Direct controls refer to the regulatory measures undertaken with objectives of converting an open inflation into a suppressed one. Direct control on prices and rationing of scarce goods are the two such regulatory measures.
1. Direct Controls on Prices:
The purpose of price control is to fix an upper limit beyond which the price of particular commodity is not allowed and to that extent inflation is suppressed.
When the government fixes the quota of certain goods so that each person gets only a limited quantity of the goods, it is called rationing. Rationing becomes necessary when the essential consumer goods are relatively scarce.
The purpose of rationing is to divert consumption from those goods whose supply needs to be restricted for some special reason, e.g., to make such commodities available to a large number of people.
According to Kurihara, “rationing should aim at diverting consumption from particular articles whose supply is below normal rather than at controlling aggregate consumption.”
Thus, rationing aims at achieving the twin objectives of price stability and distributive justice.