Articles by C Rangarajan

Monetary policy has emerged as an important tool of economic policy both in developed and developing economies. The monetary and financial system is far more complex today than it has been in the past. Financial intermediation has reached a high level of sophistication, which has itself become a source of concern. The impact of monetary policy action can be transmitted through a variety of channels, some of which though recognised in the past, have become more important. While the traditional issues such as the objectives of monetary policy and the possible trade-off among them remain relevant, they need to be related to the far-reaching changes in the institutional environment at home and abroad. The changing objectives of monetary policy, newly evolving instruments of monetary control and the transmission mechanism and issues related to autonomy in the pursuit of monetary policy are examined.

Global growth is expected to be tepid in the medium term and India will have to depend on domestic growth drivers. In order to better understand the future, a new methodological framework is proposed to estimate potential growth in India with a focus on capacity output till 2029–30. The domestic savings rate was identified as the most potent growth-augmenting driver.

Since the submission of the report of the 2012 expert group on poverty measurement, there have been a few comments on it. The purpose of this note is to clarify some of the issues raised by researchers and others on this report. The clarifi cations discussed here are (1) what is new in the approach defining the poverty line; (2) the use of calories; (3) multidimensional poverty; (4) high urban poverty in many states; (5) NAS-NSS consumption differences; (6) poverty measures in other countries; (7) public expenditure and poverty; and (8) poverty ratio eligibility for access to programmes. As most of the researchers have commented on multidimensional poverty, this note also elaborates on the reasons for not considering this measure in the report.

Tracing the rise of Keynesian policies in the post-second world war years to its decline in the 1970s and 1980s with monetary policy playing a central role in macroeconomic stabilisation, this article examines its resurrection in the years following the global financial and economic crisis of 2007-08. It points out that at the heart of the present stimulus-austerity debate is the effectiveness of Keynesian stimulus policies during episodes of growth falling below potential, and classifi es growth crises into three different types for analytical clarity. Analysis shows that though the growth crisis in advanced economies has spilled over into developing ones through trade and investment channels, its nature is different. The focus in these countries should therefore be on addressing supply shocks and structural reforms, including investment in infrastructure, through a change in the fi scal mix.

Global economic prospects are worsening rapidly. This has revived the debate on the evolving international monetary system and the international reserve currency that will underpin it. Since the 1940s, the US dollar remains the world's dominant reserve currency. Developments since 2008 have challenged the pre-eminence of the US dollar. The euro appeared to have provided an alternative during 2000-08, but has come under fire since early 2010. Prospects for internationalisation of emerging economy currencies are still limited. The global crisis of 2008-09 has resurrected interest in the special drawing right as an international reserve currency. In this paper, we argue that the SDR fails to meet the main attributes of an international reserve currency - deep and liquid markets, supported by currency convertibility; wide use internationally; macroeconomic and political stability in the issuing country. At this juncture, the critical mass of political will to invest the International Monetary Fund with these responsibilities simply does not exist and/or will take a long time to form. Despite shocks and sometimes acute differences in views on the US dollar, the current system has been resilient over decades, and is likely to remain so for some more years.