Letters: Burn the midnight oil

Demonetisation exercise undertaken by the govt there has been a strong inflow of retail deposits

Srinivasan Umashankar 

Nagpur, 10 February

With reference to the editorial, “Wise caution” (February 9), the government is doing well to stick to fiscal discipline on committed lines. The level of consumer price index inflation has stayed modest. 

Because of the demonetisation exercise undertaken by the government there has been a strong inflow of retail deposits, so banks have been able to reduce the cost of procuring funds; even with a cut in incremental lending rates, the demand for credit is surprisingly muted. 

With industries not keen for capacity-building, a piquant situation has emerged affecting growth considerably. Growth has to revive now; that can happen only with revival of business confidence and sentiment. Although the market was expecting a cut in the key policy rate by about 25 basis points, which is what the central bank can at best do in the circumstances, the feeling at the same time, however, has been that revival of business sentiment can’t be taken for granted.

In this context, the status quo on key policy rates maintained by the Reserve Bank of India at its sixth bimonthly policy meet on February 8 is not surprising and makes sense. That’s are the kind of complexities and uncertainties associated with the economy, which are difficult to manage in this increasingly globalised environment. Regulation is a matter of test now, requiring the midnight oil to be burned often to keep the wheels of the economy rolling.

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