Moody's: India's implementation of CPI target to aid inflation fight

The US ratings agency, Moody’s Investor Service came out with their latest report on India, expressing their take on the country’s latest measures to combat inflation.

The government last week notified parliament that it would introduce the target of 4%, plus or minus 2%, a key confirmation of the inflation-fighting policies championed by outgoing Reserve Bank of India (RBI) Governor Raghuram Rajan.

Key Quotes:

“An explicit target could help anchor price expectations and keep actual inflation at moderate levels. The government's implementation was ‘credit positive’ and underlined its commitment to controlling price rises”

"Sustained moderate inflation would contribute to macroeconomic stability and help prevent a repetition of the short marked cycles of the past”

"The changes to the monetary policy regime of the last two years mark a step toward greater policy transparency and predictability, both of which should help in policy transmission and hence monetary policy effectiveness"