- Monetary Policy Tools (by Central Bank):
- Increase repo rate to reduce money supply and demand.
- Increase Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
- Sell government securities through Open Market Operations (OMO) to absorb liquidity.
- Fiscal Policy Tools (by Government):
- Reduce government spending.
- Increase tax levels to reduce aggregate demand.
- Supply-side Measures:
- Address supply shortages (e.g., through imports).
- Improve infrastructure to reduce production costs.