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Moving to Inflation Targeting

Ila Patnaik () and Radhika Pandey ()

Working Papers from National Institute of Public Finance and Policy

Abstract: India adopted a flexible inflation targeting framework as a formal legal mandate of the RBI in March 2016. The preamble to the RBI Act, as well as relevant sections in the Act were amended to enable this change. The frame- work entailed many details such as on the rate of inflation to be targeted, the band, the measure, the composition of the Monetary Policy Committee and the objective. One of these sections require that the rate of inflation to be targeted needs to be reviewed every five years. In March 2021, the central government along with the RBI is required to review the target. This paper presents the logic and rationale of the various elements of India's inflation targeting framework.

Pages: 41
Date: 2020-08
New Economics Papers: this item is included in nep-mac and nep-mon
Note: Working Paper 316, 2020
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