The following steps have been taken to control price rise.
(i) Monetary Measures: The Reserve Bank of India takes the following monetary measures to control price rise:
It increases the Bank rate; i.e, the rate at which it lends money to the commercial banks. As a corollary, the commercial banks increase the rate of interest while lending money to their customers. The increase in the interest rate curbs the tendency to borrow money and invest the same in speculative ventures.
The increase in the rate of interest on the deposits encourages the consumers to invest their surplus funds. Thereby surplus funds go out of circulation. The tendency to make unnecessary purchases is curbed. This reduces the demand for the goods. The Reserve Bank withdraws surplus funds from the market by selling the government securities. It increases the Cash Reserve Ration and reduces the availability of funds with the commercial banks.
(ii) Fiscal Measures are taken by the government to control price rise. These are: The government reduces the public expenditure, postpones plans involving heavy expenditure and curbs wasteful expenditure. It increases the level of existing taxes and imposes new taxes and thereby reduces spending capacity of the people. It borrows money from the market, private individuals and institutions. Thereby, it curtails excess purchasing power and demand for goods and services.
(iii) Control on investment is a direct step to curb price rise. It encourages productive investments in agricultural and consumer goods industries. Thereby the supply of food grains and consumer goods in increased. At the same time, it discourages speculative investments.
(iv) Price Regulation and Rationing was introduced in India for the first time during the Second World War and continued till 1972, when India became self-sufficient in production of food grains. The price control continues even today. Essential commodities are mad available to the weaker sections through the public distribution system of the society. For this purpose a chain of Fair Price Shops has been set up. The government gives subsidy of food grains, petroleum products and gas to keep prices under control.
(v) Administered Price Mechanism the government has made it obligatory for all the manufacturers to state the MRP (Maximum Retail Price) on their products, which are inclusive of all taxes. Essential Commodities Act, 1955 lays down the level of stocks to be maintained and their display. The traders are required to maintain stock registers. Any disparity between actual stock and that mentioned in stock register attracts punishment.
Test
Gaurav Seth 5 years ago
The following steps have been taken to control price rise.
(i) Monetary Measures: The Reserve Bank of India takes the following monetary measures to control price rise:
It increases the Bank rate; i.e, the rate at which it lends money to the commercial banks. As a corollary, the commercial banks increase the rate of interest while lending money to their customers. The increase in the interest rate curbs the tendency to borrow money and invest the same in speculative ventures.
The increase in the rate of interest on the deposits encourages the consumers to invest their surplus funds. Thereby surplus funds go out of circulation. The tendency to make unnecessary purchases is curbed. This reduces the demand for the goods. The Reserve Bank withdraws surplus funds from the market by selling the government securities. It increases the Cash Reserve Ration and reduces the availability of funds with the commercial banks.
(ii) Fiscal Measures are taken by the government to control price rise. These are: The government reduces the public expenditure, postpones plans involving heavy expenditure and curbs wasteful expenditure. It increases the level of existing taxes and imposes new taxes and thereby reduces spending capacity of the people. It borrows money from the market, private individuals and institutions. Thereby, it curtails excess purchasing power and demand for goods and services.
(iii) Control on investment is a direct step to curb price rise. It encourages productive investments in agricultural and consumer goods industries. Thereby the supply of food grains and consumer goods in increased. At the same time, it discourages speculative investments.
(iv) Price Regulation and Rationing was introduced in India for the first time during the Second World War and continued till 1972, when India became self-sufficient in production of food grains. The price control continues even today. Essential commodities are mad available to the weaker sections through the public distribution system of the society. For this purpose a chain of Fair Price Shops has been set up. The government gives subsidy of food grains, petroleum products and gas to keep prices under control.
(v) Administered Price Mechanism the government has made it obligatory for all the manufacturers to state the MRP (Maximum Retail Price) on their products, which are inclusive of all taxes. Essential Commodities Act, 1955 lays down the level of stocks to be maintained and their display. The traders are required to maintain stock registers. Any disparity between actual stock and that mentioned in stock register attracts punishment.
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