The Role of Reserve Bank of India in Controlling Inflation: Traditional or Beyond Monetary Measures?

Bhirud, Vibha, The Role of Reserve Bank of India in Controlling Inflation: Traditional or Beyond Monetary Measures? (December 3rd, 2014) GNU-FMS International Conference on Accounting, Taxation and Finance

11 Pages Posted: 12 Aug 2016

Date Written: December 3rd, 2014

Abstract

Soaring inflation in India is a grave source of concern, given the differences between rich and poor. This paper will focus on role of the Reserve Bank of India and the way ahead. Increased prices are the result of excess money relative to the goods and services produced. The Reserve Bank of India has various roles, amongst which “Price Control” is one of the most important. Reserve Bank of India is the authority to control inflation through monetary policies which it does by increasing bank rates, repo rates, cash reserve ratio, buying dollars, regulating money supply and availability of credit. These measures reduce the money supply in the market thus reducing demand which further decreases the prices. But the ineffectiveness of these tools is hampering the growth rate and investment patterns. The question is, are monetary measures alone enough to control inflation issues? It is necessary to strengthen the supply side rather than concentrate only on the demand side. Though difficult, the Reserve Bank of India can lay certain regulation to direct funds for improvement in infrastructure instead of pushing demand.

Keywords: Reserve Bank of India, Monetary Policy, Inflation

Suggested Citation

Bhirud, Vibha, The Role of Reserve Bank of India in Controlling Inflation: Traditional or Beyond Monetary Measures? (December 3rd, 2014). Bhirud, Vibha, The Role of Reserve Bank of India in Controlling Inflation: Traditional or Beyond Monetary Measures? (December 3rd, 2014) GNU-FMS International Conference on Accounting, Taxation and Finance, Available at SSRN: https://ssrn.com/abstract=2820276

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