RBI or government can not fix inflation because growth of economy is actually growth of paper money which in itself is inflation.
Growth is measured in currency. When we say growth, it actually means growth of paper money. Quantitative Easing (15-19% per annum) + fractional reserve system is creating a flood of money in the economy which is bound to create inflation. Money is not based on gold anymore after 1971 when United States defaulted on its debt and brought down the Brettonwoods system, thereby breaking the last thread of gold standard. Reckless printing of money without any discipline of gold standard devalues currency and it is not the price of commodities going up but the value of currency going down. While the currency can be printed easily commodity can not, and instead, is a result of hard work and time. The resultant inflation as a result of currency devaluation can be temporarily controlled by increasing debt and thereby increasing supply. Since debt is not considered in GDP and discounting a low inflation which is temporarily pulled down by raising debt, shows a mirage of rising GDP. This gives an incorrect impression that economy is growing.
When debt can not be increased at the same pace as growth of paper money, then, suppressed inflation is bound to re-surge. Today, that is what is happening as due to soveriegn debt crisis there is enormous pressure on countries to contain debt. The total money supply is almost doubling in every 4-5 years and so as our national debt and GDP.
RBI is raising interest rates but at the same time pumping money into the economy, thus neutralizing any measure taken to suck liquidity from the system and therefore we are not getting much relief from inflation despite of series of interest rate hikes in last 1 year.
Growth and inflation are synonym as growth of paper money (which is not based on gold after 1971 when Richard Nixon brought the Brettonwood system down unilaterally) devalues currency and there is no resultant automatic rise in commodity production as is assumed by keynesian philosophers. Instead, growth of paper money with negative real interest rates encourages speculative investment by way of financial markets thereby turning the whole economy into a casino economy where wealth is not created but only redistributed. This is the cause of rich becoming richer and poor becoming poorer.
Currency devaluation by way of Quantitative easing and fractional reserve system is a day light robbery of buying power of real wealth generator such as a farmer who, after great deal of pain and hard work, earns this buying power stored in a paper currency. However more cheaply printed money takes away store of value function of money and reduces its buying power. Why do you think counterfeit is bad? because counterfeit works like adding water to milk thereby reducing milk’s potency. In the same way when new cheaply printed money is added to already existing money than it reduces the buying power of existing money because more money is now available to chase same supply.