How ideology muddled inflation control in India

News Today 08.09.2022

The Governor of the Reserve Bank of India reportedly stated that the inflation rate would be brought to its target level of 4% within 24 months. It had been above this level for 34 consecutive months already. If the prognosis is correct, by 2024 it would have remained off target for close to five years. In the United States and the United Kingdom, the inflation rate has been off target for a lesser period, but it has lately run at rates close to four times the target. What credibility do the world’s central banks have if they fail so egregiously in delivering on their mandate? Though the characteristics of India’s economy vary substantially when compared to those of the industrialised West, their governments follow the same approach to inflation control, termed ‘inflation targeting’ and implemented by their central banks. It would be reasonable to surmise then that the approach is ineffectual because it is flawed in its imagination. (Read More)

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