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COMMENTARY

Rajan’s Monetary Policy Foray
Pursuit of Low Ination
S L Shetty

The Reserve Bank of India is
not justied in holding steady,
almost continuously, to some
discredited ideological condition of
monetarism and thereby hurting
economic growth.

C

onsidering the situation into
which the nation’s economy was
pushed for the period of the past three to
four years at the time that the central bank steadfastly took a illiberal monetarist policy
stance with the belonging to of ghting
ination that is largely invest-induced,
there were expectations that the renovated
Reserve Bank of India (RBI) Governor
Raghuram Rajan would modify course.
It was hoped that he would indeed wariness
the pleadings of the prime contribute,
Manmohan Singh, “that the time had
advance to look at the possibilities and
limitations of pecuniary policy in a
globalized economy” and furnish supplies for “a
fresh thinking” in helping “to bring about on
with implementing social and relating to housekeeping
changes in a complex economy”. This
was not to subsist.
Again, with a rise in the wholesale
cost index (WPI) in July 2013 (on the model of a
continuous fall over 10 months from July
2012 onwards), this ~ward the eve of the latest
middle-quarter monetary policy review
of 20 September 2013, the RBI overseer
surmised that “inationary pressures are
mounting”. With of that kind a deduction, and
determined to settle a nominal anchor
which will suffer the RBI to preserve the
incorporeal value of the rupee, he has raised
the repo appraise by 25 basis points. As he entice
it: “The intent here is that which time the repo
rate becomes the competent policy rate, it
should be congruous with inationary
conditions in the system”. Thus, the intention of pursuing a alone objective,
one of ination control, with a single instrument, namely, the repo defame, has
been set in motion.
Subbarao’s Legacy

The father thanks his colleagues, Bipin K Deokar,
R Krishnaswamy, Shruti J Pandey, Anita B
Shetty and Nishigandha R Lokhande, instead of their
assistance in preparing this...

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