Articles by Amaresh Samantaraya

The Reserve Bank of India, like most central banks, has to choose between the three corners of the impossible trinity, that is, free capital flows, monetary policy independence and exchange rate stability. This article uses the Aizenman et al (2008) framework to analyse the trilemma choice of the RBI over 2000–22. The results provide interesting insights into the RBI’s shifting position in managing the impossible trinity over the years.

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Understanding Inflation Dynamics in India

Vol. 56, Issue No. 2, 09 Jan, 2021

Gopinath Tulasi, Amaresh Samantaraya, Thangjam Rajeshwar, Abhishek Chaubey

The flexible inflation targeting framework was formally adopted by India in 2016 with an amendment to the Reserve Bank of India Act. This paper attempts to throw light on the dynamics of consumer price index headline, core, and food inflation, using a relatively young and atheoretical approach pioneered by Stock and Watson in 2007. The empirical results, indicating that the behaviour of core inflation is different from that of headline and food inflation, have implications for the conduct of monetary policy.

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RBI’s Interest Rate Policy and Durable Liquidity Question

Vol. 52, Issue No. 22, 03 Jun, 2017

C Rangarajan, Amaresh Samantaraya

The Reserve Bank of India should take into consideration longer term liquidity management for smooth monetary transmission. It must clearly define “durable liquidity” in the form of some quantitative variable and set its desired path for one year or so. This will anchor expectations on future interest rate and liquidity premium, and certainly improve the link between the interest rates in various terms to maturity. Moreover, the desired target for durable liquidity can also serve to improve overall monetary policy effectiveness.

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Procyclical Credit Growth and Bank NPAs in India

Vol. 51, Issue No. 12, 19 Mar, 2016

Amaresh Samantaraya

Despite recent monetary policy accommodation, bank credit growth continues to decelerate in India, partly due to huge non-performing asset overhangs in banks. This paper explores various issues related to surging NPAs in banks and observes that excessive credit growth in the past is a major reason that has led to current NPAs. Other factors such as contemporary economic conditions, capital adequacy and overall levels of efficiency of the banks have also affected the incidence of NPAs. For promoting financial stability and enhancing monetary policy effectiveness, it is suggested that macro-prudential aspects such as counter-cyclical capital buffer and dynamic provisioning need to be strengthened. There is also a need to explore if corporate governance concerns could be instrumental in adversely impacting the loan book of state-owned banks.

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Has Odisha Become Less Poor in the Last Decade?

Vol. 49, Issue No. 46, 15 Nov, 2014

Amaresh Samantaraya, Arundhati Mallick, Auro Kumar Sahoo, Biswabhusan Bhuyna

Though there has been overall economic progress in India in the post-reform period, it has not been uniform across the country. This article points out that contrary to popular perception, Odisha gradually improved its relative economic position in the second half of the post-reform period. This is evident both in terms of per capita income and key socio-economic indicators. A household survey undertaken to assess the situation at the grass-roots level also corroborates this. An analysis of the information from the survey also suggests that good irrigation facilities, road connectivity, and proximity to vibrant economic activities, such as mining and industry, facilitate more earning and a better standard of living.

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An Index to Assess the Stance of Monetary Policy in India in the Post-Reform Period

Vol. 44, Issue No. 20, 16 May, 2009

Amaresh Samantaraya

The Reserve Bank of India has formally adopted the "multiple indicator approach" in the conduct of monetary policy since April 1998. During this period, sole reliance on traditional indicators of monetary aggregates or policy rates is not adequate to reflect the stance of monetary policy. This paper develops a monetary policy index by synthesising the extracted signals from the policy documents and quantitative information embedded in key indicators. The mpi so constructed was used to assess the impact of monetary policy on macroeconomic variables such as interest rates, bank credit, inflation, and output growth during the post-reform period. It was observed that while monetary policy has an instant influence on interest rates, the impact on inflation and output was realised with a lag of around 6 to 18 months.

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Indian Experience of Inflation

Vol. 41, Issue No. 04, 28 Jan, 2006

Amaresh Samantaraya, R K Pattnaik

An assessment of the inflation record of India reveals that inflation increased from the 1970s onwards before moderating in the mid-1990s. Supply shocks, both due to a setback in agricultural production and international oil prices, and monetary expansion due to automatic monetisation of the fiscal deficit were the major contributory factors to higher inflation. Reform initiatives since the early 1990s towards developing a broad-based financial market, particularly activation of the government securities and forex markets coupled with improved monetary-fiscal interface enabled better monetary management since the second half of the 1990s. Moreover, judicious supply management through buffer stocks of foodgrains and import of sensitive commodities containing the adverse impact of supply shocks also played an important role. It can also be noted that notwithstanding the unprecedented size of external capital flows, monetary management was effective in ensuring a reduction in inflation and lowering expectations.