The constant increase in Printed Notes Supply and the excess requirement of working capital due to processes and legacy issues are two significant elements which need to be tackled head on to rein in inflation. The slack money which is in the system as working capital in form of credit at various stages is increasingly pushing up the cost to the consumer and sucking in more credit for achieving the same output. An alternative will be to incentivise use of money for shorter periods. This has to be through a policy initiative and will signal better management of working capital limits.
Given the fact that most of the receivables are linked to central & state governments the finance ministry will do well to seek a review of the Outstanding payments; the Government's "Sundry Creditors List" and devising methods to settle the same with in reasonable limits. Even for approved plan outlays, payments are with held or not released, as either the funds are diverted for meeting out salary payments (as in the case of state implemented projects with central funds) or stuck due to terms of contract an euphemism for dithering. This needs to be addressed immediately with the accelerated growth seen in the recent years.
Cash transactions have again not been controlled as the key contributor is Real Estate whose administration is the responsibility of the Center and state. A pragmatic to capture the true Real Estate values and make it attractive to comply with completing transactions closer to realistic values needs to be put in place.
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