Change monetary policy for better growth

Abstract

The industrial output, a leading indicator for growth in the economy, for the month of August is lower than expected mainly because of the shrinkage in the index of capital goods and consumer durables, reflecting mollified demand illustrated by lower sales of cars. The retail inflation is the lowest since January 2012 because of drop in food prices and muted consumer demand. In a related development, the finance ministry has been considering to assign an inflation target to Reserve Bank of India (RBI) in an effort to modernise monetary policy. In fact, the new government assumed office in the midst of an important debate on what should be the correct monetary policy framework for India. The debate basically hovers around the philosophy of adopting inflation targeting in India and finds its origin in the Committee on Financial Sector Reforms (CFSR) set up by the Planning Commission in August 2007. The findings of the CFSR resonated, after 6 years and great financial recession, in January 2014, in RBIs Expert Committee on Monetary Policy Framework (ECMPF). In the very first budget of the new government, the finance minister doused the flames of the raging debate by announcing the need to modernise monetary policy. Read more at: https://www.financialexpress.com/archive/change-monetary-policy-for-better-growth/1300085/