Unlike the first wave, elevated inflationary pressures and record low policy rates have left the RBI with very few policy levers to support growth amid the second wave.
Yet, the RBI and the MPC have deftly manoeuvred through these constraints to support growth by relying on measures outside the conventional monetary policy toolkit. With no space on policy rates, the RBI has endeavoured to support growth through additional government bond purchases under GSAP 2.0 to prevent financial conditions from tightening prematurely. The decision to buy state development loans is a good step given the higher expenditure burden on states
Yet, the RBI and the MPC have deftly manoeuvred through these constraints to support growth by relying on measures outside the conventional monetary policy toolkit. With no space on policy rates, the RBI has endeavoured to support growth through additional government bond purchases under GSAP 2.0 to prevent financial conditions from tightening prematurely. The decision to buy state development loans is a good step given the higher expenditure burden on states
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