Rethinking the Role of Monetary Policy in India: A Critical Analysis

The ever increasing attention being paid to finance capital and the financialization process itself has rendered the old fashioned monetary policy apparently in effective in accomplishing celebrated twin objectives of containing inflation and fueling economic growth. It is becoming evident that the growth of financial institutions which have not been directly regulated by the Central Banks as in the case of orthodox financial intermediaries, has in fact rendered the weapons of monetary policy almost inoperative, and therefore, it appears that central banks all over the world, especially in developing countries like India, have confined themselves into the role of ‘measuring’ inflation and taking steps to ease inflationary pressured by the way of putting certain ‘classical restrains’ on the lending rate of formal financial institutions over which Central Banks still have the regulatory mandates.