Abstract: India, like many nations, faced rising inflation in 2021. To combat this, the MPC implemented a series of aggressive monetary tightening measures. This study investigates the effectiveness of these policies in controlling inflation and analyzes their impact on various economic aspects. The findings reveal a successful decline in inflation, achieved through reduced liquidity, increased money market yields, and a shift in government securities markets. The introduction of External Benchmark Lending Rates (EBLR) improved transmission of policy changes to bank lending rates. However, a trade-off between inflation control and economic growth emerged, with GDP growth experiencing a slowdown. The paper concludes that while the MPC's actions effectively curbed inflation, achieving a "soft landing" for the Indian economy requires close monitoring and potentially adjusted future policies.
Introduction:
Globally Inflation started rising post April 2021 and went above the target range set by most of the Central Banks. It had remained low and dormant for a substantial duration since the global financial crisis. CPI inflation in developed countries such as US, UK and Euro zone, began to exceed their traditional target of 2% and continue to stay at these elevated levels till recent time. The initial rise in inflation was primarily due to increase in demand from easing lock down restrictions, rise in profit margins of corporates and recovery in energy and commodity prices etc.
Initially, the central banks felt that this sudden rise in inflation would be temporary and transitory, so they continued with low interest rates and accommodative stance. However, with passage of time global central banks got convinced that the inflation has become persistent, and they immediately needed to front load monetary tightening.
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هذه القصة مأخوذة من طبعة October 2024 من BANKING FINANCE.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
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