ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Parliament-Caring for the Rich

the cost-push. The Survey also talks of excess liquidity in the system. This is a large problem. One recent development in this connection may, however, be noted. In the first three quarters of 1081-82, the growth in reserve money was much .smaller than during corresponding periods in the last few years. This was largely on account of the large depletion of the Reserve Bank's foreign exchange assets. The decline in foreign exchange assets (and hence in reserve money) reflected the large balance of payment deficit and could have been allowed to have a deflationary impact. This course was however not adopted. Hank credit, particularly, to the commercial sector, was allowed to increase significantly despite the negligible growth in reserve money. It could of course be argued that increased bank credit was necessary to maintain and increase economic activity. But then one cannot also argue that there is excess liquidity.

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