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Atharva Deshmukh

Stealth • 5m

Have studied about Monetary Policy in short and it's effect. The monetary policy is a tool through which the Reserve Bank of India (RBI) controls the money supply by controlling the interest rates. RBI is India’s central bank. While setting the interest rates, the RBI has to strike a balance between growth and inflation. In a nutshell – if the interest rates are high, the borrowing rates are high (particularly for corporations). If corporate can’t borrow easily, they cannot grow. If corporations don’t grow, the economy slows down. On the other hand, borrowing becomes easier when the interest rates are low. This translates to more money in the hands of corporations and consumers. With more money, there is increased spending which means the sellers tend to increase the prices of goods and services, leading to inflation.

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