Study of Antecedents of India’s Monetary Policy: The Past, Present and Future

Monetary Policy is the policy which looks after the supply of money into the economy, keeps record of inflation and takes into account the economy's growth. Central bank of a country conducts the monetary policy of that country. Reserve Bank of India (RBI) is the central bank of India hence regulates the monetary policy of the country. RBI formulates implements and supervises all the functions of monetary policy. Indian Monetary Policy has seen many structural changes since independence. During early 1990s, the major monetary policy measures were Cash Reserve Ratio (CRR) and Statutory Liquid Ratio (SLR). In case of India, it has been seen that the increase in inflationary pressure is mainly due to the money demanded by the central government to meet the budgetary deficit of the country. If we talk about the recent development in monetary policy ofIndia, we see that Monetary Policy Committee (MPC) has been constituted after the recommendation of Urjit Patel Committee in the year 2016. Establishment of MPC is considered to be a revolutionary development in the area of monetary policy. This paper intends to take a review on the monetary policy of India, changes that have been made to tackle the economic instability in the past and the recent developments in monetary policy of the country. It also intends to test the monetary policy with respect to pressure on inflation. This research paper is entirely on the secondary data. Different journals, books and other research papers within the same context have been followed for this paper.