In practice, monetary policy in India endeavoured to maintain a judicious balance between economic growth and price stability. Price stability does not necessarily mean a constant price level, but a low and stable inflation. This is because both high inflation and deflation impose costs on the economy by way of loss of output and misallocation of resources.
If we withdraw our monetary policy stimulus too early and too fast, asset prices could drop and yields rise sharply, with negative spill-over effects to the economy. At the same time, we have to be mindful, as our asset purchase programme continues, that the risks attached to it may increase the longer it lasts.