Alternatives to Inflation Targeting

Synopsis: Many economists are criticizing the RBI’s role in inflation targeting. They are suggesting alternatives to inflation targeting. Let’s have a look at them. Background The central government confirmed the continuance of inflation targeting as a tool to monitor inflation within the same bandwidth. The “inflation targeting” regime came into force in 2016. Recently inflation… Continue reading Alternatives to Inflation Targeting

Need of Continuing with Inflation Targeting

Synopsis: Inflation is still a big worry for policymakers. That is why the government is still willing to retain the inflation targeting. Introduction The Finance Ministry will continue with the inflation-targeting framework. It will guide the interest rate decisions of the RBI’s Monetary Policy Committee over the five-year period. The Department of Economic Affairs notified… Continue reading Need of Continuing with Inflation Targeting

Center to Retain the “Inflation Targeting” at 4% for MPC

What is the news? As per the top finance ministry official, the center will retain the Inflation Targeting of 4% for MPC. Introduction  The Centre will retain the inflation target of 4%, with a tolerance band of +/- 2 percentage points. This target will be applicable for the period April 1, 2021, to March 31,… Continue reading Center to Retain the “Inflation Targeting” at 4% for MPC

Impact of inflation targeting in India

Synopsis: According to the Executive Director IMF, Surjit S Bhalla, Inflation targeting has been ineffective in controlling inflation. Moreover, it has also contributed to a decline in GDP growth because of high repo rates. About inflation targeting The concept of ‘Inflation targeting’ was got acceptance in New Zealand first. Later, 33 countries adopted it as… Continue reading Impact of inflation targeting in India

Relevance of Inflation Targeting in India

Synopsis: Inflation control will always be relevant. But there is no conclusive evidence that the policy of inflation targeting has worked in India. Background The RBI was tasked with a mandate of the inflation target of 4 percent with a 2% deviation either way in June 2016. This agreement between the centre and the RBI… Continue reading Relevance of Inflation Targeting in India

Factors affecting present inflation level in India

Synopsis: The recent January 2021 retail inflation data provides relief to monetary authorities. Consumer Price Index (CPI) stood at 4.06% which is a desired outcome for ensuring macroeconomic stability.  Background: The inflation had remained above the RBI’s threshold mark of 6% for six months till November. The ideal range of CPI is 2-6%. In January… Continue reading Factors affecting present inflation level in India

Why prices of Petrol and Diesel are rising?

Synopsis: Retail prices of petrol and diesel have reached record highs in India. One major reason is a heavy tax on Petrol and diesel in India. Introduction  The price of petrol is touching Rs 89 per litre in Delhi and diesel reaching Rs 86.30 per litre in Mumbai. The government states that the reason behind… Continue reading Why prices of Petrol and Diesel are rising?

RBI’s expansionary policy and challenge of the impossible trinity

Synopsis: RBI need to exit out of its expansionary policy and manage ‘the impossible trinity’, i.e. Capital inflow, inflation and exchange rate. Source: The Hindu    Introduction  RBI adopted the extraordinary expansionary policy after Covid-19.   It reduced policy interest rates aggressively to increase the liquidity in the market. It also provided targeted assistance to especially distressed sectors.  But, now RBI… Continue reading RBI’s expansionary policy and challenge of the impossible trinity

India’s retail inflation

Context- Retail inflation showed signs of easing in November, led by easing prices of some food items. More in news- Consumer Price Index inflation stood at 6.93% in November 2020 compared to 7.61% in October, according to data released by the Ministry of Statistics and Program Implementation, though it remained above the comfort level of the… Continue reading India’s retail inflation

RBI allows RRBs to access LAF, MSF windows

Source: Click here News: Reserve Bank of India(RBI) has allowed regional rural banks (RRBs) to access the liquidity adjustment facility(LAF), marginal standing facility(MSF) and call or notice money markets with the aim to facilitate better liquidity management for these lenders. Facts: Liquidity Adjustment Facility(LAF): It is a facility extended by the Reserve Bank of India to the banks… Continue reading RBI allows RRBs to access LAF, MSF windows