Market meltdown: Time for desperate measures?
Even as many analysts showed surprise about the lack of any action by the RBI in its credit policy announcement, expectations are now building up on how every passing day could see drastic measures to fix the Indian economy.
It is clear that India is getting sucked into the global crisis despite showing signs of a healthy growth rate. But the finance minister says it will take unorthodox measures to fix the system. The big question is what could they be?
"Regarding financial stability, price stability and of sustaining growth, RBI will continue to deploy both conventional and unconventional tools. We cannot rely only on conventional measures and we need to employ if necessary unconventional methods," said Finance Minister P Chidambaram.
But it is not the first time RBI has mentioned the use of unconventional methods. But why the finance minister chose to reiterate has once again raised questions whether India is willing to take some unusual steps?
The measures could be setting up of a sovereign wealth funds which can then be used to pick up stake in companies just like UTI and LIC used to do at one time at the governments behest to prop up the markets.
Other measures could also include guaranteeing some of the dollar loans taken by Indian companies in case there is a default because of the ongoing impact of a slowdown.
While it may be ambitious to expect such extreme measures for now the RBI governor has given some hints at what could be coming.
"We have taken certain unconventional methods to deal with the situation like SMOs window for oil bonds, SLR window of 0.5 per cent for banks to lend to MFs and 14 day repo for MFs. All these are all unconventional methods," said RBI governor D Subbarao.
For now it is likely that each passing day will see some move in order to keep the financial system stable. Moreover, one can’t rule out a joint action by all central bankers ahead of the global financial summit on November 15.
By NDTV