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

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only 3.7 per cent in the previous year. Constrained by the structural adjustment policies, the Reserve Bank has been rendered acutely short of monetary instruments to mop up or sterilise the liquidity growth arising from the rising foreign exchange accruals. As a result, the flood of liquidity has begun to play havoc in the financial system as well as in the stock and commodity markets. Short-term interest rates on market-related instruments like commercial paper (CP) have fallen to exceptionally low levels. Because the demand for bank credit continues to be sluggish (non-food advances of scheduled commercial banks have expanded by a bare 4.4 per cent during 1993-94 so far compared to an increase of 19.2 per cent in the preceding year) the whole financial intermediation process has been severely distorted. The stage is truly sot for inflationary spiral with no hope concurrently of any improvement in employment and real incomes for the comman man, RESOURCE TRANSFER TO STATES Playing to the Gallery IT cannot go unnoticed that as against the total resource transfer to the states of Rs 53,817 crore in 1993-94 (revised estimates) the amount provided in the central budget for 1994-95 is only Rs 53,303 crore. Obviously, resource transfer to the states, even in absolute amount, will be smaller by Rs 514 crore. But that is not the whole story.

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