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Inflation Targeting as a Plausible Monetary Framework for India

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Author Affiliations

  • 1Lahore School of Economics (LSE), Burki Campus, Intersection Main Boulevard Phase VI, Lahore, PAKISTAN
  • 2 SDSB, Lahore University of Management Sciences (LUMS), DHA, Lahore, PAKISTAN

Res. J. Recent Sci., Volume 1, Issue (12), Pages 74-78, December,2 (2012)

Abstract

Inflation targeting is the famous framework worldwide today. Primary reasons for its increasing popularity include the breakdown of the broad money demand equation owing to financial sector reforms and globalization, which has rendered monetary targeting less reliable and the broader agreement on maintaining a lower level of inflation across several countries including India. In this paper we analyzed the Indian economy with reference to Taylor’s rule. Keeping in view the structure of the economy, objectives of RBI and the basic financial infrastructure of the country, it seems that India is not yet ready for Inflation targeting framework.

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