Hello Anonymous. I'm really sorry for my delay in continuing our discussion on current Recessionary steps being taken by Government. Your point is quite correct in terms of liquidity infusion by Government, where adding liquid flow would increase the borrowing of the banks and stabilize our economy.
But as its said every coin has two sides, on some further analysis I found that this scheme of R.B.I. is affecting our exports, not at a high scale, but is definitely affecting at a low margin. Still, this is possibly the best strategic move available. This would have a strong impact on the interest-sensitive sectors of Economy such as Banking, Insurance, etc.
Thus, in depth analysis of this aspect says that R.B.I. is doing all it can to improvise the situation and results are coming. The repo rate was recently reduced to 6.5% and C.R.R. to 5%. The economy still being in Inflation I thus feel that rate cuts are quite a "pre-mature" step, rather the better way is to keep the interest rates steady and manage liquidity in the system and be prepared for emergency liquidity infusion measures. The recent C.R.R. cut down was aimed at this step.
This step would help current Banking conditions to come up from a deep negative liquidity to a marginally negative liquidity! Lets hope for the best. I've added many other posts, Do be a part of it too.
Do express your views on this.
Bhagirath Baria
- Bhagirath Baria
- The Author of this blog has keen interest in understanding Economics and its implications on the Individual and the Economy as a whole. Has been writing articles and analysis of issues that may skip general observation, but exert deep influence on people's lives and their decisions. Discussions and Debates related to conventional as well as non-conventional Economics is done here. The author of this blog doesn't classify himself to any particular School of thought in Economics. He is tilted toward Mainstream Economics, though has keen interest in a few Heterodox schools too. Wishing all the readers a truly enriching experience.
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