Rangarajan's point was that everything else, including economic growth, followed from the control of inflation. The crucial argument of monetarists throughout the world is that the central bank's policy can only influence nominal variables, and it is not part of monetarypolicy's brief to attempt to deal with the real economy. Economists who subscribe to the more extreme versions of this view go to the extent of saying that unemployment is not something which monetary policy can do anything about. While Rangarajan had on many occasions said that the central bank must ensure adequate credit for growth, the thrust of his policy was on inflation control. Bimal Jalan, on the contrary, seems not to have such ideological preoccupations.

He has shown, by his unorthodox handling of the threat to the rupee, that he will not hesitate to take recourse to physical controls to further his objectives. That is refreshing. The weight of academic authority in the advanced economies has been on the side of pushing down the level of inflation to very low levels, regardless of its effect on employment and growth. This single-point programme, enshrined so well in the target set for the New Zealand central bank, has been part of the worldwide move towards pruning areas of government discretion-- a counter-cyclical monetary policy is ruled out.

Monetary policy is seen as a technical matter, best left to an "autonomous" central bank. Conveniently forgotten is the need for such "autonomous" institutions to be subject to the needs of a democracy. The consequence of such policies has been the giving up of the full employment objective throughout the developed world. But there exist additional reasons why such policies should not be followed in the developing world. One is the more pressing need for growth, and the other is the fact that markets are imperfect, and relying on them will not yield the desired objectives.