The Hindu Business Line : Large capital inflows pose monetary policy challenges: RBI chief

THE large capital inflows witnessed in recent years are posing major challenges in formulating the monetary policy and in exchange rate management, according to the RBI Governor, Dr Y. Venugopala Reddy.

Dr Reddy expressed his opinion in a prepared address, which was distributed to the participants in the twenty-third annual conference of the Andhra Pradesh Economic Association organised in the Andhra University here on Saturday.

The RBI Governor, who was scheduled to preside over the inaugural session, could not attend the convention.

"A critical issue in this regard is whether the capital flows are temporary or permanent in nature. The recent episode of large capital flows prompted a debate in India on the need for exchange rate adjustment. In such a situation, the monetary authorities should presume that such inflows are temporary till they are firmly established to be of a permanent nature," he said.

Dr Reddy noted "additional complexities arise in an emerging market like India. The liquidity impact of large inflows was managed largely through the day-to-day liquidity adjustment facility and open market operations till 2003-04. Since March 2004, when the RBI signed a MoU with the Union Government, treasury bills and dated Government securities are being issued for the purpose under the market stabilisation scheme.''

Prof. V.V. Bhanoji Rao, who taught at the Singapore National University, delivered the Sir C.V. Subba Rao Memorial Lecture on `Income inequality and public policy''.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Awards for Corpn Bank

Andhra Bank pact with BITS

Securities rally on surge in liquidity

Large capital inflows pose monetary policy challenges: RBI chief

No shortage of coins in Kerala, says RBI

SBI plans more ATMs in TN

Data point to status quo in RBI stance

`We feel we must do something for the co-op bank fraternity'

Looking for a fresh start — Joining hands to survive

Focus on personal attention and service