Michael D. Patra said that as financial inclusion in India further increases, volatility in consumption as a source of fluctuations in production can be expected to reduce.
Reserve Bank of India Deputy Governor Michael D. Patra on Friday said the country’s monetary policy is, by design, financially inclusive and the strategy will result in maximizing policy effectiveness and welfare.
Financial inclusion appears to have picked up, with the level of the RBI’s Financial Inclusion Index rising from 49.9 in March 2019 to 53.1 in March 2020 and 53.9 in March 2021, Mr Patra said at an event held at the Indian Institute of Management. IIM Ahmedabad.
“The evidence is still building up and strong conclusions from its analysis may be premature, but India’s monetary policy is, by design, financially inclusive and it will leverage this strategy in the future…,” he said. said.
An economy with all consumers economically involved would expect to experience less production volatility due to lower consumption volatility. In an economy with economically excluded consumers, monetary policy has to give more weight to stabilizing output, he said.
Mr Patra said that as financial inclusion in India grows further, volatility in consumption as a source of fluctuations in production can be expected to reduce.
He said this would provide headroom for monetary policy to focus on reducing inflationary volatility, which brings about welfare benefits for all.
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