Publication

This brief examines the change in the policy adopted by the Reserve Bank of India (RBI) at the end of 2008. The author identifies three elements that are different. First, in leaving key policy rates unchanged, the RPI has acknowledged that liquidity is not an obstacle to growth at present, but banks are showing a reluctance to lend. Second, by acknowledging that the growth of money supply at 20 percent is high and needs to be brought down, the RBI is concerned about money growth. Third, in cautioning about inflationary pressures, the RBI is setting its sights on tightening monetary policy in the near term.