It was felt for a long time, erroneously, that ‘strategy’ or ‘vision’ documents belonged exclusively to the domain of corporate boardrooms or business school classrooms. As the world becomes more complex and layered, everybody needs a strategy, including central banks. Financial systems in almost all economies have become exceedingly elaborate, entangled and labyrinthine; this requires central banks to detect incipient signs of financial instability which could arise anywhere in the system and turn contagious. The second layer is the impact of fiscal policy on the economy; in India, we have the complication of the Reserve Bank of India (RBI) mandated to sell government bonds. Plus, a globalized world requires central banks to watch over foreign exchange flows and manage currency-rate volatility. The top-most layer involves watching the economy’s monetary dynamics, especially the often-tricky balance of price stability and growth. It’s a highly complicated task and RBI has done the right thing by drawing up a formal medium-term strategy document. This is better than management by the seat of one’s pants, or even annual plans. Yet, two areas in RBI’s strategy document for 2023-25, Utkarsh 2.0, are crying out for improvement.
Add a Comment