Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
5. What is inflation targeting? From a critical assessment of inflation-targeting by the Reserve Bank of India (RBI) in the Indian economy. (250 words)
Difficulty level: Tough
Reference: Indian Express , Insights on India
Why the question:
India has achieved higher growth and lower inflation than most countries in these difficult times. It is dangerous to apply textbook economic theory based on perfect markets without taking contexts into consideration.
Key Demand of the question:
To write about significance of inflation targeting while discussing the concerns over the efficacy of inflation targeting by the RBI.
Structure of the answer:
Introduction:
Start with a brief background of the context in the question.
Body:
Firstly, discuss the concept of Inflation targeting first – Inflation control is a legitimate objective of economic policy given the correlation between inflation and macro-economic stability. Inflation targeting is one of the many inflation control policies.
Next, then move onto explain the role of RBI in Inflation control – itis a legitimate objective of economic policy given the correlation between inflation and macro-economic stability. Inflation targeting is one of the many inflation control policies.
Next, write about the shortcomings of RBI.
Conclusion:
Conclude by writing a way forward.
