Inflation targeting in India

Abstract

The adoption of inflation targeting in India has been a much debated topic which also becomes a challenge for an emerging economy. Though inflation targeting has already been adopted in some emerging and advanced countries, successful implementation would be a concern. The paper argues that an emerging country like India needs to consider the composition of consumer price index; state of macro econometric models; and young demographics, unemployment rate and lack of social security before adopting inflation targeting. To modernize the monetary policy framework, India could consider introducing regular review of the regional economy; instituting a monetary policy committee; and separating debt from monetary management, the paper argues.

Keywords:

• inflation
• inflation targeting
• monetary policy framework
• debt management

JEL classification:

• E31
• E42

Notes

1. In the context of the US, the debate is presented by Powell (2014) and Greenwood et al. (2014).

Additional information

Notes on contributors

Charan Singh

Charan Singh is RBI Chair Professor at Indian Institute of Management, Bangalore. Earlier, he was Senior Economist at the Independent Evaluation Office of the IMF following two decades in Reserve Bank of India. With a doctorate from the University of New South Wales, Sydney, and post-doctorate stints at Harvard and Stanford University, his current interests include macroeconomic policy and debt management.