Demand for Cereals...

Article;
Limping economy to pick up pace soon -finance minister.

Comment;

As soon as the food-inflation comes down with the implementation of the Food-Security-Bill we will have more room for aggressive monetary easing. We are worried about foreign inflows even when our interest rates are high due to elevated inflation... There are three major sources of liquidity, liquidity from monetary policy, liquidity from fiscal policy and liquidity from foreign sources. We although pursued a tight monetary policy but we never disallowed investment from the other two sources… We were worried about drying-up of foreign sources because we can not reduce interest rates at home because of high inflation. Nevertheless the CAD was a concern… we needed to improve our foreign exchange reserves for a good rating… Therefore, liquidity can come from any or all of the three major sources. Therefore, again, we need not to worry about foreign currency outflows because when capital will leave your shores that would also bring inflation down and we have a room for loose monetary policy at home. QE is an unconventional monetary policy which is poised to go down one day; if QE dries-up we can easily cut-back on interest rates and improve liquidity to the economy but only when the Food-Security-Bill is implemented and inflation comes down close to our target. Demand for cereals has a considerable weight in the CPI and the government has enough stock of food…