RBI in Impossible Trinity but ready with reserves, say economists

The RBI cannot have an independent monetary policy (setting domestic interest rates) in an environment of an open capital account and flexible exchange rates, they say

Topics
Coronavirus | Reserve Bank | RBI

Anup Roy  |  Mumbai 

The Reserve Bank of India (RBI) is precariously balancing two opposing objectives — maintaining easy financial condition in the domestic market, while ensuring external stability — and economists have started taking note. They say India is going through the classic trilemma of the ‘Impossible Trinity’.

The RBI cannot have an independent monetary policy (setting domestic interest rates) in an environment of an open capital account and flexible exchange rates. What is even more complicated for the central bank now is that financial market stability ...

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First Published: Mon, May 10 2021. 06:07 IST
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