Analysing the Impact of RBI Repo Rate Adjustments on Inflation Control in India (2010–2023)

This paper investigates the relationship between the Reserve Bank of India’s (RBI) repo rate adjustments and inflation, as measured by the Consumer Price Index (CPI), from 2010 to 2023.The repo rate serves as a primary monetary policy tool for the RBI, allowing the central bank to influence economic activity and manage inflation through changes in borrowing costs for commercial banks. Using a combination of descriptive statistics, regression analysis, and scenario-based simulations, this study aims to assess the impact of repo rate changes on inflationary trends in India. The findings reveal a statistically significant correlation between repo rate adjustments and inflation, with a correlation coefficient of 0.68, indicating a moderate to strong positive relationship. Scenario analyses demonstrate that gradual increases in the repo rate are generallymore effective in moderating inflation compared to abrupt changes. Additionally, simulation- driven analysis, employing Monte Carlo techniques, underscores the predictability of inflation outcomes under various repo rate adjustment scenarios. However, the study also highlights that external factors, such as global commodity prices and domestic supply chain disruptions, substantially influence inflation dynamics, thereby limiting the effectiveness of repo rate adjustments in isolation. Overall, this research contributes to the ongoing discourse on monetary policy effectiveness inIndia by illustrating the nuanced relationship between repo rate changes and inflation management. It emphasizes the necessity for a holistic approach that combines monetary and fiscal measures to achieve comprehensive inflation control. Policymakers are encouraged to consider these findings when formulating strategies to stabilize prices, particularly in a contextmarked by fluctuating global economic conditions and persistent inflationary pressures. Keywords: Repo rate, inflation, RBI, scenario analysis, simulation, monetary policy