Monetary Policy of India

Meaning of Monetary Policy

Monetary policy, according to D.C. Rowan , is the set of measures by monetary authorities aimed at regulating (a) the money supply, (b) the cost of money or the interest rate, and (c) the availability of money to achieve specific economic objectives .

Objectives of Monetary Policy

he primary objectives of monetary policy are as follows:

To Regulate Money Supply in the Economy

01 Monetary policy addresses both the money in circulation and credit created by banks. The supply of money is expanded through credit expansion and reduced through credit contraction.

To Attain Price Stability

02 The key aim is to ensure price stability and manage inflation. The price level is notably impacted by the money supply.

To Promote Economic Growth

03 Monetary policy plays a crucial role in providing the necessary currency and credit for economic development

To Promote Saving and Investment

04 By regulating interest rates and controlling inflation, monetary policy encourages savings and investment.

To Control Business Cycle

05 Monetary policy aims to manage the different stages of the business cycle, such as boom and recession.

To Achieve Stability in the External Value of Rupee

06 The Reserve Bank works to stabilize the exchange rate of the rupee with major foreign currencies.

To Manage Aggregate Demand

07 Monetary policy balances the aggregate demand and supply of goods and services. Credit expansion and interest rate adjustments are used to either boost or moderate demand, depending on the economic conditions.

To Ensure More Credit for the Priority Sector

08 Efforts are made to provide more credit to priority sectors, including agriculture, small industries, and weaker sections of society.

“ Monetary Policy of India ” Written by Readers Material