Effectiveness of Monetary and Fiscal Policy Coordination in Achieving Macroeconomic Stability in India

Author(s): Dr. Devashish Haldar

Abstract:

Macroeconomic stability is a cornerstone of sustainable economic development, and its achievement relies heavily on the effective implementation and coordination of monetary and fiscal policies. In India, the Reserve Bank of India (RBI) manages monetary policy, while the Government of India is responsible for fiscal policy. Although both aim to achieve common macroeconomic objectives such as price stability, economic growth, employment generation, and fiscal discipline their instruments and timeframes often differ, making coordination essential for policy effectiveness. This study examines the effectiveness of monetary and fiscal policy coordination in achieving macroeconomic stability in India. It explores theoretical perspectives, historical trends, and real-world policy responses to major economic challenges, including the 2008 global financial crisis, the implementation of the Goods and Services Tax (GST), and the COVID-19 pandemic. By analyzing macroeconomic indicators such as GDP growth, inflation, fiscal deficit, and public debt, the research evaluates the outcomes of coordinated and uncoordinated policy efforts. The study highlights the institutional frameworks, operational mechanisms, and communication channels between the RBI and the government, identifying both synergies and conflicts. The findings suggest that while India has made progress in aligning policy objectives, structural and political constraints continue to challenge seamless coordination. The paper concludes with policy recommendations aimed at strengthening fiscal-monetary collaboration to ensure long-term macroeconomic stability and inclusive growth in India.

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Pages: 122-125     |    2 View     |    0 Download