Question
Which of the following issues are the reasons behind
the inflation in Indian Economy?Solution
Inflation in the Indian economy is due to supply side issues and the inefficiencies inherent in production and distribution. For example, · Lack of efficient supply and distribution network for agriculturalcommodities · Lack of post-harvest infrastructure and facilities like cold storage, cold chain, refrigerated van etc. which help in reducing post-harvestwastage · Price differential between farm gate and consumer due to unorganized retailsector This means that policy should not be focused on aggregate demand, but rather on overcoming capacity constraints and productivity deficiencies.
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