Explain the effects of prevailing low global growth and high global inflation on present Indian domestic growth and inflation. Discuss the methods to control inflation with a special mention of inflation targeting.

RBI’s Inflation Targeting Regime1

Adopted in 2016, the flexible inflation targeting with a 4% CPI target and ±2% band, renewed till 20312, anchors inflation expectations.

Monetary Policy Committee (MPC)

The six-member MPC balances price stability and growth by setting policy rates based on inflation outlook and economic conditions.

Export Demand and Growth Slowdown

Low global growth reduces export demand, slowing GDP growth; however, Andhra Pradesh3’s GSDP growth of 9.24% in 2024-25 outpaces the national average4 of 6.4%5, showing regional strength.

Imported Inflation and Currency Pressure

High global inflation raises commodity prices, causing cost-push inflation; capital flow volatility pressures the rupee, increasing imported inflation.

Supply-Side Constraints and Regional Variability

Food price inflation driven by supply shocks requires fiscal and administrative measures; Andhra Pradesh’s targeted interventions help manage regional inflation differences.

Fiscal Discipline and Growth Focus

Andhra Pradesh’s 2026-27 budget emphasizes deficit reduction and sectoral allocations to support growth without fueling inflation.

Enhance Supply Chain Resilience

Strengthening infrastructure in Andhra Pradesh can reduce food inflation and complement monetary policy.

Credibility and Communication

Transparent MPC communication is vital to anchor inflation expectations and maintain policy credibility.