Daily Current Affairs Article 31th December 2020: Maintaining the inflation target at 4% is appropriate for India, according to a working paper titled “Measuring Trend Inflation in India” released by RBI.
The paper seeks to estimate trend inflation in India to find the answer to a question that goes to the root of flexible inflation targeting (FIT) – is the choice of the target for inflation consistent with its trend?
| Article and Schedule Quiz | Start Test! |
The 4% target for inflation — with an upper tolerance limit of 6% and a lower limit of 2% — was set by the Centre in consultation with the RBI in 2016 and its validity expires on March 31, 2021.
The paper finds a steady decline in trend inflation to 4.1- 4.3% since 2014.
A target set too [significantly] below the trend imparts a deflationary bias to monetary policy because it will go into overkill relative to what the economy can intrinsically bear in order to achieve the target
Analogously, a target that is fixed above the trend renders monetary policy too expansionary and prone to inflationary shocks and unanchored expectations. Hence, maintaining the inflation target at 4% is appropriate for India.
| Missiles Mock Test | Start Test! |
| SSC MTS Mock Test | Start Test |
| IBPS CLERK MOCK TEST | Start Test |
| SSC MTS 2022 JULY 26 Shift 1 (ENGLISH) | Start Test! |
| SSC GD Previous Year Paper 2021 Nov 17 Shift - I (Hindi) | Start Test! |
| SSC CGL Tier - 1 PYP 2022 April 21 Shift- 1 (ENGLISH) | Start Test! |
| MPSC PAPER I MOCK TEST 1 (ENGLISH) | Start Test! |
| IB Security Assistant Mock test 1 (english) | Start Test! |
| UP POLICE CONSTABLE MOCK TEST 1 | Start Test! |
| DELHI POLICE CONSTABLE MOCK TEST 1 (HINDI) | Start Test! |
