Is India Ready for Inflation Targeting?
-
Abhijit Sen Gupta
and
Rajeswari Sengupta
Abstract
In this paper we analyze the extent to which the current macroeconomic environment in India is suitable for implementation of inflation targeting as a monetary policy strategy, in light of the recommendation of the Urjit Patel Committee Report. Our results indicate that historically the Reserve Bank of India has given more importance to inflation compared to output growth and exchange rate changes in its monetary policy conduct and that in recent times there has been an increased emphasis on monetary independence thereby comfortably placing the RBI on a path to move towards inflation targeting. However we also find factors, that are traditionally outside the control of monetary policy, do exert a strong impact on aggregate prices in India thereby making the choice of nominal anchor a tricky one. Furthermore, the success of monetary policy in containing inflation is found to be crucially contingent on an appropriate fiscal policy as well.
Disclaimer
The views expressed in the paper are those of the authors and do not necessarily reflect the views and policies of Asian Development Bank (ADB) or its Board of Governors or the governments that they represent.
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Articles in the same Issue
- Frontmatter
- Articles
- With Whom Do Nations Trade? – The Fading Distance
- Long-Run Economic Growth: Stagnations, Explosions and the Middle Income Trap
- Self-Fulfilling and Fundamentals Based Speculative Attacks: A Theoretical Interpretation of the Euro Area Crisis
- Is India Ready for Inflation Targeting?
- Inward and Outward Foreign Direct Investment and Inequality: Evidence from a Group of Middle-Income Countries
- India-Us Trade and Investment: Have They Been Up To Potential?
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Articles in the same Issue
- Frontmatter
- Articles
- With Whom Do Nations Trade? – The Fading Distance
- Long-Run Economic Growth: Stagnations, Explosions and the Middle Income Trap
- Self-Fulfilling and Fundamentals Based Speculative Attacks: A Theoretical Interpretation of the Euro Area Crisis
- Is India Ready for Inflation Targeting?
- Inward and Outward Foreign Direct Investment and Inequality: Evidence from a Group of Middle-Income Countries
- India-Us Trade and Investment: Have They Been Up To Potential?
- How do Liberalization, Institutions and Human Capital Development affect the Nexus between Domestic Private Investment and Foreign Direct Investment? Evidence from Sub-Saharan Africa
