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Indian and Chinese Policies to Tackle Inflation

In: Business and Management

Submitted By fatima123456
Words 2383
Pages 10
Indian and Chinese policies to tackle inflation


India and china the two Asian giant, have shown economic growth in last few decades. The expansion of the economy brought high inflation in both countries. Inflation impacts all types of the consumers while rich or poor, it will become a real problem if the countries didn’t adopt policies to decrease the inflation rate. India and china have a very fast economic growth with fast population. The government and the central bank have to work beside to curb the inflation using two main policies are monetary policy and fiscal policy. In the monetary policy the central bank has to manage the many supply in the market and also control and decline the inflation, in terms of fiscal policy the government try to see the tax level to impact in the inflation rate. Monetary policy has more effect than fiscal policy, but also there are challenges implementations of the policies.

Argument 1(monetary policy)

India has faced a hyperinflation in years 2009 to 2011 to unprecedented level. The inflation in India affects the saving of the Indian household which decreased the value of saving in that nation. The monetary authorities are trying to impact the money supply directly without creating deformation in the economy by changes CRR (cash reserve ratio), repo and reverse repo rate. The main objective is to maintain price stability. The RBI (reserve bank of India) trying to control the money supply by using which called contractionary monetary policy that focus in decreasing the money supply, increasing the interest rate, declining in investment expenditure , declining in aggregate demand and then the price level will fall. To make the price fall the Indian central bank selling the securities through OMO (open market operations) also it raises CRR and SLR (Statutory liquidity ratio) and eventually raises bank ratio. This…...

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