The main causes of rise in prices in India during the last few years are as follows
(i) Sharp Rise in Population Population has been increasing at a faster rate ever since 1951. Increase in population by 18 to 19 million every year means constant increase in demand for food stuff and other materials and thus help to push the Aggregate Demand upwards.
(ii) Rising Prices of -Imports During the last two-three decades, India has not been freely allowing imports. Rise in imports prices of raw materials, machines, etc. have increased the’ cost of production. This has pushed up prices and resulted in cost-push inflation.
(iii) Deficit Financing The government has frequently resorted -to deficit financing in order to tide over the gap between public revenues and public expenditures. A small amount of deficit financing makes fund available for growth of the country, hut a large amount results in demand pull inflation.