Major economies prefer an independent Central Bank due to the underlying assumption that it helps in maintaining price stability and containing inflation. In this light, the present paper aims to examine the monetary policy independence in India of past four decades (i.e., 1980 to 2020) by creating a Monetary Independence Index (MI). The inverse of the annual correlation of the monthly interest rates between India (Call Money Rate) and the base nation (Federal Rate) has been used to calculate monetary independence, where the United States (US) has been chosen as the base nation. The International Financial Statistics of the International Monetary Fund has been the major data source. The analysis of index reveals how independent the monetary policy of India is from the monetary policy of the US. The trend of the index discloses that Indian policymakers have always preferred a middle path for MI where the value of the index lies more or less at an average of 50 per cent.

KEYWORDS: Central Bank, Monetary Policy, Rate of Interest.

JEL Codes: E58, E52, E43.