Inflation has been gradually building up for the last one or two decades. It is not restricted to a few countries. It is a worldwide phenomenon. Its reasons and cases are so numbers that it is scarcely possible to write all of them down here in a short essay. At most, only a sketchy account of inflation can be given and that too in relation to Pakistan alone.
In addition to general reasons applicable to all other countries of the world, there are certain particular reasons also which added to the inflationary trend in Pakistan. The 1971 War, which paralysed the economy of Pakistani and brought misery to hundreds of thousands of people, is one of the major reasons. After this War, Pakistan currency had to be devalued sharply as an initial step towards rebuilding the economy. The 1973 floods in the Punjab and the Sind destroyed crops and property worth crores of rupees and took uncountable human lives. But this was not all. The sharp hike in oil prices proved to be as disastrous for our economy as the 1971 War. The result was that the prices of goods shot up to a new height, while the balance of payment reserves dwindled to their lowest ebb.
What is the remedy? Is it possible to arrest this run-away inflation? Well. different economists offer different remedies few have proved fruitful. The most common remedy suggested is that the production of goods must be stepped up so that they could be exported to earn the much needed foreign exchange. But with the goods being sent abroad, how to check the prices at home?
Others suggest that the government should decrease its investment on public works programme. During the period of inflation the government should raise the rates of both direct and indirect taxes. The wages should not be allowed to increase as this will intensify the effects of inflation. The government may adopt the policy of allowing the individuals to have a share of the essential articles at a relatively low price as the prices of essential commodities are fixed and their distribution is also arranged at those fixed prices.