EFFECTIVENESS OF MONETARY POLICY IN INDIA: A COMPREHENSIVE ANALYSIS
Abstract
The article examines the impact of the Reserve Bank of India's (RBI) monetary policy on key macroeconomic variables such as inflation, GDP growth, unemployment, and money supply changes over the past decade. Using a quantitative research design and secondary data, the study employs a Vector Autoregression (VAR) model to capture the dynamic interactions among these variables. The analysis reveals that monetary policy adjustments, such as changes in the policy repo rate and cash reserve ratio, aim to control inflation. However, they face limitations due to structural and external factors. The study highlights the nuanced relationship between monetary policy and GDP growth, noting the trade-off between inflation control and economic expansion. Additionally, the impact of monetary policy on unemployment is influenced by broader economic conditions and structural reforms. The findings emphasize the importance of integrating real-world complexities into economic models to enhance their explanatory power and inform more effective policymaking strategies in India's evolving financial landscape.
Keyword : RBI, monetary policy, macroeconomic variables & VAR model
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