Barry Eichengreen, Poonam Gupta, Rishabh Choudhary, 12 October 2020

Inflation targeting in India is a work in progress, but the interim assessment presented in this column suggests that significant progress has already been achieved to date.  This progress is evident in the reduced volatility of a range of inflation-related outcomes (the volatility of inflation, of inflation expectations, and of exchange rates and equity markets) and in the stronger anchoring of inflation expectations, which appears to have enhanced the ability of the Reserve Bank of India to respond to the exceptional shock of the COVID-19 pandemic. The Bank would appear to be one of a substantial number of inflation-targeting central banks that were able to respond more forcefully than their non- inflation-targeting counterparts.

Aakriti Mathur, Rajeswari Sengupta, 03 September 2020

Since the 2008 Global Crisis, significant attention is paid to central bank communication, especially for countries with an inflation targeting mandate. This column analyses the monetary policy statements of the Reserve Bank of India, which formally adopted inflation targeting in 2016. It finds that the length of statements has dramatically declined, the linguistic complexity has improved, and the content is more focused on inflation topics since the regime change. In addition, there is a strong relationship between the length of statements and stock market volatility, highlighting the real impacts of effective communication.

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