Which of the following correctly describes the inflation target as notified in the official gazette...........

Economic and Social Issues Monetary and Fiscal Policy

Which of the following correctly describes the inflation target as notified in the official gazette by Central Government for the period from August 5, 2016 to March 31, 2021?

4 per cent Consumer Price Index (CPI) inflation with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent

4 per cent Wholesale Price Index (WPI) inflation with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent

4 per cent Consumer Price Index (CPI) inflation with the upper tolerance limit of 5 per cent and the lower tolerance limit of 3 per cent4 per cent Wholesale Price Index

(WPI) inflation with the upper tolerance limit of 5 per cent and the lower tolerance limit of 3 per cent

None of the options given above

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Explanation:

Inflation targeting is a monetary policy where a central bank follows an explicit target for the inflation rate for the medium-term and announces this inflation target to the public. The assumption is that the best that monetary policy can do to support long-term growth of the economy is to maintain price stability. To operationalise this mandate, the Government of India notified a medium-term inflation target of 4 per cent, with a band of +/- 2 per cent for the period from August 2016 to March 2021. The inflation target has been fixed in terms of all-India CPI-Combined published by the Central Statistics Office (CSO).