Inflation Targeting and Its Macroeconomic Implications for India: A Quantitative Approach

Abstract

the aggregate effect of quantitatively-based inflation targeting on India's economy. In 2016, India's central bank formally embraced inflation targeting as a policy tool to stabilise prices and anchor inflation expectations. By looking at how important macroeconomic variables like GDP growth, exchange rate stability, and inflation volatility were affected by India's inflation-targeting method. Using econometric models and time-series data, this article provides a quantitative analysis of the present economic climate, inflation expectations, and inflation targeting. Despite inflation targeting seems to have stabilised inflation expectations and reduced volatility, the results show that it is still difficult to handle exogenous shocks such changes in currency rates and global commodity prices. the fine balancing act that central banks in developing economies encounter as they strive for both price stability and economic growth. Increasing policy leeway and tackling fundamental economic difficulties are at the heart of the report's recommendations for improving inflation targeting in India.