Inflation means the rise in the prices of goods and services over time. When inflation increases, the value of money decreases, which means we can buy fewer things with the same amount of money. For example, if one litre of milk cost ₹40 five years ago, and now it costs ₹60, this extra ₹20 is due to inflation.

Causes of Inflation

1. High Demand – When people demand more goods than what is available, prices rise.

   Example: During festivals like Diwali, the price of sweets and gold increases because everyone wants to buy them.

2. Less Supply – If production falls due to bad weather, strikes, or lack of raw materials, prices rise.

   Example: In 2022, the price of tomatoes in India went up to ₹200 per kg in some states because crops were damaged by heavy rains.

3. Increase in Production Costs – If fuel, electricity, or labour costs rise, producers increase the price of goods.

   Example: When petrol prices rise, the cost of transporting vegetables also rises, so shopkeepers sell vegetables at higher rates.

4. Global Factors – International events also affect inflation.

   Example: The Russia-Ukraine war in 2022 increased wheat and oil prices across the world, and India was also affected.

Effects of Inflation

• On Common People: Inflation makes daily life difficult. A middle-class family has to spend more money on food, rent, and education.

• On Savings: The value of money saved in banks decreases. For example, if inflation is 6% but your savings earn only 4% interest, you are actually losing money.

• On Economy: A moderate inflation rate is normal for growth, but very high inflation (called hyperinflation) is dangerous.

How to Control Inflation

• The Reserve Bank of India (RBI) uses monetary policies like increasing interest rates so that people spend less and save more.

• The government can also reduce inflation by controlling hoarding, improving supply chains, and importing goods when needed.

• People should also avoid panic buying, which increases demand unnaturally.

Conclusion

Inflation is like a slow fire—it reduces the value of money day by day. It cannot be stopped completely, but it can be controlled with wise policies and responsible behavior. By keeping inflation under control, India can ensure economic stability and a better life for its citizens.