Implication And Impact Of Operation Twist In India
Main Article Content
Abstract
Purpose
Balanced economy toil for macroeconomic stability and speeding up the subsequent structural reforms in the financial system of country. The purpose is to create a competitive environment in the financial sector by taking care of price solidity and growth. In order to make that balance, economy requires sturdy and steady finance sectors where firms can easily avail credit. For the compliance, bank lending required to be sustainable and independent of bank loans.
High blend of various markets and increasing globalization, compelled for reforms in the operating financial framework with respect to available instruments, followed procedure and architecture of institutions. In this context, monetary policy strategy called Operation Twist is used by central banks with an objective to revive economic growth through reducing long-term interest rates. Operation Twist was first exercised in 23rd December 2019by Reserve Bank of India. Our paper attempts to understand the contribution of operation twist strategy to speed up growth and reduce interest rate for managing economy effectively.
Methodology
Review of available literature related to adoption of unconventional monetary tools with special reference to operation twist for reviving the economy was undertaken to understand the requirement for exercising such tools the their overall impact on economic growth.
Findings
With an objective to control the yield, in total operation twist has been applied in three phases. The first phase of operation twist was carried out by the Reserve Bank of India on 23rd December 2019, followed by successful second phase and third phase. The results were exceptional. The effect was witnessed instantly day as the Government bond fell by 0.2 percentage points on the same day.
Practical Implications
Thus, Operation twist could help banks free up their long-term capital for boosting long-term investments and increasing their lending opportunities. It has been an optimistic and prompt remedy in the endeavor to restore the health of Indian economy.
Originality value
Need, Framework and Implication of operation twist; one of the monetary policy tools was analyzed carefully in relation to India. Very few articles are available on operation twist. This paper attempts to remain original and describe real impact of operation twist tool.