BOOM

A strong upward fluctuation in the economic activities is called boom.79 As economies try to recover out of the phases of slowdown, recession and depression at times the measures taken by the governments as well as the

private sector might put economic activities as such which the economic systems fail to digest. This is the phase of the boom. The major economic traits of boom may be listed as given below:

(i) an accelerated and prolonged increase in the demand;

(ii) demand peaks up to such a high level that it exceeds sustainable output/production levels;

(iii) the economy heats up and a demand-supply lag is visible;

(iv) the market forces mismatch (i.e., demand and supply disequilibirium) and tend to create a situation where inflation start going upward;

(e) the economy might face structural problems like shortage of investible capital, lower savings, falling standard of living, creation of a sellers’ market.

The phase of recovery is considered good for the economy and it reaches the stage of boom which is considered better. But the boom has its negative side also. Boom is usually followed by price rise.80 As a boom is a strong upward fluctuation in an economy, the supply-side pattern of the economy starts lagging behind the pace of the accelerated aggregate demand.81 But the dilemma of recovery puts every economy on the path to boom—this has been the experience in the developed world during the 1990s, especially in the US economy. The same scenario developed in India after the economy recovered from the recessionary period of 1996–97 by the year 2002–03 when the rate of inflation peaked to almost 8 per cent for a few months. Majority of the experts felt that Indian economy at that time was passing through a phase of boom and we have seen how the government has been facing difficulty in containing inflation around the 5 per cent mark. Even the government accepted that the economy was over-heating by mid-2007. The symptoms of overheating are as follows:‌

(i) There is a downturn in the aggregate demand on overall fall in the demand;

(ii) as demand falls, the level of production (output) in the economy also falls;

(iii) as producers cut down their production levels, new employment opportunities are not created—thus employment growth rate falls;

(iv) as demand keeps on falling, usually producers start cutting down their labour force to adjust their overhead expenditure and the cost of production (labour-cut is not ‘forced’ here but, ‘voluntary’)—resulting in increase in the unemployment rate;

(v) if the government fails to rescue the economy from the phase of recession, the dangerous stage of depression remains the logical follow up;

(vi) the rate of inflation always remains at lower levels—discouraging new investments and lending.