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The Monetary Policy Committee (MPC) has to tread a tightrope between stimulating a economic growth and managing inflation in the country. Examine.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

4. The Monetary Policy Committee (MPC) has to tread a tightrope between stimulating a economic growth and managing inflation in the country. Examine. (250 words)

Difficulty level: Easy

Reference: Live Mint

Why the question:

The monetary policy committee (MPC) kept the key lending rate, the repo rate, unchanged at 4 percent and retained the monetary stance as ‘accommodative’.

Key Demand of the question:

Directive word: 

Examine – When asked to ‘Examine’, we must investigate the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications.

Structure of the answer:

Introduction: 

Begin the answer by writing the aims and objectives of monetary policy committee.

Body:

In the first part, Discuss the concept of Inflation targeting first by Monetary Policy – Inflation control is a legitimate objective of economic policy given the correlation between inflation and macro-economic stability. Discuss the impact of inflation targeting.

Next, in relative to the above, mention the economic growth aspect of monetary policy, preventing slowdown in industrial activity, generating flow of credit etc. Write how the situation becomes more precarious as India recovers from the impact of the pandemic.

Conclusion:

Conclude by suggest measures to balance India’s developmental ambitions with macro-economic stability.