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

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More of the Same

More of the Same DEVELOPMENTS of the past two years on the macro- economic scene have been a case of the proverbial slip between the cup and the lip. On the one hand, the Reserve Bank has been pumping in unprecedented levels of liquidity into the economy, hoping to drive interest rates, particularly long-term rates, down. The amounts injected into the system, through reductions of CRR, have been mind-boggling: Rs 7,225 crore in 1995-96 and Rs 18,800 crore in 1996-97. And this has been done at a time when the RBI has been buying foreign exchange from the market and injecting massive additional liquidity on that count as well: Rs 21,649 crore in 1996-97 and Rs 14,214 crore so far in the current fiscal year. In any case, this has not been a period when general liquidity in the system can be reckoned to have been inadequate. Aggregate deposits of scheduled commercial banks grew by Rs 71,780 crore or 16.5 per cent in 1996-97 as visualised in the RBFs working estimates and this year they have risen by Rs 38,028 crore or 7.5 per cent up to October 10 compared with Rs 28,132 crore or 6.5 per cent in the corresponding period of last year. Of course, the deposit growth may to an extent be the result of the large releases of liquidity.

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