Monetary policies

The amended RBI Act, 1934 provides for a statutory and institutionalized framework
for a six-member Monetary Policy Committee (MPC) to be constituted by the Central
Government by notification in the Official Gazette. The Central Government in
September 2016 thus constituted the MPC with three members from RBI including
the Governor as Chairperson and three external members as per Gazette Notification
dated September 29, 2016. The Committee is required to meet at least four times a
year although it has been meeting on a bi-monthly basis since October 2016. Each
member of the MPC has one vote, and in the event of equality of votes, the Governor
has a second or casting vote. The resolution adopted by the MPC is published after
conclusion of every meeting of the MPC. On the 14th day, the minutes of the
proceedings of the MPC are published which includes the resolution adopted by the
MPC, the vote of each member on the resolution, and the statement of each member
on the resolution.

Monetary policy in India is determined by a number of factors, including

the country’s economic conditions, inflation levels, and interest rates. The
Reserve Bank of India (RBI) generally utilizes monetary policy to restrain
inflation and maintain economic stability.
One key tool that the RBI uses to influence monetary policy is the repo
rate. When the RBI raises the repo rate, it makes it more expensive for
commercial banks to borrow money, which encourages them to lend less
money and keep interest rates high. When the RBI lowers the repo rate, it
makes it cheaper for commercial banks to borrow money, which
encourages them to lend more money and keep interest rates low.
In order to promote economic growth, the RBI has adopted a more
accommodating monetary policy in recent years. This has included
reducing the repo rate and boosting banking system liquidity. As per the
statement, the repo rate was hiked for the sixth straight time and is now
at 6.5%, an increase of 0.35% from the previous rate. This is the highest
repo rate since March 2019. The reverse repo rate, however, remained
unchanged at 3.35%.
The RBI raised the repo rate by 0.35 percentage points to 6.25% during
the most recent MPC meeting, which was place in December 2022. This
was the sixth straight increase in interest rates.
Governor Das stated that the rate hike is deemed necessary at this time
and that the monetary policy will continue to be flexible and vigilant in
regard to inflation. The repo rate is the interest rate that the RBI charges
when commercial banks borrow money from the central bank.
The Governor of the Reserve Bank of India (RBI) recently made a
statement in which he voiced optimism for the world economy and a
decline in inflation rates.
The Monetary Policy Committee (MPC) of the RBI decided, with a 4:2
vote, to continue its focus on withdrawing accommodative policies.
Furthermore, the RBI has projected India’s Gross Domestic
Product (GDP) growth to reach 6.4 percent for the 2023-2024 fiscal year.
The Central Bank of India has released its projections for retail inflation in
the next two fiscal years, estimating a rate of 6.5 per cent for 2022-2023
and 5.3 per cent for the following year. In response to the rising inflation,
the Monetary Policy Committee (MPC) decided to increase the Repo rate,
the central bank’s key policy rate, by 35 basis points to 6.25 per cent in
December 2022.

FISCAL POLICIES

When the coronavirus pandemic hit, India’s economy was already slowing down.
Economic growth had decelerated from 8.3 percent in 2016-17 to 3.7 percent in
2019-20—a period that wasn’t a crisis for the global economy. Only a few other
emerging market economies (EMEs) slowed down in this way. Then, on account of
the government’s highly stringent lockdowns, the Indian economy contracted by 6.6
percent in 2020-21 before bouncing back to its pre-pandemic level in the current
year. But the pandemic has cost India two years of economic growth and
substantially increased income poverty. However, India’s fiscal response to the
pandemic has been reasonably extensive, with additional expenditures close to the
median among emerging market economies and liquidity support backed by
government guarantees double the median among EMEs.
Fiscal policy has evolved since the pandemic began. In 2020-21, the fiscal deficit was
9.2 percent of GDP, double the previous year’s deficit. That year, the government
deployed an all-of-the-above strategy: it increased current expenditures such as rural
employment and food subsidy programs; guarantees for finance for small
enterprises, farmers, non-banking financial firms, and more; and capital
expenditures on infrastructure. In 2021-22, the deficit is expected to be 6.9 percent
of the GDP, with reduced current expenditure and increased capital expenditure. The
new budget pegs the deficit in 2022-23 at 6.4 percent of GDP, again with a reduction
in current expenditure but a large increase in capital expenditure.

After many years of opening up, India’s pivot toward protectionism began in 2017,
and this budget moves the country further in that direction. The government
announced phasing out of the concessional rates in most capital goods and projects
imports (goods required for initial setting up of a unit or substantial expansion of an
existing unit). More than 350 exemption entries will also be phased out, including
certain agricultural produce, chemicals, fabrics, medical devices, and medicines for
which the government says that sufficient domestic capacity exists.

