RBI’s monetary policy decision is due tomorrow. It comes in the backdrop of government plans to borrow Rs 15 lakh crore in 2022-23, to finance a higher-than-anticipated fiscal deficit of 6.4% of GDP. This complicates
RBI’s policy choices. This monetary policy is different from contexts defining recent ones when government borrowing increased due to the pandemic and RBI stepped in to make it cheaper for the government to borrow. It lowered the short-term policy repo rate to a mere 4% in March 2020. Then, through a series of unconventional actions, it bought immense quantities of government bonds and injected vast amounts of liquidity into banks, to encourage them to buy bonds as well.
When inflation was low
The increase in inflation was fairly modest, considering the extent of RBI’s actions. Thanks to the pandemicinduced uncertainty, banks were reluctant to lend, households were disinclined to spend, and firms were hesitant to embark on investment projects. So spending was contained. CPI inflation reached the upper limit of the RBI’s target band, but did not spin out of control.
Denne historien er fra February 09, 2022-utgaven av The Times of India Hyderabad.
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Denne historien er fra February 09, 2022-utgaven av The Times of India Hyderabad.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
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