Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
4. Evaluate the performance of the monetary policy committee in achieving its stated objective of containing inflation in the prescribed bandwidth. How will the recent the move to increase the benchmark interest rate by 35 basis points affect the Indian economy? (250 words)
Difficulty level: Tough
Reference: Insights on India
Why the question:
On Wednesday, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unveiled its latest review of the monetary policy. In it, the RBI cut India’s GDP (gross domestic product) growth forecast for the current financial year, maintained the inflation forecast, and raised the repo rate by 35 basis points.
Key Demand of the question:
To write about the performance of RBI in containing inflation and how the changes in Repo rate will affect the economy.
Elaborate – Give a detailed account as to how and why it occurred, or what is the context. You must be defining key terms wherever appropriate and substantiate with relevant associated facts.
Structure of the answer:
Begin by defining the monetary policy.
First, in brief, write in brief about the various components of monetary policy.
Next, write about the monetary policy committee (MPC), its aims and objectives. By citing statistics, write the success and limitations of MPC in controlling inflation and in creating conducive atmosphere for growth.
Next, write about the impact of increasing repo rate in the economy.
Conclude by writing a way forward to overcome the above-mentioned limitations.