Mainly Frills

Mainly Frills When social objectives and priorities are sidelined, the result often is hectic activity over marginal matters, A case in point is the importance currently assigned to the short-term money market, as highlighted at the 'inauguration' (after the institution had been in existence for nine months) of the Discount and Finance House of India (DFHI) by the finance minister earlier this month. This preoccupation with the short- term money market can be traced to the report of the Chakravarty Committee on the Working of the Monetary System. In retrospect it does appear now that the net outcome of the committee's report has been to shift the emphasis of monetary and credit policies from their basic goals to relatively peripheral concerns among which the grooming and preening of the money market has figured prominently. One is indeed hard put to point to any worthwhile achievement in, for instance, monetary targeting or in credit redeployment. On the other hand, notable distortions have been introduced into the operation of the monetary system. The changes effected in the interest rate structure, for instance, have had the effect of shifting funds away from deposits with the banking system. A particularly grotesque manifestation of these tendencies has been the device of 'portfolio management' resorted to by banks which the Reserve Bank itself has frowned upon but has failed to check.