Government SSC Economy Question:

at present inflation is ascertain by wholesale price
index,but now it is switching to ppi(purchase price
index).if we want to tame inflation then first we have to
acess whether it is demand side or supply side inflation if
it is supply side inflation then a country have to increase
the farm productivity because people are demanding same or
more but output is not available to general people at
present this can be seen in india that govt. is relying more
on monetary tightning but inflation isnot reducing since
demand is appropriate acc. to economic growth but supply is
inadequate.

but if it is a demand side inflation then monetary
tightening will work,since people have more disposable
income and supply is in accordance with economic growth so
reducing money or liquidity in system will lead to
equilibrium position.