Deepak Mohanty: Changing contours of monetary policy in India

I thank the Royal Monetary Authority of Bhutan and Governor H.E. Daw Tenzin for inviting me to address such a distinguished gathering. I thought of speaking on monetary policy in India for four reasons. First, the currencies of Bhutan and India, i.e., Ngultrum and Rupee are closely linked. Hence, monetary policy developments in India have implications for monetary policy in Bhutan. Second, in October 2011, the Reserve Bank deregulated savings deposit interest rate of banks dismantling the last vestige of interest rate regulation. Earlier we completed the process of deregulation of lending rates of banks with the introduction of the base rate system in July 2010. Third, in May 2011 we also modified our monetary operating procedure with a move to a single policy repo rate to unambiguously signal the stance of monetary policy. Fourth, we are also addressing the challenge of near double-digit inflation for almost two years now. These developments obviously are of some interest in Bhutan given the close interlinkages of our currencies.