India's economic recovery: Near Future or Distant Dream: IIFT Annual Business Summit
Economic recovery signals to a period of increasing business activity resulting in the end of a recessionary cycle. Prospects of Indian economic recovery have brightened after the formation of a stable Government. India is the second fastest growing economy with the World Bank projections of India's economy growing at over 6 percent in 2014-15 and 7.1 percent by 2016-17 as global demand recovers and domestic investment increases. However, the path to recovery is not easy. The Indian economy is going through challenges which are translating into fiscal and monetary constraints. The economy is at a crossroad where it aspires to join the likes of the US and China as the world’s superpowers, but continues to struggle with issues like rising inflation, slowdown in investments, policy paralysis, child labour, dwindling sex ratio, malfunctioning education system, illiteracy, etc. The relationship between growth and inflation has particularly been a subject of much research. In the past few years, India has suffered double digit inflation, which has weakened the growth rate. To control inflation, the Reserve Bank of India has regulated the monetary policy by adjusting the policy rates. An increase in the interest rate leads to curtailment of investment and employment resulting in a slump in growth. The tussle always persists between inflation and growth in any country. Thus, it is imperative to understand the importance of monetary policy in determining the inflation and growth in a large and open economy like India.