Perhaps the central pillar of the fiscal strategy for growth is the push for capital
expenditure projects. The government intends to shovel its way out of the crisis by
undertaking infrastructure construction in roads and highways, railways, urban
metro rail, telecommunications, and more. As a percentage of GDP, capital
expenditure increased from 1.67 percent in 2019-20, to 2.15 in 2020-21, to 2.3
percent in 2021-22 (excluding one-time discharge of debt for the government-owned
airline), and is again budgeted to rise to 2.9 percent in 2022-23. Further, the budget
proposes financing some of this infrastructure construction through transfers from
the Union Government’s budget to the budgets of state governments, because many
infrastructure projects are in their jurisdictions.

Trends in National Income of India

A detail study of the trend of the national income in India over the last 40 years is

very much essential for attaining a clear understanding about the impact of planning

on the Indian economy. Both the national income and per capita income are first

collected at current prices and then at constant prices for eliminating the effect of

any change of price level during that period.

This trend in national income also reflects on the standard of living of the people of

India. Thus, the national income at current prices is influenced by both the increase

in production of goods and services and the rise in prices. In order to make the
national income figures comparable, these figures are deflated at constant prices just

for eliminating the effect of any change in the price level of the country.

Poverty Alleviation Programmes aims to reduce the rate of poverty in the country by
providing proper access to food, monetary help, and basic essentials to the households and
families belonging to the below the poverty line.

According to the World Bank, Poverty is pronounced deprivation in well-being and

comprises many dimensions. It includes low incomes and the inability to acquire the basic
goods and services necessary for survival with dignity. Poverty also encompasses low levels
of health and education, poor access to clean water and sanitation, inadequate physical
security, lack of voice, and insufficient capacity and opportunity to better one’s life.

What is Poverty Alleviation?

Poverty Alleviation is the set of steps taken in an economic and humanitarian way for
eradicating poverty from a country. According to the World Bank, if a person is living on
$1.90 a day or less, then he/she is living in extreme poverty, and currently, 767 million
people of the world fall under that category. According to the last released official data, in
2011, 268 million people in India were surviving on less than $1.90 a day. Various
Programmes and Schemes under the Government of India were launched to eradicate poverty
and for providing basic amenities to the poor households. 

Schemes like Pradhan Mantri Awas Yojana and Housing for All by 2022 were developed to
provide housing to the rural and urban poor. The latest government schemes like Start-Up
India and Stand Up India focuses on empowering people to earn their livelihood.

List of Poverty Alleviation Programmes in India

Name of the Year of Government Objectives

Scheme/Programme Formation  Ministry

Integrated Rural 1978 Ministry of Rural  To raise the families of

Development Programme Development identified target groups
(IRDP) living below the poverty
line through the
development of
sustainable opportunities
for self-employment in
the rural sector.

Pradhan Mantri Gramin 1985 Ministry of Rural  To create housing units

Awaas Yojana Development for everyone along with
providing 13 lakhs
housing units to the rural
areas.
 To provide loans at
subsidized rates to the
people.
 To augment wage
employment
opportunities to the
households by providing
employment on-demand
and through specific
guaranteed wage
employment every year. 

Indira Gandhi National Old 15th August Ministry of Rural  To provide pension to
Age Pension Scheme 1995 Development the senior citizens of
(NOAPS) India of 65 years or
higher and living below
the poverty line. 
 It provides a monthly
pension of Rs.200 for
those aged between 60-
79 years and Rs.500 for
the people aged above 80
years. 

National Family Benefit August 1995 Ministry of Rural  To provide a sum of

Scheme (NFBS) Development Rs.20,000 to the
beneficiary who will be
the next head of the
family after the death of
its primary breadwinner. 

Jawahar Gram Samridhi 1st April 1999 Implemented by the  Developing the
Yojana (JGSY) Village Panchayats. infrastructure of the rural
areas which included
connecting roads,
 schools, and hospitals. 
 To provide sustained
wage employment to the
families belonging to the
below poverty line.  

Annapurna 1999-2000 Ministry of Rural  To provide 10 kg of free

Development food grains to the
eligible senior citizens
who are not registered
under the National Old
Age Pension Scheme. 

Food for Work Programme 2000s Ministry of Rural  It aims at enhancing food
Development security through wage
employment. Food
grains are supplied to
states free of cost,
however, the supply of
food grains from the
Food Corporation of
India (FCI) godowns has
been slow

Sampoorna Gramin Rozgar – –  The main objective of

Yojana (SGRY) the scheme continues to
be the generation of
wage employment,
creation of durable
economic infrastructure
in rural areas and
provision of food and
nutrition security for the
poor.

