Content area
Full Text
India: Monetary Policy, Financial Stability and Other Essays, C. Rangarajan, Academic Foundation, New Delhi, 2009. Pp.428. Rs. 995.00.
This compendium of essays by the author holds a proof of his scholarship, originality and wisdom of his experiences as acquiring a coveted position in India has both theoretical and policy importance. Comprehensive as it is, the book with an elaborate and appropriate introduction is a good addition to literature on various financial, economic and governance issues in the Indian economy.
The book consists of four parts. Part I discusses major issues related to monetary policy and fiscal management. It begins by placing before readers the challenges confronting the monetary policy. The crucial issue, as rightly stated, relates to the feasibility of the pursuit of the objective of price stability in conjunction with the ability of the economy to attain and sustain high growth (p.39). The author eloquently brings out the divergence between real rate of interest and real rate of growth and cautions that maintenance of financial stability is in the long run interest of economic stability (p.51). The other essays in Part I throw light on fiscal responsibility, dynamics of debt accumulation, fiscal federalism, issues before Twelfth Finance Commission and its approaches and recommendations. In a specific context the relevance of Keynesian policy prescriptions is critically examined. There is a sharp observation that even Keynes recommended his approach for 'pump priming', but not to keep the pump running (p.93). No doubt this can serve as a useful warning to those who believe that in the recession hit-economy, Keynesian theory has become totally relevant. The case and comfort with which the author...