Monetary policy refers to the regulation of the supply of money by the monetary authority of a country. Its purpose is to ensure the economic development and economic stability of the state. The central bank can only control the supply side, it is not under its control to control the demand side.
When the central side determines the repo rate, it takes into account economic parameters such as sources of money in the market, savings of the people, production of goods, but it never takes into account the climate policies. This often adds to the environmental cost.
Think of it in such a way that if the environment is harmed due to productive activities by a company, then it will not only harm the immediate but it will also harm the economy in the long run.
For example, due to climate change, extreme weather activities such as floods, droughts etc. will dominate. For example, this time paddy production was affected due to non-rainfall of water in Kharif season and when the time came for harvesting paddy, unseasonal rain affected the harvesting of paddy.
In view of these transformational developments, now the policy makers of the country have to take into account the effects of climate change while formulating their monetary policies.
Now if we look at the measures that can be taken for this, then first of all we have to understand what is climate change? After understanding this, the environmental and economic damages due to it have to be assessed.
For logical processing of these data, we will need proper research and development in this direction. Once a viable roadmap for this is prepared, it will have to be incorporated into the practices of the companies.
Companies must ensure that they include climate change in the formulation of their economic plans. Once an adequate environment is created in this regard, the central bank will have to compulsorily incorporate it in its monetary policies as well.
Only by mutual coordination of climate change and monetary policies can we save the earth from the effects of global warming and greenhouse gases.
The Intergovernmental Committee on Climate Change (IPCC) has also been a constant warning in this regard.