GOI wants RBI to pay Rs 3.6 lac cr. I can think of only 4 ways to do this:
1. sell gold;
2. sell fore-ex reserves;
3. sell portfolio g-secs, thereby increasing interest rates; or (1/2)
thequint.com/voices/opinion…
1. sell gold;
2. sell fore-ex reserves;
3. sell portfolio g-secs, thereby increasing interest rates; or (1/2)
thequint.com/voices/opinion…
4. cancel portfolio g-secs and print cash!
All 4 are utterly avoidable; let GOI be WARNED about this misadventure. (2/2)
thequint.com/voices/opinion…
All 4 are utterly avoidable; let GOI be WARNED about this misadventure. (2/2)
thequint.com/voices/opinion…
Many of you have asked for clarifications on Points 3 and 4 of my earlier tweet. Well in Point 3, if G-secs are sold (ie, their supply increases), their price will fall, leading to an increase in Interest rates. (1/2)
And in Point 4, if the RBI “cancels” G-secs, it will have to write down its reserves by an equal amount (ie, write off its assets against its reserves), after which it could just print an additional Rs 3.6 lac cr of currency for the government. Disastrous! (2/2)
