De-jargoned | Supply side constraint2 min read . Updated: 14 Nov 2012, 06:51 PM IST
Supply side constraints mean production is unable to keep pace with rising demand
The present macroeconomic conditions in the country have pushed policymakers in a tight spot; they find themselves caught between slowing growth and high inflation. For example, if the Reserve Bank of India (RBI) eases interest rates, as the industry and the government wants it to, the move will push inflation. However, if RBI maintains higher cost of money to control inflation and anchor inflationary expectations, it will, to some extent, find itself responsible for slowing economic growth.
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