It is said that a task is as good as the target. A good inflation target should be specific, easily understood, relevant, and responsive. It is with this lens one should answer the four questions the Reserve Bank of India has posed in its discussion paper on the review of the Monetary Policy Framework.These are critical questions regarding the fundamental design of India’s Flexible Inflation Targeting framework. A policy consensus on this, involving both the central bank and the central government, would be essential in laying out the monetary policy framework for the next five years.
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