Sunday, 21 June 2015

What is the need for the Union Budget when monetary policy iscontrolled by the RBI?

A police officer stands guard in front of the Reserve Bank of India (RBI) head office in Mumbai April 17, 2012. The Reserve Bank of India cut interest rates on Tuesday for the first time in three years by an unexpectedly sharp 50 basis points to give a boost to flagging economic growth but warned that there is limited scope for further rate cuts. REUTERS/Vivek Prakash (INDIA - Tags: BUSINESS)

RBI controls monetary policy ie. lending and borrowing rates. It has no control over government's decision to spend it on projects.

Apart from controlling lending and borrowing rates and regulating the banks to an extent, it is entirely up to government to whom they want to lend money, which project they want to spend it on.

RBI just ensures that in its endeavors Government doesn't enter into a transaction which can destabilize the economic environment. For example, RBI has no say in imposing import duty on electronic goods. It is entirely up to the government.

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