Foundation
Static background & why it matters
Overview
Macroeconomic stability refers to a state where an economy experiences low and stable inflation, sustainable fiscal and current account deficits, and a stable exchange rate, fostering investor confidence. Growth drivers are the fundamental factors that propel an economy's expansion, typically measured by an increase in real Gross Domestic Product (GDP). The Reserve Bank of India (RBI) is mandated with maintaining price stability while keeping in mind the objective of growth, primarily through monetary policy, while the Ministry of Finance manages fiscal policy.
Essential for understanding the overall health and direction of the Indian economy, the role of monetary policy, and the interplay of domestic and global factors affecting growth and stability. Core to GS3 Economy.
Key facts
Monetary Policy Committee (MPC)
A statutory body responsible for setting the policy interest rate (repo rate) to achieve the inflation target of 4% +/- 2%.
Fiscal Policy
Government's use of spending and taxation to influence the economy, managed by the Ministry of Finance.
Inflation Targeting
A monetary policy framework where the central bank aims to keep inflation within a specified range, currently 4% +/- 2% in India.
Gross Domestic Product (GDP)
The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.