Q.3 How does the dominant role of agriculture and the exchange rate make the Indian economy different from the OECD countries’ economies? What are the implications of this for use of monetary policy to control inflation in India? (15 Marks)

Mentor’s comment-
  • https://indianexpress.com/article/opinion/columns/rbi-inflation-7978621/
  • In the body, mention the above normal inflation ailing the Indian economy.
  • In the body mention that India’s non-oil and non-food component constitute only 47% of CPI underlining the limits of monetary policy for Inflation targeting. In the next part, mention that India’s foreign exchange reserves are required for both internal balancing and external balancing, unlike OECD countries.
  • Conclude by mentioning that the different structure of Indian economy would require different approaches from the monetary authority in its inflation targeting.
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Akshada Awale
Akshada Awale
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khushboo patre
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