Q. With reference to Structural (Bottleneck) Inflation in India, consider the following statements:
1.Structural inflation is primarily demand-driven and arises due to excessive consumer spending in the economy.
2.It is caused by a mismatch between rising demand and inadequate supply due to lack of investible capital.
3.Higher government expenditure in non-developmental areas contributes to low growth and persistent inflation.
Which of the statements given above is/are correct?
Answer: B
Notes:
Explanation:
- Structural inflation is not primarily demand-driven in the usual Keynesian sense. Instead, it results from supply-side bottlenecks, such as insufficient capital, poor infrastructure, and production constraints, typical of a developing economy like India.
- Inflation occurs due to rising demand with inadequate supply, stemming from a lack of investible capital — the defining feature of structural inflation.
Even when the government managed higher expenditure, much of it went to non-developmental areas, which leads to low growth alongside high inflation — a sign of stagnation.
