quot The decrease in money supply in the economy could not control the food inflation as increase i...........

Economic Affairs Inflation

"The decrease in money supply in the economy could not control the food inflation as increase in price was caused by skewed MSP policy, distortion caused by APMC acts and inadequate cold storage facilities." Which type of inflation best describes the situation given above?

stagflation

Demand pull inflation

Structural inflation

None

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Explanation:

Structural inflation is the one prevailing in most developing countries. The situation is due to the operation of the structural weakness (supply bottleneck, lack of infrastructure, etc.) existing in a developing economy. Lack of adequate supply responses or production to increase in demand is the cause of structural inflation. Hence option (c) is the correct answer.

A complete change in economic policy would be needed to address it. Below examples illustrate structural inflation.
To keep farmers happy, Government keeps increasing Minimum Support Price for wheat and rice but MSP for pulses remain stagnant. It disincentivises farmers to grow pulses thus decrease its supply and increases pulse prices.
Due to APMC acts of states, cartelisation and hoarding is rampant in the agricultural market. It leads to supply and demand mismatch and increases inflation