What role can monetary and fiscal policies play in safeguarding tariff-affected sectors? Analyse the limitations of RBI interventions. Suggest long-term institutional reforms for external sector stability.
Kartavya Desk Staff
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment
Q5. What role can monetary and fiscal policies play in safeguarding tariff-affected sectors? Analyse the limitations of RBI interventions. Suggest long-term institutional reforms for external sector stability. (15 M)
Difficulty Level: Medium
Reference: NIE
Why the question RBI Governor assures special support for sectors impacted by US tariffs Key demand of the question Discuss the role of monetary and fiscal policies in cushioning tariff-hit sectors, analyse the limitations of RBI’s interventions, and suggest institutional reforms for sustainable external stability. Structure of the Answer: Introduction Contextualise tariff shocks as external vulnerabilities that test India’s growth, stability, and policy coordination. Body Role of monetary and fiscal policies in providing liquidity, credit support, incentives, and trade diversification. Limitations of RBI interventions in addressing structural competitiveness, inflation trade-offs, and dependence on fiscal action. Long-term reforms such as export diversification, stronger institutions, forex buffers, and multilateral trade engagement. Conclusion Highlight the need for synergy between short-term policy cushioning and long-term structural reforms to secure external sector stability.
Why the question RBI Governor assures special support for sectors impacted by US tariffs
Key demand of the question Discuss the role of monetary and fiscal policies in cushioning tariff-hit sectors, analyse the limitations of RBI’s interventions, and suggest institutional reforms for sustainable external stability.
Structure of the Answer:
Introduction Contextualise tariff shocks as external vulnerabilities that test India’s growth, stability, and policy coordination.
• Role of monetary and fiscal policies in providing liquidity, credit support, incentives, and trade diversification.
• Limitations of RBI interventions in addressing structural competitiveness, inflation trade-offs, and dependence on fiscal action.
• Long-term reforms such as export diversification, stronger institutions, forex buffers, and multilateral trade engagement.
Conclusion Highlight the need for synergy between short-term policy cushioning and long-term structural reforms to secure external sector stability.