Despite the fact that inflation is well within the RBI?s comfort zone at 3.1%, the perceived inflationary pressures ahead have necessitated another CRR hike by 0.5% in the Q3 review to suck out excess liquidity of Rs 16,000 crore from the banking system (?RBI trains guns on excess liquidity?, Oct 31). Banks might think of revisiting their BPLRs. But in all likelihood, this time round, banks will absorb the burden themselves without passing it on to their customers, as interest rates are already high. The signal is clear: interest rates are not likely to soften at least in the short to medium term, and banks must cope with this. By keeping the other key rates untouched, the document has maintained its conservative economic growth projection at 8.5%, though the economy could go over 9%. It is a quiet but reassuring document.
?Srinivasan Umashankar, Nagpur
Left unaddressed
The RBI?s mid-term review of monetary policy comes as a disappointment. As pointed out by Rajiv Kumar, (?Ignoring the hard issues?, Oct 31), the central bank has only paid attention to ?life with liquidity?. The problems of copious capital inflows and the rising rupee remain unaddressed. The dichotomy between WPI and CPI based inflation rates exposes the limits of monetary policy intervention. This has to be addressed by removing supply side constraints. The monetary policy needs a change of orientation to not only achieve the potential of double-digit growth but also rapid growth inclusion.
?Jacob Sahayam, Thiruvananthapuram
