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

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Limited Response to Expanding Liquidity

The response of the central bank to the rapidly expanding liquidity due to the high inflows of foreign currency assets invites comment. The approach adopted and the concrete measures proposed are more short-term palliatives rather than fresh ideas for deploying these vast investible resources productively. Unlike countries in south-east Asia, concerted efforts are required in India to channel these capital inflows to supplementing domestic saving and strengthening physical infrastructures through well-calibrated delivery of project finance and other institutional credit. The central bank of the country cannot be content with merely encouraging banks and financial institutions to carry on their treasury operations with the help of such liquidity.

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