Volume : 11, Issue : 6, JUN 2025

IMPACT OF MONETARY POLICY ON CREDIT GROWTH AND INDUSTRIAL OUTPUT IN INDIA: A TIME-SERIES ANALYSIS

DR. MOHAMMED SHAHID

Abstract

Utilizing a time-series analysis from 2000 to 2023, including the repo rate and CRR, on industrial production and credit expansion, as measured by the "Index of Industrial Production (IIP)." The dynamic relationships among these variables are analyzed using the "Vector Auto regression (VAR) model" in the study, which incorporates data from the RBI and the "Ministry of Statistics and Programme Implementation."Findings reveal that contractionary monetary policy, characterized by higher repo rates, significantly dampens credit growth in the short term, with a lagged effect on industrial output. Conversely, expansionary policies stimulate credit availability, fostering industrial growth. The analysis also highlights the role of external factors, such as global economic conditions, in moderating these relationships. The findings emphasize the significance of a well-calibrated monetary policy in India, as it is essential for maintaining an equilibrium between fiscal progress and inflation control.  This study contributes to the literature by offering observed sign on how to transmit the effects of monetary policy in a developing nation, thereby enabling policymakers to optimize policy changes.

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