Comment on the view that Monetary Policy in India is used more as a stabilisation device rather than as a development tool

The monetary policy in India is decided and declared by the Reserve bank of India. It decides measures to regulate Indian economy and directs it. In Indian economy, the flow of money and capital is rather less than required to the size of Indian population.

India has layer budget deficits which needs to be financed, especially, be borrowing. Inflation rate is yet high and saving rate is, therefore, low. Due to all these measures, the RBI has to regulate Indian economy, at least to function well, rather than develop.

The money can be raised from market by Liberalising economy but yet the large part of Indian revenue is used in Interest Payment are the debt of Government.

These Limitation also put some checks against RBI to withhold itself to the limited extent of stabilization of economy.

Though the RBI Liberalised the Bank Rate and Cash Reserve Ratio in recent years to lead the economy by the rate of interest to some extent, but the fear of inflation is also there. Inflation has not been under control even after many efforts.

Generally, while being liberal, the economy gets a risk of distribution, as in, the latin American Countries and so till now, Indian Reserve Bank has not gone so far to take a risk to that extent.

But it has, as the Monetary Policies Show, decided to stabilise the economy first to make it sound from the base so that it does not full down in the greed of development.