India Stock Market

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. Inflation
. Raise interest rate
. Reduce money supply
. Lesser money : Reduce Credit : Reduce Demand
. Demand < Supply : Price down

. Price reduction
. Revenue down
. Expenses up
. Interest payment up
. Lesser corporate profit
. Reduce Wages & expenses

A fine line to balance growth & inflation.

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http://www.business-standard.com/india/news/keep-buyingdips/439610/

Stagflation is a combination of high inflation and GDP growth stagnation. It is one of the most difficult situations to combat. Various governments have adopted different strategies. There is no single formulaic solution. A lot depends on what policy-makers think politically acceptable.

One method is to cut inflation by squeezing money supply and making money more expensive by raising interest rates. Another method is to somehow improve productivity and efficiency and thereby make goods and services more abundantly available and cheaper. A radically different method is to pump prime by increasing money supply and making huge investments to stimulate demand.