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Discuss the need of working together of the monetary and fiscal policy for faster post-Covid recoveries in economies around the world.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

4. Discuss the need of working together of the monetary and fiscal policy for faster post-Covid recoveries in economies around the world.  (250 words )

Reference:  Times of India

Why the question:

The article highlights the importance of synergy of the monetary and fiscal policy for faster post-Covid recoveries in economies around the world. 

Key Demand of the question:

Explain in detail the need of working together of the monetary and fiscal policy for faster post-Covid recoveries in economies around the world. 

Directive:

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction:

The IMF’s recent global assessment shows the faster post-Covid recoveries in economies are attributable to combination of quick, substantial fiscal and monetary responses.

Body:

The answer body must have the following aspects covered:

Discuss first what Monetary and fiscal policies are.

Then explain how Monetary and Fiscal Policy interact in our country.

Highlight the factors that determine the dynamics of the Interaction.

Bring out the issues and challenges arising due to lack of Co-ordination.

Conclusion:

Conclude with importance of the synergy of the two to avoid the dangers of high inflation and financial instability for a temporary output spike from a disequilibrium strategy of massive monetary-fiscal stimulus.