The global economy is driven by two forces. The number of products and services that consumers demand is called demand.
The quantity of goods and services that farmers make available for sale to customers is referred to as supply. Maintaining a healthy economy requires consistent supply and demand. The name equilibrium is used in economics.
If demand increases more quickly than supply, there are less goods available to purchase. The people are prepared to pay more for the items. This causes demand-pull inflation, which raises the level of prices overall.
If the supply grows faster than the demand, more and more vendors will be willing to mark down the price. The overall price levels of the economy decline.
Cost push inflation is a type of inflation. A variety of factors driving up the price of raw materials can cause the cost of production to increase. Higher prices for the ultimate customers are offered by producers to protect their profits.
What is wrong with the economy?
India is caught between the devil and the sea. The country is experiencing inflation in two different ways. The economy has seen a rise in demand. Demand has begun to increase because of travel limitations. It can take time for businesses to grow their supply of goods. The increase in inflation has put more strain on our finances.
There are lots of forces working on the supply side. The supply chain has been affected by the COVID-19 epidemic. The cost of mobile phones, laptops, and other electronic devices has gone up due to the shortage of semiconductors.
The conflict between Russia and Ukraine has become more serious. Goods from Russia and Ukraine are exported a lot. This also includes oil, wheat, and rare metals. The price of oil has gone up since the outbreak. It is problematic because oil is necessary for transportation. All commodity prices increase when the price of oil increases.
Russia and Ukraine have stopped exporting wheat to other countries. We can see the results on our plates. Business practices have increased the cost of flour and related goods.
Similar shortages affect other goods around the world. The stock markets are reacting poorly to the evidence of this.
Who can save us in this situation?
Our problems have many root causes. Demand can be controlled by the Reserve Bank of India. Governments don’t have many tools to quickly repair the financial situation.
Unless the conflict between Russia and Ukraine is stopped and a regular supply chain is created, we might continue to experience high costs and unrest. We are aware of the issue, even though it may not be very promising.