An econometric model for India with emphasis on the monetary sector

The objective of this paper is to build an econometric model for India with emphasis on the monetary sector for the period 1970/71 to 1994/95. The mod el is used to project growth paths for the economy from 1998/99 through 200 1/2 under alternative policy assumptions. Broadly our model predicts that, although the economy is undergoing a difficult period due to an exceptional ly turbulent and unfavorable domestic and external environment, the economy is moving to a higher growth path with a tolerable inflation rate. But, in our view, continued growth depends on whether the country gets back onto t he reform agenda which has been held in abeyance for over the last three ye ars. The economy has benefited from the reforms that were put in place in t he first half of 1990s. Further gains can not be expected unless more and b older policy initiatives are taken, particularly in the infrastructure and financial sectors.