To control rupee appreciation (due to the huge capital inflows), the RBI kept buying foreign exchange, consequently releasing local currency in 
the market. And to control this excess flow of rupee into the economy, the RBI kept hiking the CRR (Cash Reserve Ratio) requirement of banks – but most unprofessionally, the hike was to such levels that money supply, instead of remaining at constant levels, has tanked to unmanageable lows; a situation that saw the BSE Sensex crashing on April 2, 2007, by its second largest fall ever. The hilarious part of it is that RBI itself is not clear about the objective that it should give priority to. Mirroring this perspective, Ratnesh Kumar, Research Manager, RR Finance, comments, “(RBI’s) monetary goals and exchange rate goals seem to be participants in a tug of war.”
B&E’s meetings with RBI officials have ended with them either putting the onus on other departments, or not even responding. Unless the RBI urgently clears up the conflicts within its internal departments, the mother of all money supply crises is facing India right now!
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Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
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the market. And to control this excess flow of rupee into the economy, the RBI kept hiking the CRR (Cash Reserve Ratio) requirement of banks – but most unprofessionally, the hike was to such levels that money supply, instead of remaining at constant levels, has tanked to unmanageable lows; a situation that saw the BSE Sensex crashing on April 2, 2007, by its second largest fall ever. The hilarious part of it is that RBI itself is not clear about the objective that it should give priority to. Mirroring this perspective, Ratnesh Kumar, Research Manager, RR Finance, comments, “(RBI’s) monetary goals and exchange rate goals seem to be participants in a tug of war.”B&E’s meetings with RBI officials have ended with them either putting the onus on other departments, or not even responding. Unless the RBI urgently clears up the conflicts within its internal departments, the mother of all money supply crises is facing India right now!
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2006
An IIPM and Management Guru Prof. Arindam Chaudhuri's Initiative
Read more:-
· My Blog
· IIPM News
· IIPM : IIPM Links
· IIPM: More about IIPM
· IIPM Alliances - IIPM - by RAVI
· IIPM PUBLICATION
