The Unassuming Economist

From a paper by M. Krishna Naidu, and Dasari Rajesh Babu:

“India’s monetary buildup and structure changed substantially with the official adoption of Flexible Inflation Targeting in 2016, formalised through amendments to the Reserve Bank of India Act and operationalised by a statutory six-member Monetary Policy Committee. In this paper, we conduct a systematic conceptual analysis of the multifaceted impact of FIT on macroeconomic consistency in India, including price stability, output dynamics, exchange rate behaviour, monetary transmission efficacy, fiscal-monetary coordination, and the formation of inflation expectations. The study uses longitudinal data of macroeconomic parameters over 12 years (2012-2024). The methodology is a mixed-methods conceptual framework that includes descriptive statistical analysis, regime-phase comparisons, six-channel transmission mapping, and international bench marking with 7 inflation-targeting economies. The analysis shows a large fall in headline Consumer Price Index (CPI) Inflation from an average of 9.85% (2012-2016) before the IT. The paper’s conceptual contribution is the development of a cohesive analytical framework that concurrently assesses aims, scope, limitations, transmission channels, and cross-national insights. The findings affirm that India’s FIT is a conditionally effective regime—effective in managing expectations and reducing Inflation, but requiring institutional complementary to achieve the full macroeconomic stability benefit.”