Subir Gokarn: Monetary policy considerations after the crisis – practitioners’ perspectives

I would like to thank the Ministry of Finance and the National Institute of Public Finance and Policy for inviting me to speak at this International Conference on Economic Policies for Inclusive Development. We tend to associate the process of inclusive growth and development with structural factors and the roles that they play in accelerating growth, enhancing labour productivity, creating human capital, providing access to safety nets and essential public services and so on. Many of the previous sessions have dealt directly with these issues. On the other hand, we do not usually associate monetary policy with these typically long-term considerations. However, among the many lessons that will be drawn from the recent crisis, is the critical one that imbalances in the financial sector can significantly disrupt the processes that sustain stable, long-term growth, which is a key requirement for effective inclusion. High volatility and a propensity for destabilizing shocks do not allow either the private or public sectors to make the resource commitments consistent with these two objectives. On the fiscal front, particularly, the costs of rescuing the economy from a crisis may significantly reduce the capacity of governments to sustain commitments to growth and welfare enhancing expenditure.