ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846
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Time to Rescind FRBM and Stabilisation Policies

The fiscal constraints on providing any substantial stimulus are evident from the revised estimates of the budget for 2008-09. In such a situation and given the current economic environment, exhorting banks to provide an intensive stimulus makes sense provided the monetary policy and banking operations are not constrained by stabilisation goals. The government and the Reserve Bank of India therefore need to desist from persisting with the Fiscal Responsibility and Management Act-mandated environment insofar as borrowings from the central bank are concerned. The RBI also needs to take a deeper interest in the sectoral distribution of bank credit by monitoring, applying moral suasion and by providing an appropriate incentive structure.

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