NEGLECT OF POPULATION AND PRICE MANAGEMENT IN INDIA: Population and money income are sources/causes of demand for goods and services in the markets Population is a primary cause of demand. In case, population is constant and money income is increasing, initially demand may increase proportionately for some time and start declining, thereafter, obviously because propensity to save increases with increase in incomes. In case, population increases and per capita income is either constant or declining, demand will still increase at the cost of saving Thus, inflation can not be controlled merely by controlling money supply increasing rate of interest, promoting saving and increasing rates of direct taxes, population being a primary cause of increase in demand will have to be controlled. Options available in the circumstances as such are (1) either control population (2) or live in poverty. Politically motivated transfer of wealth from one class of people to other class of people beyond a limit will cause class war and anarchy. Stage- 1- Increase in population causes increase in production and money supply comparatively at a higher rate. Additional population/ work force may be employed productively with deployment of the un-utilised non-human resources. No problem of inflation. Stage- 2 – Population, production and money supply increase more or less at a same rate. No problem of inflation. Stage- 3 – Rate of increase in population is high. Rate of increase in over all production is higher than the rate of increase in population. An economy may still face the problem of inflation due to non-participation of the unemployed population in production process and stagnant supply of wage goods which generally does not increase in proportion to increase in over all production in absence of planning in free economy. Prices will equilibrate demand and supply with exclusion of the unemployed population. Stage- 4 –Rate of increase in population is higher than the rate of increase in production. Active role of money declines. Increase in money supply for incurring higher expenditures in social sectors might win votes for the politicians, but it will be very difficult to contain stagflation. Indian style of secularism which does not promote population control is against good economics and good politics.
Posted on: Sat, 08 Jun 2013 09:25:11 +0000
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