While India has been witnessing some positive factors like high foreign exchange reserves, low inflation and ample liquidity, the RBI, in its mid-term review of the monetary and credit policy 2002-03, has announced certain policy measures like the reduction in the bank rate, CRR and the repo rate at one go. These measures have been instigated to bring the Indian interest rates in line with other world economies. The latest credit policy has also facilitated the industrial recovery process despite the bad monsoons. Is the monetary policy moving in the right direction?

RBI's Monetary and Credit Policy stance during the last few years has been both pragmatic and consistent. Its commitment to softening of interest rates, strengthening of financial markets and improving the credit delivery system are what the Indian economy urgently requires at the financial front.

But the country's critical concerns cannot be solved by the monetary measures alone. Other complementary policies have to go hand in hand with monetary measures. Growing gap between monetary steps and non-monetary steps is not letting in the desired changes.

The policy aims at providing smooth flow of credit in order to meet credit growth/support investment demand of various sectors of the economy and most importantly, keeping vigil on price movements. Towards this end, RBI would continue its policy of active demand management of liquidity through Liquidity Adjustment Facility (LAF) via Open Market Operations (OMOs) and also using various policy instruments at its disposal as and when the situation warrants.

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