Calculated Monetary Policy

09 AUG,2020 | MEDC


 

The RBI has done well by leaving policy rates unchanged. With a contraction in economic growth expected this fiscal year, that is a pragmatic way to infuse liquidity into the system. The RBI has rightly said that controlling Covid-19 is the key to softening the inevitable fall in GDP. Demand restoration is now a national priority, and the RBI has wisely maintained the interest rate structure supportive to that end. The RBI has also allowed a one-time restructuring of corporate and personal loans facing Covid-related stress. This is a step in the right direction, but it is to be hoped that adequate systemic safeguards are in place to ensure that companies and individuals do not misuse it. The RBI believes that its measures preserved financial stability, even as demand is worsening both in terms of investment and consumption. We need to trust the RBI’s judgement.

*Photo Credit: Google

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