The news came over the weekend, about a fortnight before Urjit Patel moves up the ladder to assume the governor’s office. It is recommended for most countries in need of having a monetary policy framework. Inflation targeting as a framework was more technically worked out in the 1990s by authors like Lars Svensson and Ben Bernanke, to cite two well-known economists. The RBI’s objective-set plus the indefinite effectiveness of transmission mechanism have rendered the bank cautious in adopting a formal framework till the Urjit Patel report raised the question of inflation targeting in December 2013. With the financial stability issue so prominent in view of the high non-performing loans of commercial banks, Patel will have a lot on his plate.

Source: Mint August 23, 2016 23:03 UTC