Contrary to predictions made by interested quarters, the Reserve Bank of India has sent a strong message that it is a tough monetary regulator. It has not changed the policy rates for valid reasons. The corporate world, advocating reduction in interest rates, cannot expect to drive the central bank as per its desire.

The RBI indirectly blames the Government — by saying its decision to cut rates in April was based on the premise that the process of fiscal consolidation would get under way, along with other supply-side initiatives.

It also conveys that the government has not implemented oil sector decontrol and reforms, with

“the consequent subsidy burden on the Government crowding out public investment at a time when reviving investment, both public and private is a critical imperative”.

We have to see whether the Government gets the message and addresses these issues. The RBI is clear that it will not relent. Its priority is management of liquidity and it will use Open Market Operations to this end. Hats off to the RBI.

S. Kalyanasundaram


Reforms deficit

This refers to the editorial ‘Missing a ‘rate’ trick (Business Line, June 19) During its mid-quarter review, the RBI has done a good job in enhancing the limit of export credit refinance (ECR) from 15 per cent to 50 per cent, which will increase the credit flow to the export sector.

It has managed to keep the deposit rate steady which will also help the people, especially senior citizens, to get higher interest against their hard earned money deposited in banks. The RBI asked the central government to control the fiscal deficit, which the government has failed to do.

The government has also failed to carry forward economic reforms such as FDI in multi brand retail, decontrol of urea and petro-product prices, pension reforms and the Insurance Bill.

Jayant Mukherjee


(This article was published on June 19, 2012)
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