Reddy in the Reserve Bank and Shri Montek Ahluwalia as Finance Secretary have helped establish the autonomy of monetary policy in India, free of fiscal policy compulsions. Experience over the last five years has shown that despite that autonomy, the degrees of freedom available for monetary policy management can be constrained by the Government’s fiscal stance.
What will be history’s verdict on how we, as an economy, managed this tension between fiscal and monetary policies? Managing policy in a globalizing world 17. I am often asked about the challenges for the Reserve Bank of India on the way forward.