Topic: Inflation and Employment
Q6. Identify the causes and consequences of cost-push inflation in India. What structural reforms are required to address it? (15 M)
Difficulty Level: Easy
Reference: InsightsIAS
Why the question
Cost-push inflation has been a recurring concern in India due to food and fuel price shocks, making it important for understanding macroeconomic stability and policy limitations.Key Demand of the question
The question requires identifying the structural and external causes of cost-push inflation and explaining its macroeconomic consequences. It further demands outlining long-term structural reforms rather than short-term policy tools.Structure of the Answer:
Introduction
Briefly define cost-push inflation with Indian context and highlight its increasing relevance due to supply-side constraints.Body
- Causes of cost-push inflation: Focus on supply-side factors such as input costs, supply disruptions, or external shocks.
- Consequences: Explain its impact on growth, purchasing power, and macroeconomic stability.
- Structural reforms required: Suggest long-term supply-side and institutional measures to address persistent inflation.
Conclusion
Conclude by linking structural reforms with sustainable price stability and inclusive growth.
