Need for Monetary-Fiscal Policy Coordination

Monetary policy, managed by the central bank (RBI in India), controls money supply and interest rates to achieve price stability and growth. Fiscal policy, managed by the government, uses taxation and spending to influence aggregate demand. Effective coordination between these two powerful tools is crucial for achieving stable economic growth, managing inflation, and ensuring sustainable public finances.

Recent Developments

  • Retail inflation averaged 4.6% in FY 2024-25, reaching a six-year low, with March 2025 seeing a year-on-year drop to 3.34%.
  • The RBI's Monetary Policy Committee (MPC) maintained the repo rate at 6.50% in December 2024, focusing on aligning inflation with the ....
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Indian Economy