Disastrous Waiting Game

tage in the slack season, the record harvest of this year is unlikely to result in a decline from last year's drought prices. Bank credit during the present busy season has so far increased by Rs 354 crores as against Rs 373 crores during this period in the last busy season. This has been financed mainly by increase in deposits (Rs 132 crores) and running down of investments (Rs 174 crores) with borrowings from the Reserve Bank of only Rs 84 crores. Compared with this, during this period in the last busy season the increase in bank deposits was Rs 50 crores, depletion of investments Rs 227 crores and borrowings from the Reserve Bank Rs 121 crores. In fact, it is wrong to take, credit expansion last year as a guide for this year's credit expansion, because last year's credit expansion was unjustified in the light of last year's crops. Moreover, recourse to Reserve Bank credit has been small mainly because of the substantial expansion in bank deposits this busy season (induced by this year's deficit financing). Since the hump of the busy season is more or less over, it is likely that the price-level will tend to rise in the coming months, thereby neutralising the impact of the good harvest on the price-level.