Abstract
This volume presents research that applies contemporary monetary theory and state-of-the-art econometric methods to the analysis of the monetary and financial aspects of the Indian economy and the impact of monetary policy on economic performance. This chapter provides an overview of the individual chapters and discusses how they tie into the broader aims and scope of the volume.
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Notes
- 1.
A full overview of fiscal dominance in India and of these reforms is provided by Reserve Bank of India (2013), “Report on Currency and Finance,” March 4, 2013. The narrative here draws from the Report.
- 2.
These points are made in the Chapter of this volume by Viral Acharya and Krishnamurthy Subramanian.
- 3.
See the Chapter of this volume by Atish Ghosh, Mahvash Qureshi and Eun Sung Jang.
- 4.
India’s recent experience with capital flow surges and stops is the subject of the Chapter of this volume by Poonam Gupta.
- 5.
Background for the inflation targeting framework adopted by the RBI is provided by Reserve Bank of India (2014), “Report of the Expert Committee to Revise and Strengthen the Monetary Policy Framework,” January 21, 2014.
- 6.
In India, there is open ended procurement of grains such as rice at the minimum support price (MSP). As a result, the wholesale market price cannot generally fall below the MSP. This policy also pre-empts the re-allocation of land and other resources from agriculture commodities to products that have support prices. Inflation is therefore fueled not only by demand pressures because of the mismatch between GDP growth and agricultural growth, but also the existing system of price support and procurement.
- 7.
Rajan (2015) argues that because of the RBIs past focus on WPI inflation, this put weight on internationally traded goods like commodities as opposed to domestic nontraded goods like services. This meant that whenever international inflation came down, pressure for a rate cut increased, leaving inadequate attention to domestic sources of inflation.
- 8.
Food price dynamics are very different in emerging market economies (EMEs) than in advanced economies (AEs). In EMEs food price shocks are more persistent and propagate strongly into nonfood inflation. Such second round effects are important in economies (such as India) where food is a high share in a household’s consumption basket. Therefore, for economies with important second round effects food inflation should not be ignored in the formulation of monetary policy.
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Ghate, C., Kletzer, K.M. (2016). Introduction. In: Ghate, C., Kletzer, K. (eds) Monetary Policy in India. Springer, New Delhi. https://doi.org/10.1007/978-81-322-2840-0_1
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