IJMSS Vol.01 Issue-03, (July, 2013) ISSN: 2321–1784 IMPACT OF MONETARY POLICY ON INDIAN ECONOMY *Rajesh Garg **Sumit Gupta INTRODUCTION By monetary policy, we mean policy concerned with changes in the supply of money. Issues connected with monetary policy are: objectives or goals of the policy, instruments of monetary control, its efficacy, implementation, intermediate target of the policy etc. India‘s monetary policy since the first plan period was one of 'controlled expansion-that is, a policy of adequate financing of economic growth ensuring reasonable price stability. Thus, RBI helped the economy to expand via expansion of money and credit and attempted to check rise in prices through monetary and other control measures. A mild version of the liberalization process in the Indian economy was initiated in the mid 1980s. But, it lacked depth, coverage and self sustaining character. During the fag end of the 1980‘s the economy suffered a big jolt with the eruption of a major macro-economic crisis. It manifested initially in the form of foreign exchange crisis, and then debt and interest payment problems. To meet the crisis India approached the World Bank and the International Monetary Fund (IMF) for a big loan. For granting the loan, World Bank and the IMF stipulated certain conditions. Since India was in a critical situation, she accepted the conditions of the World Bank and the IMF and then provided an immediate context for the realignment of the macro-economic fundamentals, through a programme of economic stabilization. With this end in view, India initiated the new economic policy in July 1991. Assistant Professor, Haryana College of Tech. & Management, Kaithal **Lecturer, Haryana College of Tech. & Management, Kaithal