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How Government Curbed Soaring Inflation In India

How Government Curbed Soaring Inflation In India

RBI’s aggressive move to tame the soaring inflation in the nation seemed to have paid off as the WPI inflation had come down to 10.7% in September 2022 from its peak soaring form of 16.2 in June earlier this year. Saket Dalmia, President PHD Chamber of Commerce and Industry, said that the government and Reserve Bank of India’s calibrated efforts have significantly impacted the wholesale price escalation.

Although RBI undertook an aggressive move to tame inflation and raised the repo rate by 190 bps during the last 6 months to 5.9% to a measly 4.4% present in the month of May. But the finer detail of the whole process is that the GDP growth rate has also been maintained with a lesser deceleration as compared to many other economies which have been reeling under the pressure of inflation.

These crucial steps taken by the government were necessary to put a bridle upon the soaring inflation with a secondary aim of maintaining economic growth at around 7% in the current financial year 2022-23. According to economic forecasts reported by industry bodies, the CPI inflation would often fall below 6% by December 2022.

In the future, deductions in excise duties, especially in petroleum products, along with the establishment of petroleum products under the ambit of GST, with a profound strengthening of the global value chains and shifting sources of the imports from those of high-price foreign retailers to low price foreign retailers while making sure that hoarding of essential items is minimized to negligible would help in stabilizing the inflation trajectory within a targeted range ordained by the RBI.

Ways Governments Curb Soaring Inflation

Monetary Policies

Controlling the money supply in the economy is one of the easiest monetary ways to curb inflation in the economy. If the money supply goes down, the demand for goods will reduce, causing a price fall. Another way governments use it in dire conditions is to withdraw specific paper notes and coins from circulation. Lowering the lending rates also helps the government control the money circulation in the economy. The central bank can also block commercial banks’ money by issuing government securities.

Fiscal policies

Under fiscal policies, the government can change its tax rates to increase the revenue or manage the expenditure according to the circumstances in hand. Inflation is a situation of higher demand than supply. The government tackles the situation in two ways either by decreasing the expenditure and transfer payments, and increasing the tax rates leads to decreased individual demand and a drop in the economy’s money supply.

Some of the policies the Indian government undertook to bring stability to the price rise in the country.

  •   The reserve bank of India consecutively hiked the repo rates to control inflation.
  •   An excise tax cut on petrol and diesel and with a fall in the per barrel rate of crude oil, there would be a further reduction in the prices in India.
  •   Reduced the import duty on critical raw materials for the steel and the plastic industry, the reduced cost of production causing stability in the prices of the final goods.
  •   They permitted duty-free imports of 20 lakh tons of crude sunflower oil for the next two years.

The steps notified above have ensured that inflation has softened a bit, providing much-needed relief to Indian nationals. While excessive inflation is not a good prospect, a certain amount of inflation is necessary to ensure that the nation is headed the right way; plus, a certain amount of inflation is inevitable in a country with a high amount of developmental expenditure.

India is on the route to becoming a global player in the world with exports on the rise and local indigenous industries and its IT sector fulfilling demands worldwide; with such prospects up ahead, an investment carefully directed towards any industry of India would reap profound benefits. Let FDI India take charge of finding the best possible investment opportunities for you with their financial supervision and other services. With our support, ensure your future investments and income stream remain intact.


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