Quantitative Easing: Its’ Impact on and Lessons for the Vulnerable Indian Economy

A monetary authority or a central bank or the reserve bank of a country is an institution set up to manage the money supply, currency and interest rates in the economy. All the commercial banks come under the jurisdiction of this central monetary authority.

In order to improve the growth rate of an economy a Central bank can employ a number of policies. Such policies adopted by the central bank must strike a balance between the long-term market expectations and short-term improvements in the economy. The economy might enter into a recession if the central bank tapers its activities too quickly. On the other hand inaction on the part of the central bank with regard to tapering might be inflationary in nature. In the context of India it will be wise enough if timely steps are taken to strengthen the economy to safeguard it from such external changes. There is an immeasurable impact on fiscal credibility and policy confidence when a country acts in advance without being forced to do so.