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Apr 3, 2008

Rupees appreciation to check the inflation

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It is again the appreciation of rupees to check the inflation. The appreciation of rupees will help the economy to check the high inflation rate through the supply side. In order to check the bottleneck, it is important to maintain the supply of essential commodities into the market. Whereas the demand side for the inflation could be effective through fiscal measures. Last week the inflation reached to 6.68, considering this high inflation the central bank has reduced its market intervention to by dollar. This mechanism will helps in appreciation of rupees.

The appreciation of rupees against dollar is an advantage for the import of commodities from the international market. India is also planning to import essential goods and services to check the inflation from the supply side. The import of essential commodities from international market will increase the supply in the market and ultimately the supply will reduce the price. In this way the inflation can be brought down to a normal figure mark. However, the whole mechanism will take some time to put impact on the market. The government and central bank would also prefer to check the inflation from its demand side too by lowering the interest rate, which is also necessary to check the high inflation rate.


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