Agricultural Productivity and Inflation – The Economic Transcript – Beragampengetahuan

Assume that in this case, monetary policy would reduce demand to reduce inflation: If supply-side improvements aren’t made which would allow for future increases in food supply at a fixed price, inflation is certain to return as demand increases and growth picks up. We would have started over from scratch.

There is no other option except to take action on the supply side if inflation, in the long run indicates an inadequately elastic supply of food or one that cannot quickly expand output in response to an increase in demand. We have a perfect example of how, in the middle of the 1960s, we drastically changed the agricultural supply side of India. We have never experienced a food shortage since then because of the Green Revolution.

In actuality, the policy of consistently boosting minimum support prices causes inflation by nature. A policy that supports the expansion of agricultural yield is what is required. Even if prices dropped slightly, farmers would still benefit from increased produce.

The economic policy pays no attention to the rising food inflation in India. Following the economic changes of 1991, the justification for policy changed, giving the private sector greater prominence. This is not a problem in itself. However, the move also resulted in a disregard for the things that the government alone can achieve, one of which is increasing agricultural production. Unnoticeably, there was a move in favor of the Washington Consensus’s principles, which promoted putting macroeconomic stability first.