Reserve Bank of India
India is one of the fastest growing economies in the world. They currently have a GDP of
around 2.7 trillion dollars being the sixth largest economies in the world sorted by GDP. The
GDP per capita is low at about 2300 dollars resulting in India being ranked 145th of the
world's countries. Inflation has been a big problem for India's economy almost always being
higher than the target and in december 2021 it landed at 5.59%. The unemployment rate in
january of 2022 was 6.57% which is the lowest it has been since march 2021. The current
repo rate is 4%. The exchange rate between Indian rupees and USD is 74,64 rupees per
dollar.
The main objective of the monetary policy of India is to maintain price stability. This is so
that the economy of India can grow in a sustainable way as growth is a big focus in India's
monetary policy. To achieve this the inflation needs to be controlled. It is up to the
government of India to set the inflation target every five years but the reverse bank of India
plays a big part in the decision. The inflation has been a big problem for India during the
years and has been hard to control for the indian government often landing over the targeted
rate. In March 2021 the government in consultation with the RBI set the inflation target at 4%
with an upper tolerance of 6%. The inflation landed at 5.59% for december 2021. (Reserve
bank of India, 2022)
The reserve bank of India was originally privately owned but it was nationalized in 1949 and
is now fully owned by the government. The bank has a board consisting of one governor and
three deputy governors, these are appointed by the government and are appointed for a period
of four years. This means that the RBI and the government of India are very correlated and in
my opinion not independent.
Since India's economy has grown so fast not everything has been keeping up. It has been up
to the reserve bank of India to ensure that this growth happens in a sustainable way. For
example as the implementation of electronic payment systems rapidly developed it has been
up to the RBI to ensure the safety and accessibility throughout the country.
The RBI plays a big part in controlling and supervising the financial markets in India to
ensure its stability and growth. The RBI sets up organizations and committees to supervise
and develop the infrastructure of the financial markets.
Since the government has a lot of control over the central bank I think this can create a moral
hazard where the RBI might abuse their power to benefit the government instead of the
overall economy in the country.
Reserve Bank of India. (2022)