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What are the objectives monetary policy? Evaluate the major impediments RBI faces in achieving its objectives.

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

5. What are the objectives monetary policy? Evaluate the major impediments RBI faces in achieving its objectives.  (250 words)

Difficulty level: Moderate

Reference: Live MintInsights on India

Why the question:

The article discusses how mixed incentives can complicate the Reserve Bank of India’s (RBI) monetary policy objectives.

Key Demand of the question:

To write about the role of RBI especially as part of monetary policy and impediments it faces in achieving it.

Directive word:

Evaluate – When you are asked to evaluate, you have to pass a sound judgement about the truth of the given statement in the question or the topic based on evidence.  You must appraise the worth of the statement in question. There is scope for forming an opinion here.

Structure of the answer:

Introduction: 

Begin by defining the monetary policy.

Body:

First, in brief, write in brief about the various objecitves of monetary policy.

Next, write about the impediments it faces by RBI in achieving monetary policy objectives – Price Stability, high inflation, particularly in food and fuel prices, delicate balance between stimulating growth and controlling inflation etc. Substantiate by citing statistics.

Conclusion:

Conclude by writing a way forward to overcome the above-mentioned limitations.