Inflation Targeting in India: A Decadal Study

Abstract

Rising prices have been prime focus of money management since 2016 in India. Central bank's target: keep consumer inflation close to 4 percent +/- 2 points. Initial numbers were good - quiet markets, stable numbers. But then there was 2020 and the year shook things up – pandemic waves, broken supply chains, and oil cost fluctuations. As it all happened, doubts arose as to whether the system could live up to the expectations. In this study, the success of this price goal is examined from 2016 to 2025. Sources of information include official records, previous reports and published information - not new surveys. The first was to establish confidence, the second to withstand storms beyond borders and the third to uncover deep-rooted flaws. Rain-fed farms don't have a one size fits all formula, factories are not scaled up and wages are insufficient. Rules are important - but also the realities, such as the informal sector, the weight of the food in baskets, and unexpected crop failures. The model had logic. Life outside models? Less predictable. Surprisingly, setting clear inflation goals seems to have boosted trust in central bank actions while taming wild price swings. Still, rising food costs keep causing trouble, on top of delayed effects across markets and repeated disruptions from production issues. Oddly enough, one way forward might be adjusting policies to better fit local economic realities instead of sticking strictly to standard models.