio-fuels. This has resulted in pushing up the international prices of food grains by over 80 per cent, thus raising the cost of imported food grains.

The growing opportunities in the IT and ITES sector has enhanced the lifestyle of nearly 40 per cent of Indian population. So there is too much money chasing few goods and people who can afford to win them and the common man suffers. The solution is to decrease the loans given by banks, increase agricultural production and bring down the slab for income tax.