Measures To Check Inflation
For Demand-Pull Inflation
- The government may go for import of goods which are in short supply— as a short-term measure (as happened in India in the case of ‘onion’ and meeting the buffer stock norm of wheat).
- As a long-term measure, governments go on to increase production to match the level of demand. Storage, transportation, distribution, hoarding are the other aspects of price management of this category.
For Cost-Push Inflation
Governments may try to cool down the price by cutting down the production cost of goods showing price rise with the help of tax breaks— cuts in the excise and customs duties (as happened in June 2003 in India in the case of crude oil and steel). This helps as a short-term measure.
In the long-term, better production process, technological innovations, etc., are helpful.
The governments may take recourse to tighter monetary policy to cool down either the demand-pull or the cost-push inflations. This is basically intended to cut down the money supply in the economy by siphoning out the extra money. This is a short-term measure.
In the long-run, the best way is to increase production with the help of the best production practices.
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