The primary objective of monetary policy is a low and stable inflation. In achieving this, the economy has to be allowed to maintain growth at the highest possible rate consistent with a low and stable inflation. However, the context in which these objectives are pursued obviously changes over time.
In my view, there are three key factors that are playing an important role in the current Indian context. Each of them has a bearing on both the monetary stance and the strength of the monetary transmission process. Non-inflationary rate of growth (NIRG) The first critical factor is the maximum rate of growth that the Indian economy can generate without provoking inflationary pressures.