Business Standard

Time to improve the fiscal architecture

To chip away at the fiscal dominance of monetary policy, it is important to focus on institutional design and process improvements

RBI
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RBI

A Prasanna
The critics of the Reserve Bank of India’s (RBI) monetary policy fall in two camps. One camp casts monetary policy as powerless while the other side vests it with omnipotent powers. Needless to say, both the camps get it only partly right. The missing piece is the fiscal dominance of monetary policy.

In economics, fiscal dominance has a specific connotation and it may seem odd to talk about it when the key macro indicators are within bounds. CPI inflation has averaged less than 4 per cent over last four years and general government deficit has fallen by nearly 1 per
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

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First Published: Jan 31 2019 | 8:33 PM IST

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