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India: Monetary Policy, Financial Stability and Other Essays   
India: Monetary Policy, Financial Stability and Other Essays
C. Rangarajan
Hard-bound Book (6¼" x 9¼") :   Pages : 428
2009  Edition   :  ISBN - 978-81-7188-735-4
Price : INR 995 / US $ 69.95
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THE volume covers a wide spectrum of topics ranging from monetary policy and financial stability to globalisation and economic growth and social development. The essay on "Financial Stability" though written much before the current crisis, had anticipated many of the issues that are being debated today. The essay on "Monetary Policy" argues that maintaining price stability should be the dominant objective of monetary policy. The essay on "Globalisation" points out that India should seek to wrest maximum advantages from globalisation by identifying the comparative advantages that India possesses. In the essay “Economic Growth and Social Development”, the author pleads for an approach that weaves equity and efficiency into a coherent pattern of growth. Economic growth and social development are the two legs on which a nation should walk. Ignoring any one leg will only mean that the nation will limp along.

The book is divided into four sections: Monetary Policy and Fiscal Issues; Growth and Development; Sectoral Issues – Industry, Power, Banking and Agriculture; and External Sector and Globalisation. The book contains in all 25 essays and should interest a wide cross section of audience.


Dr. Chakravarthi Rangarajan, a distinguished economist, has been a cerebral policy maker of India who brought to bear not only deep scholarship but lateral thinking on the formulation of public policy. He is presently a member of the Rajya Sabha, the upper house of Indian parliament.

Dr. Rangarajan has held several important positions in the Government. He was Chairman-Economic Advisory Council to the Prime Minister (2004-2008) and headed the Twelfth Finance Commission (2003-04) which paved the way for fiscal consoli-dation. He was Governor, Andhra Pradesh (1997-2003) and Governor, Reserve Bank of India (1992-1997).

As Governor RBI, Dr. Rangarajan gave a major thrust to financial sector reforms. The institutional environment was altered to make monetary policy a more effective instrument of economic policy. The exchange rate regime underwent a fundamental change.

He was member of the Planning Commission during 1991-92. Prior to that, he held the position of Deputy Governor, Reserve Bank of India, for almost a decade. During this period, he was instrumental in bringing about a number of changes in the credit and financial system, both in terms of induction of new instru-ments and new institutions.

Dr. Rangarajan has taught at the Wharton School of Finance and Commerce, University of Pennsylvania and the Graduate School of Business Administration, New York University. In India, he has taught at Loyola College, Madras; Indian Statistical Institute, New Delhi and for well over a decade and a half at the Indian Institute of Management, Ahmedabad.

He is the author or co-author of the following books: Short-term Investment Forecasting (1974); Principles of Macroeconomics (1979); Strategy for Industrial Development in the ’80s (1981); Innovations in Banking (1982); Indian Economy: Essays on Money and Finance (1998); Perspectives on Indian Economy (2000); Structural Reforms in Industry, Banking and Finance (2000) and Select Essays on Indian Economy (2 vols., 2004).

Among the several awards received by him are: Business Man of the Year 1997 (Madras Management Association); Honorary Fellow, Indian Institute of Management, Ahmedabad 1997; Award of Excellence in Finance (Bank of India) 1998; Finance Man of the Decade (Bombay Management Association) 1998; Financial Express Award for Economics 1998; Wharton-Indian Alumni Award for Outstanding Leadership (2002).

Dr. Rangarajan was awarded the Padma Vibhushan, the second highest civilian honour, by the President of India in January 2002.



Part I: Monetary Policy and Fiscal Issues

1. Challenges for Monetary Policy 

  • Historical Evolution

  • Issue of Concern

  • Objective; Transmission Mechanism; Intermediate Target; Level of Interest Rate; Exchange Rate Management; Financial Stability; Autonomy of Central Banks

