Inflation, why? The INDIA's case...

Inflation happens due to scarce resources...  we need innovations to save resources... we need to investment more in education and skills... which will result in higher technology... To avoid inflation we need to operate with capacity above demand... no doubt we need more investment... but in the short-run we experience inflation because labor is scarce... full employment is our second objective besides price stability... and when labor becomes scarce then firms start competing for labor, and, wages and income increase which in a developing economy with supply side constraints result in overheating and produce inflation which the central banks tries to control by increasing interest rates. In the short-run the Central-bank needs to restrict demand because supply is almost fixed, especially in the case of agricultural products, the market takes time to respond, supply increases only with a lag. If the farmer expects higher prices he will produce more, but that incentive is missing in INDIA, because prices are fixed by the government because it buys the produce…We need to liberalize the agriculture, too ...  This is INDIA's case itself...