INDIA and INFLATION

A million dollar question was posted yesterday on facebook '' petrol currently at 67 and Sachin R Tendulkar at 99 who will achieve century first". I really don't know, a big fan of Sachin thought  it's quite difficult,anyway that's not the point.  A theory of macroeconomics says that no country can simultaneously have high consumption as well as rapid growth. To control inflation we need to destroy purchasing power of the people of that country, I remember watching news on NDTV : our home minister Mr. P.Chidambaram explained to the  country  the root cause of inflation being people in rural India since they can afford to buy more.... i didn't even wait for him to complete this statement, at  that time i was unaware of that (-) ve sloped curve which signifies that with increase in   income demand increases and if machineries  are not in place so will be price. 

If i get a chance to meet the policy maker of the country i would really thank them for increasing the prices of petrol without considering there personal profit of gaining popularity in democracy.

Reason for that would be USA's tryst with inflation during the 70s. After the Iranian revolution price of oil rose from $14 to $34 per barrel as a result inflation in US rose from 6% to 14%  - that time Jimmy Carter was the president of the country he was left with two options :-

1. Lower inflation rate which had to go through increasing unemployment .
2. Introduction of expansionary fiscal and monetary policy  and risking stability of whole country.

After his decision Jimmy carter lost the poll but his decision was in favor of the country his successor Ronald Reagan did't do any different what Jimmy stood for and that's the reason US is not facing problem like Greece .

As Churchill once said    

"Democracy is the worst form of government, except for all those other forms that have been tried from time to time."

In a  free market a policy to reduce inflation must pay the price in huge unemployment and large GNP gaps. Conversely if a nation wishes to grow rapidly and enjoy low employment, inflation will  follow.

Since the situation is not that bad in our country some times our policy-makers take a decision rising above personal gain (votes) which no one in their right state of mind would . No one would like a govt. like the one  in Greece. A country can curb inflation temporarily  with wage and price control, but it will result in distorted price and economic inefficiency. My faith still lies in my democratic govt. its better to pay rather losing out opportunity to stay capable of paying.