RuhaniAIR 5 · CSE 2023 · 128 wordsTheir whole copy
Opening · a definition
Inflation targeting refers to the regime in which RBI targets an inflation rate (now 4%) and accordingly, alters the interest rate to achieve the target.
SUCCESSES OF INFLATION TARGETING
Body · points
→ Credibility of RBI has enhanced in the market → Inflationary expectations have got anchored → RBI has been successful in controlling demand-side inflation.
CHALLENGES OF INFLATION TARGETING:-
→ Growth suffers → Supply-side inflation cannot be controlled through inflation targeting → Due to Russia-Ukraine war and disruption of supply chains, the inflation rate breached its maximum limit of 6%. → Fed tightening has further contributed to inflation due to depreciation of rupee and costly imports.
Close · a summary
Thus, the achievement of inflation targeting regime has been mixed. However, it has provided the much needed price stability without compromising with the growth.