Industry

‘Reaction to Operation Twist as expected’

Shaktikanta Das

Shaktikanta Das   | Photo Credit: Prashant Nakwe

Reserve bank has carried out three rounds via open market operations so far

Reserve Bank of India Governor Shaktikanta Das said on Tuesday that the market’s reaction to the simultaneous buy-sell of government bonds was on expected lines.

The simultaneous buy-sell of government bonds, known as Operation Twist, was conducted to bring down long-term interest rate while allowing short term rates to inch up. The move was aimed at addressing liquidity, which is assymetric — abundant at the shorter end but not on the longer end. The move will help in monetary transmission.

The central bank has so far carried out three rounds of simultaneous bond buy-and-sell via open market operations.

To a query from reporters on the sidelines of an event, Mr. Das said that the programme was “on expected lines”.

In the third such open market operation in as many weeks, the RBI had on Monday bought ₹10,000 crore of three long-term securities while selling a similar amount of three short-term bonds.

In his opening remarks at the ‘Third Suresh Tendulkar Memorial Lecture’, Mr. Das emphasised on reform of agricultural markets to improve supply chain management which could result in bringing down the gap between the price paid by end customers and the price received by farmers.

He highlighted a survey conducted by the RBI in 2018 covering farmers, traders and retailers in 85 mandis spread across 16 States, which found that the difference between retail prices that consumers paid and mandi prices that farmers received varied across crops and centres. “The average share of farmers in retail prices of major primary food items varies between 28 and 78%. It is lower for perishables and higher for non-perishable items. Higher share of retail prices going to farmers augurs well for the rural economy, which in turn, could help sustain domestic demand,” he said.

He also said that the mandate given to RBI on maintaining price stability, financial stability and economic growth was not only important from a macroeconomic perspective, but also for the objective of inclusive growth.

“Persistently high inflation adversely impacts the economy’s allocative efficiency and impedes growth,” he added.

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Printable version | Feb 25, 2020 1:01:28 PM | https://www.thehindu.com/business/Industry/reaction-to-operation-twist-as-expectedpersistently-high-inflation-impedes-growth/article30506489.ece

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