The supply-side in INDIA...

The current wave in economics is the Real-Business-Cycle-Theory which says that more money-supply is likely to reduce interest rate and improve supply and reduce prices in the long-run... however, inflation is expected in the short run due to full-employment and protectionary policies... It concentrates on increasing demand/supply and growth by concentrating on real variables rather than nominal variables... Lower interest rate would decrease prices in the long-run by lowering the borrowing cost... Higher interest rate would make the Indian companies uncompetitive because of the higher borrowing cost, however the US, for example, is capital rich... INDIA has comparative advantage in labor-intensive techniques because labor is abundant and wages are cheap. Exports would only be competitive if the industry uses more cheap labor than expensive capital-intensive techniques which save labor. Interest rates in INDIA are high compared to the developed-world which means INDIA needs to specialize in labor-intensive products...  Indians would benefit from labour intensive production functions, but if the borrowing cost is also low that would be an added advantage... Higher interest rate is not good for domestic investment... High rural-agri interest-rate cost is another big problem because of lack of proper credit facilities... Farmers borrow at higher rates form the local money-lenders...  

INDIA has a tight unemployment rate on which the supply-side rests too much... INDIA''s, both, high demand and low-supply-side are the reasons for higher prices for food... which increases wage-demand and prices depending on productivity (wages equals marginal product of labor) which in turn depends upon training and skills, they might have a correlation... Moreover wages also do depend upon inflation and inflation expectations... productivity also increases supply which may help keeping prices stable and lower interest-rate and increasing the economic-activity and growth... More public investment in training and skills is needed when the private-sector is constrained by higher credit cost... Low inflation and low wage demand would increase the economy competitiveness among peers... Skills and training might also help keeping prices in check by increasing productivity and supply... In order to boost productivity investment in skills development and innovation, through investment in education and research, are equally important.

FDI which increases employment in INDIA should be promoted, if the domestic investors are reluctant and cost is high... Agriculture is an employment-intensive sector in the country, it gives employment to close to 50% of the population, it is a major source of income in the economy... FDI in food-processing and retail would increase farmers'' income by cutting the middleman-chain by procuring directly for the farmers... Food-inflation is high in the country, more investment would cut supply-side bottlenecks and reduce inflation... 100% FDI in marketing of food products sourced locally is a major supply-side reform to reduce the prices of food items and improve farmers income. Companies can source directly from the farmer... It is the same FDI in multi-brand retail... 100 %... but, only in the food...  Deregulation and liberalization are not the same and sometimes liberalization might require better regulation...

Lower supply would increase prices... And, higher supply would reduce them (prices)... Look at the oil prices behaviour...  The world is going through excess capacity and therefore there is deflation... INDIA is supply constrained and slow trade liberalization has kept prices in a fix... After full-employment imports would help lower prices... It would also help shoot foreign demand... Income in the trading partners’ economy would go up... Imports are important for price-stability, demand, full-employment and growth and jobs... Interest rates are higher due to sticky prices or inflation... It also restricts domestic investment...