RBI cannot control inflation with its current Monetary Policy

it is time we transform our systems

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

"I wasn't affected by inflation, I had nothing to inflate."

- Barzan, Gerald
DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

FUNCTIONS OF RBI
RBI is the apex institution in the banking and financial structure of the country. It plays a leading role in organizing, running, supervising, regulating and developing the banking and financial structure of the economy. Its activities are very essential for the proper functioning of the economy. Among many of its important functions like issuing currency, a very vital function that RBI plays is that of controlling inflation.

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

HOW DOES RBI CURB INFLATION ?

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

MONETARY POLICY
Monetary policy is the process by which monetary authority of a country, generally a central bank controls the supply of money in the economy by exercising its control over interest rates in order to maintain price stability and achieve high economic growth.

In India, the central monetary authority is so designed as to maintain the price stability in the economy by the Reserve Bank of India (RBI) in order to control n stabilize currency.

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

MONETARY MEASURES TO CONTROL INFLATION

BANK RATE

REPO RATE
REVERSE REPO RATE CASH RESERVE RATIO STATUTORY LIQUIDITY RATIO OPEN MARKET OPERATIONS
DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

MONETARY MEASURES TO CONTROL INFLATION

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

DEMERITS OF CURRENT MONETARY POLICY

Inflation is not a spontaneous reaction it builds up over time and is caused by various reasons, thus temporary policies to control inflation are not going to be effective. Temporary policies will contain it but will not eradicate the problem of inflation from its root. Controlling inflation with its temporary monetary policies will result in deterioration of growth and development. Temporary monetary policies would result in moderation of inflation over time but it will still remain above tolerance level. There are various concerns over the fiscal deficit; the current account deficit and deteriorating asset quality loom large. The food inflation has resulted in the rise of prices of fuel and other commodities which accentuated domestic inflationary pressures.

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

MERITS OF CURRENT MONETARY POLICY

The temporary policies have reduced the stress on the economic frailties that had restricted the growth somewhat. RBI has increased the repo rate or the rate at which it lends money to other banks which is one way to deal with inflation and has worked efficiently.

Temporary policies that have been implied is due to the fact that supply shocks are temporary and they are the main reason driving inflation. It allows the bank and private sectors to adjust to the high interest rate gradually.

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

Despite a hike in diesel prices, high inflation will act as a dampener which may prevent the RBI from cutting any key rates, say experts
DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

References
www.investopedia.com www.wikipedia.com www.economictimes.com

DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy

Thank You

Maanvi Mathur
DAYALBAGH EDUCATIONAL INSTITUTE FACULTY OF SOCIAL SCIENCES

RBI Cannot Control Inflation With its Current Monetary Policy