anti-inflation

Talking about the rising inflation, Finance Minister P Chidambaram said that the rate of inflation, which has accelerated to near three-year highs in recent weeks, will moderate over time as the impact of fiscal and monetary measures kick in.Now how does the control on inflation works?There are two measures to control inflation- monetary and fiscal.Monetary measures include expansion and contraction of money while fiscal measures deals with the Government's policy related to the expenditures and taxes.et us talk about the fiscal measures first.
The commodities in which India is having a comparative advantage (incentives provided to the country by the means of opportunity costs), it will export them like tea, coffee, iron-ore and other heritage rich products. And, similarly India will import commodities from other producers who have a lower cost of production like oil seeds, rice and other agricultural products. The main concern to India at present is to provide the basic necessities of food, clothing and shelter. With soaring food prices, there is a disequilibriun between the availabilty of the food and its rationing
Imports slash down the prices of the commodities in the domestic country as the similar good is produced at a higher cost providing the consumers a surplus.India nearly imports all the essential commodities like edible oil, food grains etc from other countries. An increase in prices in one country leads to an increase in prices in other countries as well by the tools of exports and imports.This kind of situation is often described as 'exported inflation' assuming that the currency rate does not change.Likewise, India is also experiencing the same, which is very common with the countries importing essential commodities.Encouraging imports and discouraging exports shifts the aggregate demand of the commodities towards right, which means that the aggregate demand rises with an increase in imports.