ForumIAS LATEST
- Prelims Test Series (PTS) for Prelims 2027 starts 11th Oct. 2026 Click Here to know more →
- [Pre-order] Ethics Redbook 3rd Edition: Delivery starts from 10th October onwards Click Here to Read More →
- 21 Sept. | Forum Residential Coaching (FRC) for UPSC preparation Click Here to know more →
- 21 Sept. | GS Advance Program (GSAP) for UPSC 2027 Mains starts from 10th Oct. Click Here to Read More →
Context:
The Lack of an honest debate on inflation and monetary policy, is hurting India’s growth
Introduction:
- The entire sustained decline in inflation from 5+ levels has been missed by the RBI.
- Last 12 months average inflation of 3.4 per cent with the maximum of 5+ observed in August 2016.
- Deputy Governor in charge of monetary policy, Viral Acharya opines: “Higher real rates are justified in the meantime as absent efficient transmission, attempts to address symptoms of balance-sheet problems with aggressive monetary easing get wasted and can even backfire by misallocating investments, fueling asset price inflation, creating false hopes of a growth boost, and relaxing the pedal on deeper structural reforms.
- At the release of an edited book by Rakesh Mohan, one of India’s leading economists and thinkers, there ensued a panel discussion on what policies were needed to get India growing again.
- The eminent panel fully recognised that the economy, particularly the manufacturing sector, was not in good condition
- The panel discussed the importance of sun-spots affecting jobs.
Key points:
- The median real policy rate in emerging economies is 0.8 per cent.
- Many economies (including Bangladesh and Vietnam) have negative real policy rates.
- Excluding Brazil and Russia, India has the highest real policy rate in the world, and the Russian rate is only 50 bp higher.
