Pakshal SecretryAIR 8 · CSE 2025 · 228 wordsTheir whole copy
Opening · a figure
Recently monetary policy committee reduced the repo rate by 50 basis point in its April meet.
MPC was created on recommendation of Urjit Patel Committee to decide monetary policy in India.
Body · points and prose
Responsibility of MPC
- Decide Monetary policy of the country
- fix repo rates for borrowing by banks
- Target inflation → Range of (4±2%) band
- Support growth while having primary focus on inflation
- Chech on liquidity condition in the banking system
Effectiveness of RBI's Monetary policy
Positives
(1) Able to bring down inflation (see fig) -
(2) In 2025 → Reduction in repo rates to support growth (3) C Rangarajan (Ex-RBI governor) views → Lowered inflation expectation among economic agent → Monetary policy credibility has improved → Rational Expectation among people (4) Helped in recovery during Covid-19 period via Quantitative Easing model of RBI. (5) Innovative solution's to deal with problem eg MSS Scheme, Operation Twist (6) Rising forex reserves.
Negatives
(1) In 2022 → inflation was above 6% for 10 consecutive months (2) High core inflation persists (3) Economic Survey (2024-25) → Too much focus on inflation, hurts growth (phillips curve) (4) Depriciation of rupee → 2.8% in FY 25 (5) Government interference in MPC
Way forward
(1) Role of RBI in growth facilitation should be reviewed. (2) Flexible growth linked target for inflation instead of static target
Close · a way forward
None written.