OMOs, again...

Article;
RBI to infuse Rs 10000 cr liquidity into market on Wed via omo.

Comment;

OMOs at this point of time when inflation is high will increase more money in circulation... Moreover, the central bank is buying securities which will reduce interest rate on the same. Government will borrow more and will spend more which will push inflation up... The government's fiscal situation is worsening, debt will increase... During high inflation financial innovation makes more sense because it will reduce money in circulation and will, thereby reduce demand and inflation... Why the central banks think that there is a problem of liquidity when inflation is high? The government has put enough money in circulation which resulted in demand pressure due to rise in wages and income... The monetary policy, by increasing interest rate, is the first tool to control inflation the other being the fiscal policy, the use of income-tax... If the loose fiscal policy has created demand pressures then use of taxes to control demand is more plausible... More tax means more revenue... Fiscal position would improve...