As Mahatma Gandhi said, the test of every public policy decision should be, “how is this decision going to affect the poorest person in the country?”, which is the same as asking yourself, “is this decision that I am taking “going to touch hearts and spread smiles” among the less privileged people in the country.” 5.
To address this, the Central Bank’s forward looking strategy is to gradually reduce the outstanding lending to the government. This would absorb any excess liquidity that had its origin in accumulated past central bank financing of the government.5 Where does all of this leave us in terms of improving the environment for monetary policy, and making it less procyclical?