But the fact that resistance to reforms happens for a reason does not mean that it is a superior reason. This is evident in the field of government financing. Markets have not been able to discipline governments. But who else, if not creditors, would be more suited to pushing governments to take a sustainable financial path?
Second, in the recent period, the enduring strength of foreign exchange inflows has complicated the conduct of monetary policy, as such inflows can potentially reduce the efficacy of monetary policy tightening by expanding liquidity. Third, in India, levels of livelihood of large sections of the population are inadequate to withstand sharp financial fluctuations, which impact real activity.