Various other methods of combating Inflation

  • Monitory Policy : Monetary policy is one of the most commonly used measures taken by the government to control inflation. It uses tools like – Bank rate, Repo Rate, Open market operations, etc.
  • Fiscal Policy : The two main components of fiscal policy are government revenue and government expenditure. In fiscal policy, the government controls inflation either by reducing private spending or by decreasing government expenditure, or by using both. It reduces private spending by increasing taxes on private businesses. When private spending is more, the government reduces its expenditure to control inflation. However, in present scenario, reducing government expenditure is not possible because there may be certain on-going projects for social welfare that cannot be postponed.
  • Price Control : In this method, inflation is suppressed by price control, but cannot be controlled for the long term. The historical evidences have shown that price control alone cannot control inflation, but only reduces the extent of inflation.