Mahatma Gandhi National 2005 Ministry of Rural  The Act provides 100
Rural Employment Development days assured
Guarantee Act employment every year
(MGNREGA)  to every rural household.
One-third of the
proposed jobs would be
reserved for women. The
central government will
also establish National
Employment Guarantee
Funds. 
 Similarly, state
governments will
 establish State
Employment Guarantee
Funds for
implementation of the
scheme. Under the
programme, if an
applicant is not provided
employment within 15
days s/he will be entitled
to a daily unemployment
allowance.

National Food Security 2007 Ministry of  To increase production

Mission Agriculture of rice, wheat, pulses and
coarse cereals through
area expansion and
productivity
enhancement in a
sustainable manner in the
identified districts of the
country

National Rural Livelihood 2011 Ministry of Rural  It evolves out the need to
Mission Development diversify the needs of the
rural poor and provide
them jobs with regular
income on a monthly
basis. Self Help groups
are formed at the village
level to help the needy

National Urban Livelihood 2013 Ministry of Housing  It focuses on organizing

Mission and Urban Affairs urban poor in Self Help
Groups, creating
opportunities for skill
development leading to
market-based
employment and helping
them to set up self-
employment ventures by
ensuring easy access to
credit

Pradhan Mantri Jan Dhan 2014 Ministry of Finance  It aimed at direct benefit
Yojana transfer of subsidy,
pension, insurance etc.
and attained the target of
opening 1.5 crore bank
accounts. The scheme

Pradhan Mantri Kaushal
Vikas Yojana
Saansad Aadarsh Gram
Yojana (SAGY)
Pradhan Mantri Jeevan Jyoti
Bima Yojana
Pradhan Mantri Suraksha
Bima Yojana
National Maternity Benefit
Scheme
Pradhan Mantri Ujjwala
Yojana (PMUY)
particularly targets the
unbanked poor
2015 Ministry of Skill  It will focus on fresh
Development and entrant to the labour
Entrepreneurship market, especially labour
market and class X and
XII dropouts
2014 Ministry of Rural  To develop the
development institutional and physical
infrastructure in three
villages by 2019. The
scheme aims to develop
five ‘Adarsh Villages’ or
‘Model Villages’ by
2024.
2015 Ministry of Finance  The scheme provides life
coverage to the poor and
low-income section of
the society. The scheme
offers a maximum
assured amount of Rs.2
lakhs
2015 Ministry of Finance  The scheme is an
insurance policy to the
people belonging to the
underprivileged sections
of the society
2016 Ministry of Health &  To provide a sum of
Family Welfare Rs.6000 to a pregnant
(MoHFW) mother who is aged
above 19 years. 
 The sum is provided
normally 12–8 weeks
before the birth in three
instalments and can also
be availed even after the
death of the child.
2016 Ministry of Petroleum  It envisages the
and Natural Gas distribution of 50 million
LPG connections to
women below the
poverty line
 Pradhan Mantri Garib
Kalyan Yojana (PMGKY)
Solar Charkha Mission
National Nutrition Mission
(NNM), Poshan Abhiyan
Pradhan Mantri Shram Yogi
Maan-Dhan (PM-SYM)
Prime Minister Street
Vendor’s AtmaNirbhar
Nidhi – PM SVanidhi
Apart from eradicating poverty in India, the Poverty Alleviation Programmes also took an
initiative in providing employment opportunities to the households of the BPL categories.
2016 Ministry of Finance  the scheme provides an
opportunity to declare
unaccounted wealth and
black money in a
confidential manner and
avoid prosecution after
paying a fine of 50% on
the undisclosed income.
An additional 25% of the
undisclosed income is
invested in the scheme
which can be refunded
after four years, without
any interest.
2018 Ministry of Micro,  It aims at Employment
Small and Medium generation for nearly one
Enterprises (MSME) lakh people through solar
charkha clusters in rural
areas
2018 Ministry of Women  to reduce the level of
and Child under-nutrition and also
Development enhance the nutritional
status of children in the
country. Also, to
improve the nutritional
outcomes of adolescents,
children, pregnant
women and lactating
mothers
2019 Ministry of Labour  It is a central government
and Employment scheme that is introduced
for old age protection
and social security of
Unorganised Workers
(UW)
2020 Ministry of Housing  It aims to provide micro-
and Urban Affairs credit facilities to street
(MoHUA) vendors affected due to
COVID-19 pandemic