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Highlights of RBI’s Working Paper

Published on December 31, 2020
Current Context: The Reserve Bank of India (RBI) working paper is authored by Harendra Kumar Behera and Michael Debabrata Patra.
Highlights of RBI’s Working Paper
  • The working paper describes that Inflation rate of 4% is appropriate for India.
  • The paper details that there is a steady decline in trend inflation to 4.1-4.3 % since 2014. 
  • The lower inflation rate will impart deflationary bias to the monetary policy as it will go into overkill relative to what the economy can intrinsically bear in order to achieve the target while the higher rate will render monetary policy too expansionary and will result into prone to inflationary shocks.
  • Therefore, it is in safe side to maintain the inflation target at 4% for the country, as per the authors of the working paper.
  • Static Part: 
    • HQ of RBI: Mumbai
    • Governor of RBI: Shaktikanta Das
    • Deputy Governor of RBI: Bibhu Prasad Kanungo, Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao

Question: 

Q.1 As per the RBI’s working paper authored by Harendra Kumar Behera and Michael Debabrata Patra, the Inflation rate of ____% is appropriate for India?
a. 3.7%
b. 4.2%
c. 3%
d. 4%
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