Letter to BS: Govt must take steps to resolve supply-side bottlenecks

Topics Letter to BS

Reserve Bank of India | File Photo
This refers to "Market sees a long pause from RBI as CPI hits 7.35%" (January 14). Since the 135 basis point cut in the repo rate is waiting for full transmission, any further cut would be worthless. The task of lifting the economy from the deep slowdown and to transform it into a $5trillion economy by 2024-25 needs fast growth in household savings to push investment. The current inflation is due mainly to the hike in the prices of food articles. The government must initiate corrective measures to resolve the supply-side bottlenecks for smooth flow of food products. It must not refrain from spending as envisaged in the Budget. Increasing the supply of credit and arresting the accumulation of bad assets is crucial to making the banking sector robust. Any push to the banks to reduce the lending rate will force them to cut the deposit rates and that would negatively impact resource mobilisation and ultimately the supply of credit. 

VSK Pillai,  Kottayam
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