Indian Monetary Policy and Economic Reforms
Contents: Preface. 1. Introduction. 2. Studies on monetary policies. 3. Indian monetary policy : a revisit to objectives and tools. 4. Monetary policy initiative for promotion. 5. Promotional role of Indian monetary policy. 6. Conclusion and suggestions. Bibliography.
A noteworthy feature of Indian growth process over the last one and a half decades has been its stability. This is evident from the substantially lower coefficient of variation of real GDP growth during the post-reform period as compared to that during the pre-reform period, that is, before the nineties. It is also important to note that India\'s growth is driven by domestic consumption contributing on an average to almost two-thirds of the overall demand, while investment and export demand are also accelerating. In recent years, is displaying moderate deficit in current account after a few years of marginal surplus. The strengthening of economic activity in the recent years has been supported by persistent increase in domestic investment coupled with an efficient use of capital.
It is reasonable to say that the performance of the Indian economy has been by and large robust and resilient, which is attributable to economic reforms in several areas thus improving efficiency and competitiveness in the system as a whole. The conduct of monetary policy also has some significant role in this outcome, in view of its success in broadly fulfilling its objective growth with stability, the latter encompassing macroeconomic, price and financial stability. The positive contributions of monetary policy were made possible by reviewing and continuously refining the monetary policy framework, in tune with changing economic environment and context.
Author referred stepping up agricultural growth, infrastructure development, fiscal consolidation, building social infrastructure particularly primary education and basic health, managing globalisation and good governance are six most important challenges warranting priority attention. The conduct of monetary policy will continue to provide support to these areas by creating an appropriate atmosphere of macro-economic stability, especially price and financial stability, which will, undoubtedly, facilitate accelerated growth.
The author argues, the emphasis of reforms seems to be on exhibiting the form of the textbook characteristics of a liberalised, and open economy, at the cost of the substances of development : reduce state intervention and involvement in economic activities, usher in market-driven economy, abolish all subsidies including food and interest rate subsidies to the poor, and let the poor fend for themselves and so on. In the hierarchy of priorities of contemporary Indian policy makers, for instance, privatisation has gained ascendancy over poverty reduction. Economic reforms have thus become empty rhetorics so far as the attainment of end-objectives of development is concerned.
This books seeks to provide concrete evidence in support of this central them. The discussion also sketches the broad contours of policy correctives that are needed if the substance of development is to be retained as an important ingredient in the Indian monetary policy mix. (jacket)
