Monetarist Blinkers

Monetarist Blinkers The Annual Report of the Reserve Bank of India, released this week, expects real income to grow by 9 per cent in 1988-89, compared to the growth of 2.5 per cent in 1987-88. One need not quarrel with this assessment; it reflects largely the anticipation, in the wake of the satisfactory monsoon this year, of a recovery of agricultural production which had fallen by 4.6 per cent in 1987-88 and 5.6 per cent in 1986-87. What one does expect from the country's central bank is some indication of what it proposes to do within its own sphere, that of monetary policy, to make the most of the favourable environment for growth of the economy which it says has been created by the good monsoon and the revival of agricultural output. This, unfortunately, the Reserve Bank's Annual Report fails to provide. What one gets instead are opaque statements of a general nature, such as that "monetary policy is essentially a short-term instrument" and, in more or less the same breath, that "the integral link between money, output and prices cannot be viewed exclusively within a narrow time frame of a year".