India’s financial markets now have a real-time mirror, and it is not the repo rate. In a quiet yet consequential move, economists at the Reserve Bank of India have developed a high-frequency Financial Conditions Index, compiled from twenty daily indicators across the money, bond, foreign exchange, equity, and corporate credit markets.Unlike traditional metrics that offer lagged, narrow glimpses into market stress or exuberance, the new Financial Conditions Index distils India’s financial pulse into a single, dynamic number. Though published as a research article and not an official RBI policy document, it is part of the central bank’s broader effort to fine-tune its liquidity operations and rate signalling, especially as it seeks to distance monetary policy from episodic noise.
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