Reasons for rising prices and possible solutions

Rising prices is caused by an increase in the supply of money caused by the government at a rate more rapid than the supply of gold and silver. Defining inflation in terms of one of it's major symptoms, rising prices, says nothing about the cause. On the basis of the definition of inflation as rising prices, people wrongly attribute every possible cause of increasing prices e.g. bad weather causing poor crop thus raising prices. Thus they believe that inflation can be caused either by "demand pull", that is, by spending outstripping the growth in the supply of goods and thus "pulling up the prices" or by "cost push", that is, by rising costs forcing up prices.
The current rise in inflation around the world can be attributed to the enormous credit expansion that was done by the U.S. federal reserve during the 2001-2005 periodin an attempt to stay clear of recession following the tech-bubble burst and 9/11. This cheap money led to widespread speculation in housing that inflated housing prices in the U.S. The securitised paper based on these mortgages created a flood of liquidity all around the world. India and China benefitted during this time from export of good and services respectively. During the same time the U.S. was fighting a costly war in Iraq and the government was financing this war at a global cost by willingness of central banks around the world, including India, to accumulate this vast amount of dollars. In order to maintain export competitiveness, India like most other countries adopted a strategy to buy dollars and release a lot of local currency into the system. This explains the cheap loans in housing and auto sector that was available in India during the 2004-2006 period.The cheap credit made the performance of all industries in India as well as assets classes like real estate and stock markets to grow at a tremendous pace. Commodity prices were largely subdued as in generally the case in periods of rapid credit expansion.
The over-inflated housing prices by mid 2005 caused the fed to start raising interest rates to cool off the housing market. This caused the monthly payments of mortgageholders to go up that speculation in the housing market to cease abruptly. Lax lending practices by banks to supply cheap credit to people who could not afford to them, sub-primemortages, led to the rise in payment defaults and thus a drastic reduction on the perceived value of mortagage backed securities. This led to a steep fall in the assets held by major banks which in turn meant a reduction in overall money supply in compliance with the reserve requirements for banks. To prevent a large scale deflation, which would cause the prices of goods and wages to fall in line with the available money supply, the federal reserve is in the process of pumping even more dollars. This in turn expands credit (by wanting to preserve a weak currency) in countries dependent on export earnings from the US and stoking inflation up. As the value of the dollar is diminished, the prices of commodities in general and oil in particular rose in an attempt to preserve the value of their dollar based value.
The consequence of the lost value in the mortgage securties has been a large scale sell off in most asset classes worldwide. In India too the stock market fell by over30% from its peak in January 2008 as investment banks had to sell securities to meet the margin requirements. The appreciation of major currencies like the Euro and the Yen against the U.S. dollar made carry-trade positions (borrowing in cheap currency to make a bigger investment gain) to unwind causing further fall in the value of securities. The period of cheap money is coming to a close and what follows is a major correction is prices of across all asset classes.
The rise in inflation in India currently can be attributed to the "wage-push inflation" (rising wages increasing costs of production and prices), "profit-push inflation"(rising prices due to businesses such as cement and steel wanting to maximize profits) and a rising price of commodities such as oil that is a major factor of production. .The natural way for gain control over this would be to reduce the money in the economy by either increasing interest rates or increasing the reserve requirements of banks. The government also needs to adopt a policy of not supporting the U.S. dollar and instead require the exporters to increase value of exports by supplying goods of better value to the importing nation.
It is only by controlling the causes of inflation can the symptom of rising prices be managed effectively and till then growth needs to be sacrificed because inflation impacts far more people and creates bigger economic inequality within society.