Monetary policy of the Reserve Bank of India: a study of central banking in an undeveloped economy

HITHERTO the major contributions to monetary and banking theory have been developed mainly in terms of the highly organised financial systems of Western Europe and North America. In this book Mr. Raj attempts the task of examining them against the very different background of the Indian economny, and in particular of considering how far the familiar Western concepts of the functions of a central bank are applicable to a type of system which is in many ways so different from those in which the concepts were originally evolved.

After a detailed examination of recent Indian experience, especially during the years 1935/39, he comes to the conclusion that the lack of adequate credit-channels between the Reserve Bank and the ultimate users of agricultural, and sometimes industri al, credit largely frustrates the power of the central bank to exercise any real influence over the bulk of the economy. The effects of an expansion of Reserve Bank credit, for instance, are more likely to be seen in an inflationary boom in the limited range of financial and commercial markets which are in close contact with the Bank than in any easing of credit in the small towns and villages up and down the country.