In making our policies, we have to factor in external developments, particularly the spillover impact of the policies of advanced economies on our macroeconomy. This will become even more important as India’s integration with the global economy increases. Surely, globalization is a double edged sword. It comes with costs and benefits.
The Reserve Bank needs to sharpen the analytical and intellectual rigour to make policies that exploit the advantages of globalization and mitigate its risks. 40. Over the last five years, as an institution, we have learnt quite a lot about managing policy in a globalizing world. Yet the learning curve ahead is steep.