Money on the markets

A maturing market amid the mayhem

Why should the government control inflation?

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INDIA-ECONOMY/FINMIN

The ‘reform agenda’ understood as ‘market-oriented reform’ or giving more space to market mechanism in food and fuel economy seems to have been held up.

The government can not be seen to be doing away with subsidies just as prices are up. Its hand is stayed for now.

But is that enough for say the gross national happiness?

Food and fuel inflation has been in the news for a while.

The government has no short-term control over supply side issues causing price rise like a bad monsoon leading to a low harvest or floods, but it can control the rising demand by reining in liquidity.

It is guarded on doing so for fear of stifling growth.

Is that fair to the poor?

Prolonged inflation redistributes income in favour of the rich (who possess non-monetary assets) as the value of money, whatever little of it may be held by the poor, goes down.

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