...........By underlining the limited role of monetary growth, the RBI has sent a clear signal to the government. Finance minister P Chidambaram must deliver on the promises he made during his recent roadshow in America. Without initiating long-pending structural reforms the government cannot expect the RBI alone to ensure growth. That’s the message Subbarao has passed on.........
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Let us remember the following observation made by Sukhmoy Chakravarty in 1986:
“In a mixed developing economy, there is considerable scope for direct controls for matters which pertain to basic necessities of life. But equally clearly there are major areas of economic life where a variety of indirect methods of regulation may be usefully deployed. I believe that monetary policy is only one amongst these methods of regulations. It is somewhat simple minded and may therefore be misleading to expect a solution to India’s most pressing problems of growth and poverty from any monetary policy, howsoever judiciously devised. But it is even more dangerous to indulge in the feeling that ‘easy credit, low interest rate’ policy contains the major answer to India’s pressing problems of growth, poverty and self-reliance.”(Excerpted from Sir Purushotamdas Thakurdas Memorial Lecture,1986)
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