21 That insight leads to rules that incorporate inertia, thereby slowing down the movement of rates over time. Each of these insights has some validity, and each has important implications for the prescriptions of a policy rule. 19  In general, the unemployment rate is more informative of the state of the business cycle than GDP because of the difficulties in estimating potential output.
A study undertaken by the Reserve Bank shows that the credit to GDP ratio has not historically been a good indicator of build up of systemic risk in our banking system. 53. Furthermore, some economic sectors such as real estate, housing, micro finance and consumer credit are relatively new in India, and banks have only recently begun financing them in a big way.