Turning to the monetary analysis, both the annual growth rates of M3 and loans to the private sector were negative in November, standing at –0.2% and –0.7% respectively. The concurrent declines to historically low growth rates recorded in these two series over the past months support the assessment of a decelerating underlying pace of monetary expansion and low inflationary pressures over the medium term.
In contrast, even if the scheme was wildly successful in attracting inflows, the payout would only be in the tens of thousands of crores. Of course, there might be cheaper ways of restoring confidence but it was not clear what they were. Discussions with my soon-to-be colleagues at the RBI threw up another rationale.