ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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TECHNOLOGY-Precept and Practice

in inflation? Why don't the stocks disappear and utilisation rates go up as the aggregate demand in the economy is boosted by credit expansion? The answers to this are several: First, the price support programme of the Government and the easy availability of liquidity to hold stocks has in general led to one-way price expectations in the economy, so that the reserve price at which the surplus farmers and the businessmen are prepared to sell has gone up. Corresponding to this is the fact that the government seems to be unwilling to unload its food stocks to bring down the price level: otherwise, there is no reason why the prices of cereals should have gone up by 3.6 per cent between December 1976 and December 1977; if at all, the government should have used the stocks to bring down the price level in absolute terms from the high level it had reached in the periods of inflation. Second, while there are stocks of cereals with the government, and unutilised capacities in several sectors of the industry, there are still various essential consumption goods which are in short supply, e g, pulses and oil. One of the major sources of price rise in food articles has been the very large rise in prices of pulses (by about 67 per cent) in the last one year. Fruits and vegetables was another source of rise in prices. Therefore, when aggregate demand rises due to expansion in credit, there are always some essential commodities which are in short supply; the government, in principle, can meet these shortages by importing the commodities concerned. But clearly the government has failed to do this so far. The question is: Why? Is it because it has not thought about it? or because it does not have the administrative machinery? or again because there are more powerful reasons which involve offending sectional interests?

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