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With reference to the inflation targeting, consider the following statements:
1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.
2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
With reference to the inflation targeting, consider the following stat...
Statement 1: India switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.
The first statement is correct. In 2015, the Reserve Bank of India (RBI) and the Government of India agreed to adopt a flexible inflation targeting framework. Under this framework, the RBI is mandated to keep inflation within a specified range. The inflation target was set at 4% with a tolerance band of +/- 2 percentage points. This means that the acceptable range for inflation is between 2% and 6%.
The framework was formally implemented from April 2016 onwards, with the target for the financial year 2016-17 set at 4%. Since then, the RBI has been actively monitoring and managing inflation to ensure it remains within the target range.
Statement 2: Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.
The second statement is also correct. In a recent announcement, the Union Finance Ministry confirmed that the inflation target for the next five years (from April 2021 to March 2026) will remain unchanged at 4%. This means that the RBI will continue to focus on maintaining inflation within the target range of 2% to 6%.
The tolerance band of +/- 2 percentage points allows for some flexibility in inflation management. If inflation falls below 2% or rises above 6%, the RBI may take appropriate measures to bring it back within the target range. These measures can include adjustments to key policy rates, such as the repo rate, which can influence borrowing costs and liquidity in the economy.
Conclusion: Both statements 1 and 2 are correct. India adopted an inflation target-based monetary policy framework in 2015, with a target of 4% and a tolerance band of +/- 2 percentage points. The recent announcement by the Union Finance Ministry confirms that the inflation target will remain unchanged at 4% for the next five years, with an upper tolerance level of 6% and a lower tolerance level of 2%.
The first statement is correct. In 2015, the Reserve Bank of India (RBI) and the Government of India agreed to adopt a flexible inflation targeting framework. Under this framework, the RBI is mandated to keep inflation within a specified range. The inflation target was set at 4% with a tolerance band of +/- 2 percentage points. This means that the acceptable range for inflation is between 2% and 6%.
The framework was formally implemented from April 2016 onwards, with the target for the financial year 2016-17 set at 4%. Since then, the RBI has been actively monitoring and managing inflation to ensure it remains within the target range.
Statement 2: Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.
The second statement is also correct. In a recent announcement, the Union Finance Ministry confirmed that the inflation target for the next five years (from April 2021 to March 2026) will remain unchanged at 4%. This means that the RBI will continue to focus on maintaining inflation within the target range of 2% to 6%.
The tolerance band of +/- 2 percentage points allows for some flexibility in inflation management. If inflation falls below 2% or rises above 6%, the RBI may take appropriate measures to bring it back within the target range. These measures can include adjustments to key policy rates, such as the repo rate, which can influence borrowing costs and liquidity in the economy.
Conclusion: Both statements 1 and 2 are correct. India adopted an inflation target-based monetary policy framework in 2015, with a target of 4% and a tolerance band of +/- 2 percentage points. The recent announcement by the Union Finance Ministry confirms that the inflation target will remain unchanged at 4% for the next five years, with an upper tolerance level of 6% and a lower tolerance level of 2%.
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With reference to the inflation targeting, consider the following stat...
On the last day of the financial year 2020-21, the Finance Ministry announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.
- This is the retail inflation target that will drive the country’s monetary policy framework and influence its decision to raise, hold or lower interest rates.
- India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.
- Many developed countries had adopted an inflation-rate focus as an anchor for policy formulation for interest rates rather than past fixations with metrics like the currency exchange rate or controlling money supply growth. Emerging economies have also been gradually adopting this approach.
- In adopting a target for a period of five years, the central bank has the visibility and the time to smoothly alter and adjust its policies in order to attain the targeted inflation levels over the medium term, rather than seek to achieve it every month.
Hence both statements are correct.
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With reference to the inflation targeting, consider the following statements:1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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With reference to the inflation targeting, consider the following statements:1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to the inflation targeting, consider the following statements:1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to the inflation targeting, consider the following statements:1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
With reference to the inflation targeting, consider the following statements:1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With reference to the inflation targeting, consider the following statements:1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to the inflation targeting, consider the following statements:1. India had switched to an inflation target-based monetary policy framework in 2015, with the 4% target kicking in from 2016-17.2. Union Finance Ministry recently announced that the inflation target for the five years between April 2021 and March 2026 will remain unchanged at 4%, with an upper tolerance level of 6% and a lower tolerance level of 2%.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
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