What does inflation targeting entail? How does India’s inflation targeting mechanism work? (Answer in 200 words)
AI-driven tools can analyze data from sensors, satellites, and drones to monitor crop health, soil conditions, and weather patterns. This enables farmers to apply the right amount of water, fertilizers, and pesticides, reducing waste and increasing efficiency. AI systems can predict water needs baseRead more
AI-driven tools can analyze data from sensors, satellites, and drones to monitor crop health, soil conditions, and weather patterns. This enables farmers to apply the right amount of water, fertilizers, and pesticides, reducing waste and increasing efficiency.
AI systems can predict water needs based on weather forecasts and soil moisture levels, allowing for more efficient irrigation practices. This is particularly crucial in regions facing water scarcity, ensuring that crops receive adequate hydration without depleting water resources.
AI can identify early signs of diseases and pests in crops through image recognition and predictive analytics. Early detection allows for timely interventions, reducing crop loss and enhancing food security.
AI can assist in managing resources like seeds, fertilizers, and machinery, ensuring that farmers use their inputs effectively and reduce costs. This can make farming more economically viable, especially for smallholder farmers.
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Inflation targeting is a monetary policy framework where a central bank sets a specific inflation rate as its target and uses monetary policy tools to achieve and maintain price stability. In India, the inflation targeting framework was adopted in 2016, and the Reserve Bank of India (RBI) is responsRead more
Inflation targeting is a monetary policy framework where a central bank sets a specific inflation rate as its target and uses monetary policy tools to achieve and maintain price stability. In India, the inflation targeting framework was adopted in 2016, and the Reserve Bank of India (RBI) is responsible for its implementation.
Here’s how it operates in India:
1. Target: The RBI sets an inflation target of 4% with a tolerance band of +/- 2% (i.e., 2-6%).
2. Framework: The RBI uses a flexible inflation targeting framework, which means it considers growth and other macroeconomic factors while setting policy rates.
3. Tools: The RBI uses monetary policy tools like the repo rate (short-term lending rate), reverse repo rate, and open market operations to manage liquidity and inflation.
4. Decision-making: The RBI’s Monetary Policy Committee (MPC) meets every two months to review inflation trends, growth, and other factors to decide on policy rates.
5. Communication: The RBI communicates its inflation projections and policy decisions to the public, ensuring transparency and accountability.
By adopting an inflation targeting framework, India aims to maintain price stability, promote economic growth, and enhance the credibility of monetary policy.
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