Indian economy is going through underlying changes in post-pandemic recovery process. Effect of policies, monetary or fiscal, on macroeconomy needs a thorough analysis in these recessionary times. In this context, this study develops a closed-economy DSGE model to see the impact of monetary policy on the Indian economy. The model includes price rigidities, and parameters are calibrated using the data on the Indian economy. The model includes two sectors - production and consumption, and an inflation-targeting regime following the Taylor rule. The model is simulated for a positive productivity shock and an expansionary monetary policy shock. Results show that a positive productivity shock improves economic activity, and an expansionary monetary policy shock increases output for the short term only
