, it is possible to mention some limitations to making communication more effective in india. most often, in any given context, the preferences of market participants may be different but not necessarily opposed to the public policy preferences. while transparency and communication in such circumstances helped in a reordering of the preferences, a surprise element in the decisions and timing of the communication was more effective when the public policy preferences and the market preferences were in virtually opposite directions. in the latter case, the communication of the reasoning for the actions, either concurrently or ex post, was found to be desirable. communication is not pre - commitment pre - commitment is generally useful on many occasions as part of monetary policy communication. i have two observations based on our experience in this regard. first, in highly uncertain conditions, a conscious view needs to be taken on the virtues of precommitment. second, even when there is a pre - commitment and some reversal was needed at some stage due to unforeseen circumstances, a detailed and timely explanation for deviating from the assurance helps clarifying the situation. further, degrees of precommitment may vary from a “ vague but indicative ” to “ a definitive time - table ”, and our choice has varied depending on the circumstances. what to communicate on what to communicate, professor blinder refers to four different aspects of monetary policy ; namely, overall objectives and strategy, motives behind a particular decision, the economic outlook and future monetary policy decisions. most difficulties in putting these into practice arise in regard to the future monetary policy decisions. our effort in this regard has been to explain the stance of the monetary policy that would govern the future, which is done currently at quarterly intervals. the emphasis of this communication is on presenting information and analyses, that allows the market participants to draw their own inferences, but the rbi desists from giving any explicit forward guidance. the rbi is not only responsible for monetary policy but also for banking regulation, and for management of the external sector and the government debt. further, the content of communications relates not only to policy changes but also to the path of structural reforms, including legal reforms. in our periodical communications we have adopted a format of presenting the monetary policy and developmental and regulatory policies in two distinct sections in our annual and mid - term reviews ; while the first quarter and the third quarter communications are confined to monetary policy. cross - references are no doubt, inevitable. these are in addition to various other forms of communication – regular or ad hoc, and formal

and credibility. on the impact of rbi ’ s communication on financial markets, the most notable contribution has been in generating a better understanding, debates and sensitivities among the market participants and analysts, of the issues involved in money, finance and macro - stability. this process has been critical for india partly because the legacy of a planned economy required un - learning as well as re - learning and partly because the financial sector reform process as well as the context has been somewhat more unique to india than in many other emes. predictability on the predictability of the monetary policy decision in india, i am not aware of any research work on the subject. let me therefore take recourse to anecdotal evidence. since 2004, rbi has been withdrawing monetary accommodation, strengthening prudential requirements and emphasizing risks to price as well as financial stability. most market participants seemed to have conditioned, at least until recently, their expectations of monetary policy response on what they considered to be the standard practice in advanced economies. as a result, for some time in the past, the rbi acquired an unwarranted reputation of always surprising the markets, prompting me to quip at one stage that “ the financial markets always surprise me with their expectations from the rbi ”. as regards the forms of central bank communications, our experience is that formal, structured and periodic statements are normally valued significantly, but there is a markedly heightened interest in speeches and comments in times of unexpected global or domestic developments. india is not an inflation - targeting country. the democratic pressures have proved to be a disciplining force so far, and its record over five decades is reasonable relative to most developing countries. further, the two groups of commodities that carry a large weight in the consumption basket, namely food and fuel, are subject to supply shocks, making it difficult to identify a “ core ” that could be meaningfully targeted. yet, there are suggestions, mainly from the academia, for inflation targeting but there is little or no support for it in political economy. there is a reference in the paper to paying some attention to communication with the general public. in india, we recognize that communication is not neutral to the target audience. the rbi communicates with various types of audiences – researchers, analysts, academicians, media persons, entities regulated by the central bank, other central bankers, rating agencies, international or multi - lateral bodies, and players in the financial markets. the rbi also endeavours to communicate with other special audiences, such