Reserve money or the monetary base is made up of circulating money and commercial bank deposits in the central bank is the money used to clear final transactions in an economy.
Precarious Balance
However, economic analysts have warned that in the context of defending a US dollar peg, reserve money targeting would either crowd out both the government and private sector or result in currency troubles.
In the first half of the year, there was severe crowding out as the central bank collected foreign reserves, and in the second half of the year, currency pressure has emerged as an effective loosening of policy took place and the central bank rapidly lost reserves.
In a bid to maintain reserve money, the central bank has pumped in more than 90 billion rupees of money in the