RBI Cuts CRR another 1%, and still needs to pump cash

From the weekly supplement, it looks like RBI sold about $7.8 billion in a week (till last week). They've sold $25 billion since end March. That's about 100,000 cr. Which means the CRR cut is only 60% adequate.

They probably need to cut repo hard too. Still, that won't make a difference to liquidity. Most importantly they need to force the oil marketers to cut prices - which as private entities they will be loath to do. They are nearly bankrupt anyhow. So nationalise them and buy out all their shares from the market, fully capitalize them with the rupees you bought when you sold the dollar, and set the oil pricing mechanism right. I'm sure the prices will be brought down well before elections, but just enough so people remember.

So how to get rupees back into the system? Can you believe this is a problem? Just 10 months ago they were squeezing liquidity out. Soon, we'll have to tackle deflation.

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This entry was posted on Friday, October 10th, 2008 at 7:09 PM and is filed under Crisis2008. You can subscribe to any comments to this entry via RSS 2.0. You can leave a response, or trackback from your own site.