  • Conclusion

2. Financial Stability: Some Analytical Issues

  • Defining Financial Stability

  • Instability Bias

  • Regulating Institutions and Markets

  • Components of Regulation

  • Regulating Payment and Settlement Systems

  • Macroeconomic Stability

  • Crisis Prevention and Crisis Management

  • Monetary Policy and Financial Stability

3. The Importance of being Earnest about Fiscal Responsibility

  • Fiscal Responsibility—The Debate

  • Post-Reform Trends in Deficits

  • Impact of Deficits on Economic Prospects

  • Fiscal Adjustment—The Contrarian View

  • In Defence of Fiscal Adjustment

  • Targeting Deficits—Some Issues

  • Conclusion

4. Dynamics of Debt Accumulation in India: Impact of Primary Deficit, Growth and Interest Rate

  • Introduction

  • Decomposing Accumulation of Debt

  • Some Data Preliminaries

  • Accumulation of Central Debt

  • Profiles of Growth and Interest Rates

  • Accumulation of Primary Deficit

  • Summary and Medium-Term Prospects

5. Fiscal Federalism: Some Current Concerns

  • Federalism—As a Form of Government

  • Fiscal Federalism

  • Fiscal Transfers

  • Competitive and Cooperative Federalism

6. Issues Before the Twelfth Finance Commission

  • Fiscal Trends

  • Sustainability Issues

  • Design of Fiscal Transfers

  • Vertical Dimension

  • Horizontal Dimension

  • Restructuring Issues

7. Twelfth Finance Commission Report: Approach and Recommendations

  • Vertical Transfers

  • Horizontal Transfers

  • Role of Grants

  • Debt Restructuring

  • Institutional Changes

  • Restructuring Public Finance

Part II: Growth and Development

8. Indian Economy: Challenges and Opportunities

  • Challenges Ahead

  • 1991 Reforms—Genesis

  • Economic Reforms—Break with the Past

  • Rationale Underlying Reforms

  • Stabilisation and Structural Adjustment

  • Uniqueness of India’s Reforms

  • Post-Reform Growth Performance

  • Six Challenges on the Way Forward

  • Technology

  • Sustaining the High Growth

  • Conclusion

9. Economic Growth and Social Development

  • Evolution of Thinking on Growth

  • Performance of the Indian Economy

  • Interaction between Growth and Human Development

  • Efficiency in Expenditures

  • Conclusion

10. Economic Growth and Issues of Governance

  • What is Good Governance?

  • Nexus between Good Governance and Economic Development

  • State and Market

  • Role of the Government

  • Good Governance—Characteristics

  • Conclusion

11. Employment and Growth

  • Employment and Unemployment Scenario

  • Sectoral Distribution of Employment

  • Occupational Status of Workforce

  • Elasticity of Employment

  • Employment Projections

  • Conclusion

12. Rural Employment Guarantee Scheme: Physical and Financial Planning

  • Physical and Financial Planning

  • Delivery Systems and Capacity Building

  • Asset Creation

  • Monitoring and Experience Sharing

  • Conclusion

13. State, Market and the Economy: The Shifting Frontiers 225

  • Developments in the Literature

  • Government Intervention and Planning

  • Historical Experiences: East Asia, Russia and India

  • Conclusion

14. National Statistical Commission: An Overview of the Recommendations 241

  • Approach of the Report

  • Administration of Indian Statistical System

  • Agricultural Statistics

  • Industrial Statistics

  • Services Sector Statistics

  • Infrastructure Statistics

  • Socio-Economic Statistics

  • Financial and External Sector Statistics

  • Price Statistics

  • Corporate Sector Statistics

  • National Accounts Statistics

  • Conclusion

Part III: Sectoral Issues: Industry, Power, Banking and Agriculture

15. Paradigm Shifts in Industrial Policy 273

  • Introduction

  • Pre-Reform Industrialisation Paradigm

  • New Economic Policy

  • Trends in Industrial Production

  • New Challenges

  • Technology Intensity

  • Road Map for Indian Industry

16. Banking Sector Reforms in India 295

  • Banking in the Pre-Reform Period

  • Contours of Reforms

  • Processes of Reform

  • Way Ahead

17. Financial Inclusion: Some Key Issues 307

  • Nature of Inclusion

  • Extent of Exclusion

  • Institutional Changes

  • Commercial Banks

  • Regional Rural Banks

  • Role of Technology

  • Micro Financial Institutions

  • National Rural Financial Inclusion Plan

18. Agricultural Credit: Reaching the Marginalised Farmers 317

  • Banking Reforms and their Impact

  • Credit to Agriculture

  • Credit to Marginal Farmers

  • Strategy for Enhanced Credit to Marginal Farmers

19. Regulation of Tariffs in the Power Sector 327

  • Elements in the Power Reform Process

  • Role of Regulatory Commissions

  • Tariff Fixation

  • Price Discrimination

  • Tariffs and Competition Other Issues

  • Conclusion

20. The Widening Scope of Insurance 333

  • What is Insurance?

  • Insurance and Growth

  • Assessment of Risks

  • Regulatory Framework

  • Conclusion

21. Reforming the Pension System 339

  • Demographic Changes

  • Existing Coverage of Pensions

  • Issues in Pension Reform

Part IV: External Sector and Globalisation

22. Globalisation and its Impact 345

  • Introduction

  • Historical Development

  • Gains and Losses from Globalisation

  • Concerns and Fears

  • India and the External Sector

  • Framework of Policy

  • Conclusion

23. Global Imbalances and Policy Responses 367

  • Introduction

  • Is it a Cause for Concern?

  • Status of Global Imbalances

  • Factors behind the Current Account Deficit of the US

  • Redressing Global Imbalances

  • Fiscal Policy

  • Monetary Policy

  • Expanding Domestic Demand Outside the US

  • Exchange Rate Policies

  • Indian Response

  • Conclusion

24. Nature and Impact of Capital Flows 385

  • Capital Flows: Magnitude and Composition

  • East Asian Crisis

  • Forms of Capital Controls

  • The Indian Experience

25. The Financial Crisis and its Fallout 405

  • Evolution of the Crisis

  • Regulatory Failure

  • Immediate Tasks

  • Medium Term Concerns

  • Impact on India

  • Monetary and Fiscal Actions


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