Every time the US Federal Reserve raises interest rates, a quiet ripple travels outward. Currencies in emerging markets weaken, borrowing costs climb and policymakers gather to reassess their room for maneuver. No official directive is issued abroad, yet decisions made in Washington often shape the economic choices in New Delhi, Jakarta or Nairobi.

It is within this unequal monetary landscape that Ankur Bhatnagar and C. Saratchand’s 2025 book, Foundations of Money and Banking in India, must be read. On the surface, the book is a comprehensive guide to India’s money and banking institutions. But beneath its careful exposition lies a deeper and more unsettling question: How much monetary sovereignty can a developing economy truly exercise in a dollar-centered world?

Money is not just technical, it is political

One of the book’s strengths is its refusal to treat money as a neutral instrument. From the opening chapters, the authors situate currency within social trust and state authority. Their discussion of India’s 2016 demonetization captures this vividly. Rather than analyzing it as a narrow policy error, they frame it as a rupture in the social contract of money itself. Currency works because people believe in its stability. But when that belief is shaken, the costs are not evenly shared. Poor workers and small enterprises in the poorer countries absorb the shock first.

This framing sets the tone for the rest of the book. Monetary policy is not presented as a mechanical adjustment of levers, but as a practice embedded in power relations between the state and citizens, between regulators and markets, and increasingly between national economies and the global financial system.

The chapters on interest rate determination are particularly revealing. Bhatnagar and Saratchand note that developing economies often adjust their policy stance in response to movements in external “anchor rates,” especially those set by the US Federal Reserve. This is not a minor observation. It is an admission that domestic monetary policy frequently operates in reaction to global benchmarks.

When the Federal Reserve tightens, emerging economies must often follow or risk capital outflows and currency depreciation. In such circumstances, interest rate decisions become defensive measures rather than purely domestic judgements about growth or employment. Monetary sovereignty exists, but within boundaries drawn elsewhere.

The book recognizes this asymmetry, though it does so in measured language. Inflation targeting, presented as a framework of transparency and credibility, also functions as a signal to international markets. Stability becomes not only a macroeconomic objective but a reassurance to global investors that policy will remain predictable.

The contrast with advanced economies is striking. Central banks at the core of the international system can expand balance sheets dramatically, as seen after 2008, without fearing immediate external constraint. Emerging economies rarely enjoy that latitude. The rules are formally similar, but the power embedded within them is not.

Banking reform in a world of global liquidity

The institutional account of India’s banking reforms from asset quality recognition — the identification of an institution’s asset value and risk on a financial balance sheet — to insolvency frameworks — assessing an institution’s ability to prevent the failure of paying off debts — is thorough and accessible. The narratives of reform are laid out clearly, allowing readers to see how domestic institutions attempted to repair balance sheets and restore confidence. This includes examinations of nonperforming assets (NPAs), which are loans or debts with missed payments; recapitalization, or changing a company’s capital structure; and resolution mechanisms, the management of financial institution failure. 

Yet banking stress does not arise in isolation. It is deeply shaped by global liquidity cycles. Periods of abundant capital encourage borrowing and risk-taking; tightening cycles expose fragility. The book documents the domestic response to stress effectively, but the broader international transmission mechanism could have been foregrounded more strongly. Asset crises in emerging markets often mirror shifts in global risk appetite and funding conditions.

The comparative discussion of India and China is instructive here. China’s state-owned banks retain sector-specific mandates aligned with industrial strategy, reflecting a distinct approach to finance and development. India’s post-liberalization trajectory, by contrast, emphasized regulatory convergence and market discipline. The book presents this divergence analytically, but in a geopolitical context, the pressures of integration into a dollar-dominated system sit somewhat in the background.

Fintech, crypto and the new monetary frontier

To its credit, the book engages with contemporary developments such as fintech platforms and cryptocurrency. These are not peripheral topics; they are reshaping payment systems, cross-border transactions and even debates about monetary sovereignty. Digital currencies and alternative settlement systems have entered geopolitical discourse, especially amid discussions of de-dollarization.

However, while the book acknowledges these developments, it could integrate them more deeply into its broader analysis of international monetary power. Fintech and crypto are not merely technological innovations; they challenge or reinforce existing hierarchies. Digital payment infrastructures can reduce transaction costs, but they can also deepen financial surveillance and concentration. Central bank digital currencies raise questions about whether emerging economies might gain greater autonomy or become further embedded within global standards. By touching on these themes without fully developing their geopolitical implications, the book leaves readers with an important but unfinished conversation.

Why a measured critique of monetary orthodoxy matters now

Perhaps the book’s most important contribution lies in its restraint. It does not present itself as a manifesto. Instead, it carefully maps institutions, policies and debates. Its tone is cautious, sometimes deliberately so. For readers seeking sharper normative conclusions, this measured approach may feel unsatisfying.

Yet there is value in this moderation. By presenting the architecture of India’s monetary and banking system without polemic, the authors allow readers to see the contours of constraint for themselves. The limits of policy space, the discipline of capital mobility and the asymmetry of currency hierarchy become visible precisely because they are not overstated.

The international monetary system is entering a period of uncertainty. Persistent geopolitical tensions, debates over reserve currency status and tightening global liquidity have revived questions that many assumed were settled. Who controls money? Who absorbs risk? And who decides the boundaries of economic choice?

Foundations of Money and Banking in India does not answer these questions definitively. What it does is remind us that they exist and that they shape everyday policy decisions in emerging economies.

For a global readership, the book offers more than a national case study. It is a window into how a large developing economy navigates an unequal financial order, balancing credibility with growth, stability with development and autonomy with vulnerability. Money, the authors suggest, is never just a technical instrument. It is a site of power and in an unequal world, understanding that power is the first step toward questioning it.

[Cheyenne Torres edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.