Wednesday, July 2, 2014

How to control inflation?


Article;
How to keep food prices down.

Comment;
In a supply constrained economy like INDIA where employment levels are near full and people are over-employed, production can not be increased, but in such a condition the external economy can help reducing /increasing demand/supply and reduce prices... This can be done in many ways, either we reduce import-duty on the items in which prices are volatile or/and increase export duty on the same items, or allow FDI in multi-brand-retail... The government so far has refrained from increasing export-tariff on food-products because that might make the domestic prices crash and cause loss to domestic investor who have invested in those products, farmers too. The government's attempt to crack-hoarding may be supplemented with the above measures... Decrease in import duty on selected items which are important from the point of view of inflation is likely to increase supply in the domestic market and prices will go down and increase in export tariff on same selected items will also increase domestic supply and prices will go down... Moreover, hoarders will be forced to sell their stock if they expect or see such an action from the government to reduce inflation... Cutting the middle man chain is equally important… FDI in multi-brand-retail will directly affect farmers’ income by cutting the middle-man chain... The government is concerned about domestic retail players but how we can forget that 60% (the majority) of INDIA’s population is dependent on agriculture for livelihood which is also good from the point of view of votes compared to the population engaged in the multi-brand sector... The Congress voted to power the second time because of MGNREGS for the rural area and the present government at the center should also seize the opportunity to increase their chances of wining next-time by allowing FDI in multi-brand retail which is expected to boost the rural economy. Improve in farmers income will increase demand and investment for other things and will push the economy’s growth-rate…

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