Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
5) RBI’s recent constricted monetary policy has kept real interest rates high, impacting investment flow and job creation. Critically analyze.(250 words)
Why this question:
The article captures the recent trends of RBI’s tight monetary policy that has kept real interest rates high, affecting investment movement and job making.
Key demand of the question
The answer must critically analyze the changing policies of the RBI, discuss that the primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth and that price stability is a necessary precondition to sustainable growth. You must critically bring out the issues wit current trends of monetary policy, what needs to be done.
Critically analyse – When asked to analyse, you have to examine methodically the structure or nature of the topic by separating it into component parts and present them as a whole in a summary. When ‘critically’ is suffixed or prefixed to a directive, one needs to look at the good and bad of the topic and give a fair judgement.
Structure of the answer
Briefly narrate the background of the issue.
The answer should cover the following :
- Discuss first the role of RBI’s Monetary Policy.
- Monetary Policy Process and Goals Of Monetary policy.
- Current issues facing RBI policies.
- What needs to be done to address these issues and challenges?
Conclude with significance of resolving such issues and how role of government policies is also of prime importance in handling such issues.