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

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Exchange Rate Management:Sense of Drift

The many challenges thrown up by the large inflow of foreign currency assets and the rapid build-up of foreign exchange reserves are not being faced frontally. Decisive actions on the exchange rate front will have major beneficial effects for the economy.

All-Round Financial Slackening

All major indicators of financial sector activity - commercial bank credit, capital market equity and bond issues, sanctions and disbursements of development finance institutions and foreign capital inflow - confirm an economic slow down in 2000-2001.

Fiscal Turnaround

Moderate market borrowing relative to the budgetary target and consistently modest use of ways and means advances from the RBI point to an impressive turnaround in the central government's fiscal position in the current year.

Little Scope for Lower Lending Rates

While commercial bank lending rates were undoubtedly high till March 1999, the scope for any significant reduction in them below their current levels is small as banks' margins have been squeezed by their cost of funds, transaction costs and burden of nonperforming assets as also by non-bank competition.

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