There is a need to design credible fiscal consolidation plans and coordination strategies to ensure an appropriate fiscal-monetary mix. This will facilitate attainment of the growth target and more headroom for monetary policy to address macroeconomic goals, according to a Reserve Bank of India (RBI) report."Among the prominent post-crisis challenges is the need to insulate the financial sector from negative feedback from sovereign debt-related concerns, as also to minimise the fiscal burden on monetary policy. With the inability of governments to stabilise debt levels or even finance deficits at reasonable interest rates, monetary policy is confronting a new phase of fiscal dominance," the report on currency and finance 2009-12, released today, said. According to the report, some valuable lessons for fiscal-monetary coordination have emerged from the recent crisis. The crisis highlighted the inadequacy of macroeconomic stability in ensuring financial stability. Financial stability has, therefore, emerged as a separate policy objective, besides growth and price stability for central banks.

Source - http://www.business-standard.com