The authors have correctly argued that RBI has limited scope for deploying other instruments.
But what the RBI can do and which has failed to do is to prevail up on the Finance Ministry to deepen the debt market. Corporate paper is nearly absent in the debt market and there is crying need for it to be quickly implemented so that the Non agricultural credit growth is met at rates which the industry can service and credit growth in this segment is not mixed up with the rest of the market.
Similarly expansion of currency notes in circulation, which is taking place year on year to support the Real Estate expansion and phenomenal rate increases is being ignored. It is surprising that RBI as an institution which does not come under any direct influence of the Government should turn a blind eye to this phenomenon.
It is necessary for RBI to take a bold step in this regard and announce through its reports the damage currency based transactions bring to its policies. As long as RBI continues to hide and thus encourage such transactions, they will be blamed and quite correctly too.
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