The Evolution of Inflation Targeting in India: Challenges, Strategies, and Outcomes

Abstract

India's inflation targeting system, tracking its development over time by looking at its execution, obstacles, tactics, and results in controlling inflation. India has achieved great progress in stabilising inflation and improving policy transparency since the Reserve Bank of India (RBI) formally adopted inflation targeting in 2016. Background on India's monetary policy, with an emphasis on how it evolved from a more ad hoc, discretionary system to one that is more directly tied to the country's laws and regulations. Despite structural restrictions, external shocks, and pressures from within the economy, the RBI has struggled to anchor inflation expectations. The efficacy of inflation targeting in fostering long-term economic growth, stabilising inflation expectations, and lowering inflation volatility as determined by empirical research. The impact of outside forces, such changes in exchange rates and the cost of commodities around the world, which have made it very difficult to achieve inflation goals. While inflation targeting has helped contain inflation to a considerable extent, the results show that it needs to be adjusted to deal with the changing economic climate. maintaining India's continuing prosperity despite worldwide economic uncertainty and the country's inflation-targeting policies.