Role of RBI/Govt. in controlling the Inflation

Measures to Check Inflation

(i) Demand Side Measure

• In this category mainly, two types of steps are taken. Firstly, the consumers are appealed to cut back the consumption of the items which show higher inflation (called austerity). This step has generally failed across the world because it does not work in case of essential items (such as wheat, rice, milk, tea, etc.) and as people who have money, they don’t wish to cut down consumption.
• Secondly, the government may tighten flow of money in the system (known as monetary measure)—central bank making money costlier (by increasing repo rate, ....