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JAMIA MILLIA ISLAMIA

Project Work- Economics


Project Topic- Contemporary India’s Monetary
Policies.
Prepared by
Name: Sarthak Sharma
Standard: B.A.L.L.B(Regular), Ist Semester
Subject: Economics
Guided by: Dr. Younus Bhatt.

Submitted to: Dr.Younus Bhatt.


Contents
1.) Introduction to Govt. of India’s Monetary Policies.
2.) Contemporary Monetary Policies and their Impact
over Indian Economy.
 GST.
 Demonetization.
Introduction
Monetary policy is the process of controlling the supply of
money in the economy by the central monetary authority of a
country, which in India is Reserve Bank of India(RBI), in order to
maintain the price stability in the economy.
Indian Government’s Monetary policies Since 1991(after
introduction of New Economic Policies by UPA Government)
have undertaken a series of financial sector reforms in gradual
steps. Considerable progress has been made in developing
Domestic financial markets and in Financial market integration
with the rest of the world.
Over the last 26 years the Dynamic environment for Monetary
policy had completely changed due to the LPG policy of the
government leading to relaxation of entry barriers in banking,
deregulation of interest rates and development of non-banking
financial institutions, moreover many of the loss-generating sick
PSUs were either closed down or their shares were sold out to
the Private sector(Disinvestment). Private investment was
opened up in all the Public sectors except the Four industries of
strategic importance namely, Railways, Atomic energy, Arms
and Ammunations. These all and many more reforms and
policies started shaping the Financial environment of our
country in the current scenario.
Contemporary Monetary Policies of Government of India
Since the NDA Government coming to power, under the
leadership of Prime Minister Narendra Modi the government’s
Monetary Policies have given a major breakthrough to its
people.
During the NDA’s three years in power a considerable number
of landmark reforms have been implemented. Indian economy
is on a journey to transform itself into a STAR(simple,
transparent, affluent and resilient) economy. Foreign Exchange
reserves are on a significant rise sence mid-2013 and presently
India has sufficient reserves to cover 11.4 months of imports.
RBI and the central government had already agreed to the
biggest change in the monetary policy after the opening up of
Indian economy by introducing Inflation targeting and setting
consumer inflation target of 4 percent.

GST
The Goods and services tax that came into effect from 1st
July,2017 had completely revolutionized the whole taxation
system. GST is an indirect tax regime that is levied over all the
goods and services and has replaced many indirect tax laws all
over India.
The GST has 3 applicable taxes under it:
 CGST- Central GST is collected by the Cental government
on an intra-state Sale.
 SGST- State GST is Collected by the state government on an
intra-state sale.
 IGST- It is collected by central government for inter-state
sale.

So, After implementation of GST If we visit a Restaurent for


dinner we have to pay 14% SGST and 14% CGST for the services
availed. The total tax paid is 28%(14% each).
GST had the improved the Tax collection and had also boosted
the development of economy by erasing the indirect tax barriers
between states. GST had also created a uniform tax rate all over
the country, leading to uniform prices of products like Petrol in
all the parts of the country. For eg- Earlier, before GST the price
of Petrol differed a lot in Delhi and in Ghaziabad but now after
Introduction of GST the price of Petrol is same in Ghaziabad as
well as in delhi.

Demonetization
Demonetization is the act of striping the currency unit of its
status as legal tender. There are a lot of reasons for which
Demonetization could be initiated such as to discourage a cash-
dependent economy, to facilitate trade, to combat inflation etc.
On the 8th day of November 2016, the NDA government
announced demonetization and curbed all the 500 and 1000 rs
notes of their legal status, diminishing their economic
importance and making them a mere piece of paper. The
government claimed that this bold action will curb
counterfeiting and will bring all the black Money back to the
Money circulation system.
On the Day of the announcement of Demonetization the stock
Exchanges of the country namely, BSE Sensex and NIFTY50 stock
indices fell over 6% as a result of the decision, and it also
created a disturbance throughout the economy, there was huge
shortage of currency despite the fact that new Rs.2000 and 500
currency notes were introduced and huge queues were seen
ouside almost all the banks and ATMs in the succeeding weeks.
Many political parties and economists Criticized as well as
appreciated this deciosion of government as per their views and
opinions.
As per my opinion The fact that Demonetization had curbed the
black money prevailing in the economy is completely worthless
because the majority of the black money is either in Swiss bank
accounts or in the form of Properties and both remains
unaffected by this descion. Moreover such decision only
affected the common people and huge business giants like Vijay
Mallya who is one of the leading loan defaulter of the country
with a mammoth total of Rs.10000 crores also remained
untouched by this decision.