......The RBI’s obsession with fighting global cost push inflation by crushing domestic demand gets revealed for what it actually is: Ignorance of basic economics cloaked in outmoded dogma and defended with arrogant obduracy. Publicly the UPA government has joined the chorus of praise the RBI for what it did not do. But if it wishes to save the economy and its own chances of re-election in 2014 it would do well to persuade the RBI to see the error of its ways before October 30.
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I am wondering, are we not putting too much pressure on Dr Subbarao by pressurizing for CRR reduction and rate cut? Some aspects like excess SLR maintained by banks, NPAs caused by mismanagement of corporates and ‘business houses’, guidance to banks to bring down Net Interest Margin(NIM), improving customer service which will result in chanelising more of household savings to banking channel, increasing direct outreach of banks to semi-urban and rural clientele and so on are concerns which are these days being addressed in inaugural speeches of seminars or some review meetings of banks. These aspects, if addressed with support from GOI and political leadership, together, will release much more funds for providing credit for economic development than a quarter percentage point reduction in CRR.
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