The Hindu Business Line : Incompatible approaches

The Union Finance Minister, Mr P. Chidambaram’s advice to the bankers to cut interest rates (Business Line, October 6) in order to stimulate industrial growth is incompatible with the recent mopping up operations of the Reserve Bank of India (intervening vigorously in the money market through the reverse repo rate) to reduce excess liquidity to the tune Rs 50,000 crore.

Now, the suggestion of the Finance Minister to reduce the interest rate will push up the demand for loans and liquidity in the economy will rise again, leading to a situation of “too much money chasing too few goods” or, in other words, inflation. The monetary policy of the country must be in tandem with the government’s way of thinking.

S. Ramakrishnasayee, Ranipet

More Stories on : Letters | Financial Policy

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

Stories in this Section
FTA concerns

Spectre of sovereign wealth funds

Bank automation: Towards paperless transactions

Finance and the real economy

Capital market plays a catalytic role

Incompatible approaches

Using reserves