limit for indirect agricultural credit is plotted in terms of share in total agricultural credit to make it comparable. for working this out, the sub - limit of 4. 5 per cent of adjusted net bank credit ( anbc ) was first converted into absolute amount by taking actual data on anbc. second, the share of this amount in total ( both direct and indirect ) agricultural credit was calculated. ( vii ) decline in the share of long - term agricultural credit starting the 1990s, the share of short - term agricultural credit in total agricultural credit has been going up, and that of long - term credit has been declining. this is disturbing but not surprising given the slowdown in capital formation in agriculture [ chart 6 ]. indirect credit to agriculture includes loans to food and agro - based processing units ( with investments in plant and machinery up to 100 million ), credit to all activities that contribute to the development of diary business, credit for purchase and distribution of fertilisers, pesticides, and seeds, credit for purchase and distribution of inputs for the allied activities ( up to 4 million ), two - third of loans ( in excess of 10 million ) to corporates, partnership firms and institutions for allied activities, finance for setting up agri - clinics and agri - business centres, finance for hire - purchase schemes for distribution of agricultural machinery and implements, loans to farmers through primary agricultural credit societies ( pacs ), farmers ’ service societies ( fss ) and largesized adivasi multi purpose societies ( lamps ), loans to cooperative societies of farmers for disposing of the produce of members, loans for construction and running of storage facilities, finance extended to dealers in drip irrigation / sprinkler irrigation system / agricultural machinery subject to certain conditions, credit outstanding under loans for general purposes under general credit cards, loans to mfis for on - lending to agriculture subject to certain conditions, loans granted to rrbs for on - lending to agriculture and allied activities sector, and overdrafts, up to 25, 000 ( per account ), granted against “ no - frills ” accounts in rural and semi - urban areas. the sub - limit for indirect credit to agriculture is fixed at 4. 5 per cent of adjusted net bank credit ( anbc ) under the priority sector guidelines. indirect credit in excess of this sub - limit is not reckoned for assessing performance under the 18 per cent priority sector target for agriculture. bis central bankers ’ speeches source : handbook of

per cent by january 2016 and 5 per cent by q4 of 2016 – 17. 2016 onwards : flexible inflation targeting 17. amid this, a monetary policy framework agreement ( mpfa ) was signed between the government of india and the reserve bank on february 20, 2015. subsequently, flexible inflation targeting ( fit ) was formally adopted with the amendment of the rbi act in may 2016. the role of the reserve bank in the area of monetary policy has been restated in the amended act as follows : “ the primary objective of monetary policy is to maintain price stability while keeping in mind the objective of growth ”. 18. empowered by this mandate, the rbi adopted a flexible inflation targeting ( fit ) framework under which primacy is accorded to the objective of price stability, defined numerically by a target of 4 per cent for consumer price headline inflation with a tolerance band of + / - 2 per cent around it, while simultaneously focusing on growth when inflation is under control. the relative emphasis on inflation and growth depends on the macroeconomic scenario, inflation and growth outlook, and signals emerging from incoming data. since then rbi has been conducting monetary policy in a forward - looking manner and effectively communicating its decisions to maintain inflation around its target and thereby to support growth. at the same time, rbi is also fine - tuning its operating procedures of monetary policy for effective policy transmission across the financial markets and thereby onto the real economy. as an outcome, inflation has fallen successively and has averaged below 4 per cent since 2017 – 18, notwithstanding recent up - tick in inflation driven by food prices, especially the sharp increase in vegetable prices reflecting the adverse impact of unseasonal rains and cyclone. evolution of monetary policy in line with the changing theoretical developments and international best practices 19. the monetary policy framework in india has also been guided by developments in theory and international best practices. for instance, the collapse of the bretton - woods system of fixed exchange rates and high inflation in many advanced economies during the 1970s provided the necessary background to the choice of money supply as a nominal anchor. since the late 1980s, however, experience of many advanced countries with monetary targeting framework was not satisfactory inter alia due to growing disconnect between monetary aggregates and goal variables such as inflation. a similar instability in money demand function was also evidenced in the indian context in the 1990s which led to a shift from monetary targeting to multiple indicators approach in 1998. 4 / 6 bis central bankers'speeches 20. since early 1990s, beginning with new zealand