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The Monetary Policy Committee (MPC) has to carefully balance the recovery phase of economic growth and manage rising inflationary tendencies in the uncertain geopolitical climate. Examine. (250 words)

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

 

3. The Monetary Policy Committee (MPC) has to carefully balance the recovery phase of economic growth and manage rising inflationary tendencies in the uncertain geopolitical climate. Examine. (250 words)

 

Difficulty level: Moderate

Reference: livemint

 

Why the question: Inflation worries are rapidly spreading across the world. Price pressures are not the same across countries, despite the fact that all of them have been hit by very similar supply shocks over the past two years.

Key Demand of the question: To write about the great balancing act that MPC has to done to manage growth and inflation in uncertain geopolitical climate.

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.

Next, write about the geopolitical uncertainty due to the crisis in Ukraine, global supply of crude oil, crisis in Sri Lanka which will affect the inflationary tendencies.

Conclusion:

Conclude with a way forward which summarises that India needs to take steps in order to protect its own interests.