BY EDWARD THEOPHILUS

Inflation has been defined by various economists in the past, and three definitions were in economics texts, cost push, demand pull and the third interpretation came from monetarists such as Milton Friedman in early 1960s and monetarists suggested charging a tax as an effective solution. The meaning of inflation could be regarded as an increase in prices of goods and services and the reasons for increasing prices may be contributed by the combine of many factors. As the ordinary people could see, inflation has been working when they go to market places through the increase in prices of goods and services. The inflation had been worked since it beginning of the world, and various dynamic innovation such as computers, mobile phones and internet services contributed to the increase in inflation in modern time. From practical experience, it could define inflation is contributed by modern products innovation, which attracts expensive input and there is no harm interpreting modernisation is also a contributing factor for inflation. However, modernization is a qualitative factor which is complicate to calculate.

Is there a permanent solution to inflation, accurate answer for the question is no, as long as the world is from now, inflation exists within different areas, pushing pressure to consumers. When it considers the various innovations of products and services, prices of such products subject to increase and such situation is contributed by various factors, sometime complicate to identify. Entrepreneurs produce new products and services using newly invented products and services which have an increasing trend of prices could be assumed as a reason for increased in prices.

Modernisation seems to be a contributing factor for increasing prices, but it is a qualitative factor that is formidable to calculate. The figures presented by various governments as an increase or decrease in inflation is not purely accurate and the methods are used in many countries-based on inflation calculation for the prices of selected goods and services may be political purposes or for guidance for the community. In this way, a change prices of selected goods and services might not be accurate for inflation calculation and it. Should go beyond because the prices of production factors are increased by a certain percentage in each year, therefore, it could conclude that inflation is impossible to remove from the world and it is not an easy task, but it could be controlled by policy actions of governments.   

Despite the potential problems in economic process, an increase in production and services could be used as a positive solution for controlling the inflation and the trend of increasing inflation in the world gives positive stimulation for demanding wages increase for trade unions, and it is also a survival strategy of trade unions. Various negotiations are going on between trade unions and the governments and firm owners, the reality of such negotiations might be further increase in inflation. The outcomes for the solutions for inflation are temporary and the struggle for an increase in wages is expanding, as seen in many countries is a positive encouragement for a further increase in inflation.

Modernization seems to be a major factor for increasing inflation as it sees that modernisation does means as innovating new products and services which can attract demand of consumers, however, modernisation associates with changing attitudes and a different way of thinking.  Without modernising, the world cannot go forward and innovations in various areas could not be eventuated. Despite the traditional definitions of inflation, it could manipulate a new definition as the influences of modernisation for the goods and services. Mathematical model development using modernisation may not be easier and, for a descriptive study, this factor is appropriate.

In Sri Lanka, policies for increasing production of goods and services have not given the priority and popular talks and gossips are expanding about the increase in inflation. Ordinary people need to understand that inflation is the display of prices of goods and services is going up, the major reason is the prices of goods and services are subjected to boost by the modernization.

The monetary policy of the central bank developed focusing on the control of inflation since its beginning, however, disregarding the potential problems and ignoring active policies for increasing production and services got away from monetary policy tasks. Promoting innovation in specific production as technology is necessary, sometimes, for controlling the increasing inflation. This means more production than manual would reduce the market price. In this environment, policy leadership cannot ignore the modernisation and its relationship with the technology. Therefore, the challenge for the monetary authority is to developing policies for improving the relationship with the technology and modernisation and to connect budget policies as a method of combine operation not as an alternative. In Sri Lanka, budget policy and monetary policy work as alternatives and the control of inflation distances with the modernisation. The budget policy should be developed for the interest of politicians to attract votes and implementation of monetary policy and budget policy is an arduous task because the operating style of politics. It may need encouraging the government intervention, to reduce many subsidies and saved funds from such actions reallocating to investment for modernisation.

This message should be given to people by politicians and government officers to educate the mass community for controlling increasing inflation. Policy analysts of the country have not yet begun open talks about modernisation and the solution for increasing inflation. The division of the community based political parties restricts openly talks on inflation control and it needs educating about the government policy on controlling the inflation.

Inflation could not eliminate from the world and developing policies to easily adapt to the inflation is the way as a practical technique to control the inflation.