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

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MONETARY POLICY-Interest Rates Muddle

Interest Rates Muddle JUDGED against the monetary authorities' known attachment to monetarism, the reduction of the cash reserve ratio (CRR) by a lull percentage point at one stroke from 13 per cent to 12 per cent and that too at a time when the pace of monetary expansion has been picking up does seem odd. Between March 29 and June 7, money supply (M,) expanded by Rs 20,294 crore or 3.4 per cent compared to a rise of only Rs 823 crore (0.2 per cent) between March 31 and June 9 last year. The rise in the central government's monetised deficit as well as its recourse to ad hoc treasury bills have touched exceptionally high levels. In this fiscal year till June 14, the increase in net RBI credit to the government was Rs 16,157 crore and that in the use of ad hocsRs 18,120 crore.

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