Monetary and Fiscal Policy Must be Aligned

Monetary Union EU is moving forward to meet its fate and Britain may perhaps be the first step in its breakdown. The proper analyses of the economic problems that European Union has been facing for long clearly indicate that the problem lies nowhere but in basic concepts behind the foundations of this Union itself. Until and unless the fiscal and monetary policies are aligned, no beneficial result is possible.

Same situations are there in India as well; as the monetary policy (RBI) moves in northward while fiscal policy (governments (UPA and NDA both)) in southward direction. Being prudent is different thing but being obsessive to something is completely a different thing. RBI Governor Dr Raghuram Rajan has been obsessive rather than being prudent (Greenspan Effect). And perhaps earlier government had idea about this that's why he was given three years stint instead of a regular appointment for five years.

Although EU is a great innovative experiment to undermine the role of governments and to push forward the idea of efficient market carried on by capitalism but it was bound to fail as it was an effort to function the body only with mind and without pumping of blood by the heart. Both the mind and heart are important for the body and they must work in tandem so are the fiscal and monetary policies for the economy.

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