According to the Economic Survey 2023-24, what measures

Solution

Prudent monetary policy response and calibrated trade policy measures along with strong output growth, helped reduce core inflation in India to a four-year low in FY24 Prudent Monetary Policy Response:

1. Interest Rate Adjustments:
• The Reserve Bank of India (RBI) implemented a series of interest rate hikes to absorb excess liquidity from the economy. Specifically, the policy repo rate was increased by 250 basis points from 4% in May 2022 to 6.5% in February 2023.
• This tightening of monetary policy helped to control inflationary pressures by making borrowing more expensive, which in turn reduced spending and investment, leading to lower demand-pull inflation.
2. Inflation Targeting:
• The RBI maintained a commitment to its inflation targeting framework, which aims to keep inflation within a target range of 2-6%. By focusing on this goal, the RBI took proactive measures to ensure that inflationary expectations were anchored, thereby preventing a wage-price spiral.