• Investment World
• eWorld
• Brand Line
• Mentor
• Life
• Brand Quest
• The New Manager
• BL Club
• Smartbuy

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Cross Currency

• Rates
  
  

Shipping

• Ports
  
  

Archives

• Yesterday
• Datewise
• Resources
• In Focus
• In Depth
• Events 2007

Group Sites

• The Hindu
• The Hindu ePaper
• Business Line
• Business Line ePaper
• Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

This refers to the news item “RBI opens liquidity tap again; signal for rate cuts” (Business Line, November 2). Opening the liquidity tap 360 degrees is as bad as keeping the same tightly closed. The need of the hour is to regulate the tap to ensure smooth and rationed flow of liquidity.

The Keynesian theory cannot really be replicated in today’s changed environment as well in technology. Excess liquidity may not be a total solution and we should not end up in a situation where the tap goes fully dry and industry and businesses of all sorts perish for want of liquidity.

The RBI has realised that the confidence of investors, FIIs and the general public has all but disappeared into thin air and is taking measures to address this. But to help them regain confidence will be a gargantuan task for he central bank.

The slashing or raising of repo, CRR, and other rates/ratios may remain of classroom interest, but may have little impact on the attitude of business profitability and investor interest. The RBI must also guard against rocking the investment boat, which is yet to sight a safe harbour. Controlled liquidity is the answer to the huge problems across sectors in the economy.

Ashok Jayaram Bangalore

More Stories on : Letters | RBI & Other Central Banks

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

Copyright © 2008, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line