ISAS Briefs

The recent policy statement of the Reserve Bank of India (RBI) signifies a departure from the stance that it had been adopting in the last three quarters. There are three elements that are different. First, in leaving key policy rates unchanged, it has acknowledged that liquidity is not an obstacle to growth at present, but banks are showing a reluctance to lend. Second, by acknowledging that the growth of money supply at 20 percent is high and needs to be brought down,3 the RBI is concerned about money growth. Third, in cautioning about inflationary pressures, the RBI is setting its sights on tightening monetary policy in the near term. All these have significant implications for the Indian economy.