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Is Team Modi election ready? Part 1 – Inflation

New Delhi: The biggest exercise in the free world is about to take place in India. Being the biggest democracy in the world, with 900 million voters and representing around 1/6 of humanity, the parliamentary election in India is a shining testimony to the best political innovation of mankind – democracy.

As India enters into the election frenzy the million dollar question on everyone’s mind is who will be the next Prime Minister?

Though Narendra Modi is topping the list in the recent surveys, we look into the different aspects of his governance, policies, decisions, and issues which will have a direct effect on the prospects of BJP.

Inflation has always been the most decisive single factor in any election anywhere in the world. However, as election to the 17th Lok Sabha approaches, inflation has completely disappeared from public discourse and opposition accusations.

Retail inflation for the month of January 2019 stood at 2.57%. Compare this with 6.73% in February 2014 just before the last general election and we will understand why no one is discussing inflation this election season.

India’s inflation woes have largely been tackled by the Narendra Modi government. While the previous UPA government had to face a lot of criticism for price rise and the mismanagement of the economy, the NDA government has succeeded to rein in inflation.

Although there are many variables that led to the price decline, we must note the significance of the Monetary Policy Committee (MPC) created by the Modi government in 2016 to keep the inflation at a lower rate.

MPC is a body set up to decide on the monetary policy and fix the interest rate from time to time. It consists of six members with three from the RBI and three members appointed by the Government. The RBI Governor is the chairman of MPC.

The Monetary Policy Committee was an improvement over the previous Technical Advisory Committee (TAC) which was only advisory in nature.

MPC is tasked with keeping the inflation in check within a fixed range of 4% by revising interest rates from time to time. If the inflation target is not met for three consecutive months, then the RBI must give an explanation to the government.

Till date, the MPC has done a commendable work and has kept the inflation rate well within the target range agreed upon.

While many governments in the past faced criticism for price rise before elections, Narendra Modi and his team can be confident that the problem of inflation has been effectively addressed.

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