Assessing the Effectiveness of Inflation Targeting in India’s Monetary Policy Framework

Abstract

the impact of inflation targeting on India's monetary policy, with a particular emphasis on the strategy employed by the Reserve Bank of India (RBI) to control inflation since its official implementation in 2016. how inflation targeting has affected India's economic performance overall, as well as inflation stability and expectations. This article offers a thorough evaluation of the results of the RBI's inflation targeting strategy by studying its effects on economic development, credibility of monetary policy, and volatility of inflation. This study uses empirical analysis to look at the RBI's performance in tying inflation expectations to the target range, stabilising inflation, and lowering inflation swings. The difficulties that India has had in achieving inflation targeting, which include the influence of external variables including changes in global commodity prices, variations in exchange rates, and limitations on the domestic supply side. According to the results, achieving the inflation target consistently is still complicated by structural variables and external shocks, even if inflation targeting has helped increase policy transparency and decrease inflation volatility. In order to address the larger macroeconomic issues of a fast growing economy and maintain long-term price stability, the study finishes with policy suggestions for improving inflation targeting in India.