Topic: Important International institutions, agencies and fora- their structure, mandate.
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: Tough
Reference: The Hindu
Why the question:
The MPC has rather surprisingly opted to keep the RBI’s repo rate unchanged at 6.5% for a fifth straight bi-monthly meeting.
Key Demand of the question:
To write about the balanced approach between inflation targeting and economic growth aspects of the MPC.
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.
Conclusion:
Conclude by suggest measures to balance India’s developmental ambitions with macro-economic stability.
