Inflation volatility: In 2016, the government, in consultation with the Reserve Bank of India (RBI), put in place a Monetary Policy Committee (MPC) framework. In the nearly three years since the MPC began, both core and headline inflation have come down and, more importantly, inflation volatility has reduced. Currency volatility: With inflation being targeted and contained, the remaining source of currency volatility is a shock induced by the balance of payments (BoP). A fiscal prudence wave would reduce economic volatility, but as of now, this is more hope than reality. Policy volatility: While monetary and currency policy have contributed to a reduction in volatility, sector-specific policies are a mixed bag.

Source: Mint April 02, 2019 19:07 UTC