Business Standard

Monday, December 23, 2024 | 05:49 PM ISTEN Hindi

Notification Icon
userprofile IconSearch

RBI's puzzle

The central bank has to perform the difficult task of keeping a balance among inflation, exchange rate and public debt

Illustration: Ajay Mohanty
Premium

Illustration: Ajay Mohanty

Ajay Shah
The RBI’s main objective is to deliver a consumer price index (CPI) rate of 4 per cent. It also has two other objectives: Exchange rate policy and public debt management. There are interesting tensions shaping up between these objectives. High interest rates can defend the exchange rate and ensure adequate sale of government bonds, but that will slow down the economy and give inflation of below 4 per cent. Monetary policy in the coming year will be about dealing with these contradictory impulses.

From its creation in 1934 till February 2015, the RBI had no well-specified objective. This created confusion. The
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper

What you get on BS Premium?

  • Unlock 30+ premium stories daily hand-picked by our editors, across devices on browser and app.
  • Pick your 5 favourite companies, get a daily email with all news updates on them.
  • Full access to our intuitive epaper - clip, save, share articles from any device; newspaper archives from 2006.
  • Preferential invites to Business Standard events.
  • Curated newsletters on markets, personal finance, policy & politics, start-ups, technology, and more.
VIEW ALL FAQs

Need More Information - write to us at assist@bsmail.in