In an article in Business Standard titled How to combat inflation , the author provides the simplest of solutions to tackle Indias problems for the short term.,

a. Allow a 10% appreciation in INR  (to USD/INR = 36) to quell inflation

b. Reduce Interest rates by 3% (to say 4% p.a)

 My Take : I wish the policy makers were this straight forward. They always want complicated untested methods employed like the below

a. Ban Rice exports

b. Subsidise maize imports

c. Cut Steel prices

All the above activities are naive and useless. I wish the policy makers knew,

“If the prices of volatile commodities are rising, and the prices of finished goods and services are rising at a slower rate than would be warranted by their commodity content (which is to say, the price of value added above those component commodities is not rising, at least not any faster than is considered normal), how does this resemble a balloon blowing up? Most of the balloon is not expanding.”

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