Monetary Policy Instrument in India
CHAPTER 1 MONETARY POLICY INSTRUMENTS- AN INTRODUCTION
Money plays a dominant role in the life of human society. It has fashioned and shaped the destiny and fortunes of kings and rulers. With the rise of the philosophy of laissez faire and capitalism, money became a motivating force and fuel to all economic activities throughout the world.
Money and its management were not unknown to the ancient India. Kautilaya had devoted a part of his famous ‘Arthasastra’ on money and minting. Even the Vedic and ‘Pauranic’ scriptures have revealed the use and importance of money during those days.
The powerful forces behind the process of transition of economy from a barter, semi-feudal system to a modern monetized sector are the use of money proper. We have embarked on the path of planned economic development with the advent of the five year plans in the countries in fifties. We have adopted the mixed economy in which both public sector and private sector go hand in hand but wedded to the ultimate goal of “socialist pattern of society”.
Monetary policy in any country is largely conditioned by the institutional framework and environment in which it is expected to operate the structure of money market is the base on which the operation of monetary policy will depend. Monetary management is largely governed by institutional factors like the use of credit, credit consciousness of the people and their preferences, the general banking structure and development of banking habits of the people as a whole.
Monetary policy is the name given to the principles whereby the Government and the Central Bank of a country fulfill the general objectives of the country’s economic policy. Thus, monetary policy has no objective of its own and is at best a handmaid of general economic policy.
In recent years, almost all the countries of the world have been suffering from the malady of inflation. It has become a
Money plays a dominant role in the life of human society. It has fashioned and shaped the destiny and fortunes of kings and rulers. With the rise of the philosophy of laissez faire and capitalism, money became a motivating force and fuel to all economic activities throughout the world.
Money and its management were not unknown to the ancient India. Kautilaya had devoted a part of his famous ‘Arthasastra’ on money and minting. Even the Vedic and ‘Pauranic’ scriptures have revealed the use and importance of money during those days.
The powerful forces behind the process of transition of economy from a barter, semi-feudal system to a modern monetized sector are the use of money proper. We have embarked on the path of planned economic development with the advent of the five year plans in the countries in fifties. We have adopted the mixed economy in which both public sector and private sector go hand in hand but wedded to the ultimate goal of “socialist pattern of society”.
Monetary policy in any country is largely conditioned by the institutional framework and environment in which it is expected to operate the structure of money market is the base on which the operation of monetary policy will depend. Monetary management is largely governed by institutional factors like the use of credit, credit consciousness of the people and their preferences, the general banking structure and development of banking habits of the people as a whole.
Monetary policy is the name given to the principles whereby the Government and the Central Bank of a country fulfill the general objectives of the country’s economic policy. Thus, monetary policy has no objective of its own and is at best a handmaid of general economic policy.
In recent years, almost all the countries of the world have been suffering from the malady of inflation. It has become a