DMPQ: Inflation is a heavy tax and erode the purchasing power of rupees. Discuss the ways to control inflation.

Inflation is the sustained increase in the general price of goods and services and hence it reduces the purchasing power of Rupee. But some mild inflation is good for an economy as it help to grease the wheels of the commerce.

 

There are various ways to control Inflation:

 

 

Fiscal ways:  Reduction in taxes. Like cut on excise duties in the case of petrol.

 

Monetary ways:  Taken by RBI and it decrease the money supply through various means available like increase in the repo rate, open market operations by selling securities, Increase in CRR. Also sterilisation through government bonds transactions as in the case of MSB.

 

Supply side measure: Put ban on export of items to increase its availability in domestic market. Removing ban on import of goods is also one of the way.

 

Administrative:  Implementation of DE hoarding and anti black marketing measures. Wage and price controls can also be used.