Inflation targeting, monetary policy: The way forward.

Kishore, Kartik, Misra, S.N and Ray, Abhipsa (2023) Inflation targeting, monetary policy: The way forward. In: International Conference on Smart Computing and Communication, 24-25 January,2023, Jaipur,Rajasthan.

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Inflation targeting has been Reserve Bank of India's (RBI) prime concern since 2014. During 2006–2013, India witnessed an average inflation of 9 %, affecting the bottom half of the population significantly. The Urjit Patel committee in 2014 suggested that RBI’s Repo rate should be decided by a Monetary Policy Committee (MPC) with economists and finance sector experts from outside, instead of the RBI governor, consider Consumer Price Index (CPI) as nominal anchor for inflation targeting rather than Wholesale Price Index (WPI) and contain inflation within a glide path of 4–6%. These recommendations were put into effect in 2015. The paper brings out relationship between Repo rate and inflation from 2008 to 2013 and contrasts it with rates decided from 2014 to 2016. The changed arrangement shows that there is a healthy correlation between Repo rate, GDP growth, and CPI. The paper also explores how RBI has addressed economic challenges from 2017 to 2019 and the pandemic period of 2019 to 2021 and economic revival thereafter. It brings out how inflation forecast by MPC has often not kept pace with actual inflation and laments its failure not to note the dystopic effect of demonetization. It also notes the fine harmony between monetary and fiscal policy during the Covid period when low Repo rates walked hand in hand with fiscal stimulus measures by the finance minister. As India recovers from exogenous shock of Covid19, the paper very strongly recommends that best global practices like keeping the Taylor rule as a template for Repo rate determination should be kept in mind by RBI.

Item Type: Conference or Workshop Item (Paper)
Keywords: MPC | Repo | Taylor Rule | GDP | WPI | CPI
Subjects: Social Sciences and humanities > Social Sciences > Social Sciences (General)
JGU School/Centre: Jindal School of Government and Public Policy
Depositing User: Amees Mohammad
Date Deposited: 22 Jun 2023 04:24
Last Modified: 22 Jun 2023 04:27
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