Pointers To New Policy

In order to ensure that the projected money supply expansion in 1996-97 holds good, the central bank would have to not only use the instruments of policy as its command, but also develop institutional mechanisms to broaden the investor base for government securities through establishment of primary and satellite dealers in government securities, and efficient settlements, dearing and payment systems. Concerted efforts have been made in this direction to build up the institutional structure and these efforts would be reinforced in 1996-97.

It is, therefore, necessary that both fiscal and monetary policies are committed to inflation control as one of the important objective of policy. There would then be greater autonomy for monetary policy an in such a milieu, it would be the duty of monetary policy to ensure that the inflation rate is kept low, not just as an end in itself but as a means to promote sustained and equitable growth.

 

(Excerpted from the RBI Annual Report 1995-96)