UPSC CSE Mains Syllabus: GS-3- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

In news:

Why an increase of prices:

Food inflation:

Moderating inflation:

Sellers raining prices:

  MPC control on inflation The main responsibility of the MPC will be to keep the inflation targets set by the RBI. The MPC decides the changes to be made to the policy rate (repo rate) to contain inflation within the target (based on CPI) level set under India’s inflation targeting regime.   Members of the MPC can suggest reasons for their support or opposition for a policy rate change.   · In case the inflation target is failed to achieve (2% higher or lower than the set target of 4% for continuous three quarters), the RBI has to give an explanation to the government about the reasons, the remedial actions and the estimated time for realizing the target. · Another responsibility for the RBI is to publish a Monetary Policy Report every six months, elaborating inflation forecasts and inflation sources for the next six to eighteen months.   Repo rate :   · Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. · Repo rate is used by monetary authorities to control inflation.   Its impact on inflation: · In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. · This ultimately reduces the money supply in the economy and thus helps in arresting inflation. · The central bank takes the contrary position in the event of a fall in inflationary pressures.   

Some hopes:

Market outlook:

RBI’s Dilemma:

Source:” The Hindu“.


With inflation already above the Reserve Bank’s target upper bound, monetary policy makers face an unenviable choice. Examine.