LETTERS TO EDITOR

VRRR auctions

The lukewarm reception to the three VRRR auctions conducted by the RBI at the weighted average rate of 6.49 per cent highlights the limited appetite of banks to deploy their surplus funds at the given rate. Despite offering a rate marginally lower than the repo rate of 6.5 per cent, further improvements in the VRRR seem challenging.

In light of banks holding significant surplus liquidity, they must explore alternative avenues for profitable deployment. Despite Crisil indicating slower credit growth compared to fiscal 2024, banks cannot afford to let their funds remain idle and incur opportunity losses, especially considering the relatively high cost of funds. Under these circumstances,

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adjustments to Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) might have proven more effective than the VRRR auctions, which only absorbed ₹0.57lakh crore against a notified amount of ₹3.5lakh crore. Increasing CRR and SLR could have incentivised banks to lend more meeting the twin objectives of liquidity absorption and profitable deployment of surplus funds by banks.

Chennai

China’s industrial capacity

The article, ‘The truth behind China’s industrial overcapacity’ (April 4), is an excellent case study of building excess capacity, yet unabatedly surging ahead in economic and

industrial growth. Industrial capacity built over the past five decades has enabled China capture global markets with lowcost exports. Despite “Boycott China” calls in several countries, Chinese exports have been growing. Its virtual monopoly in EVs and solar equipment is likely to continue. All the sanctions by the US and European countries have been largely ineffective.

Delhi

Job opportunities

This refers to ‘Working India hobbles along’ (April 4). Despite much buoyancy in economic growth, there has not been a matching increase in generation of employment

opportunities. The two terms of NDA rule did not focus much on addressing the issue of unemployment. Thousands of people migrate every year in search of work from the North to the South and vice versa and engage in construction and other micro businesses. A recent trend in the South is migrant workers are engaged even in agricultural activities, right from planting to harvesting.

Chennai

Infra sector development

Apropos ‘Infra development vital to boosting GDP growth’ (April 4), while the services sector has seen strong growth, infrastructure development

is the most critical sector that can play a vital role not only in its contribution to GDP, but also in facilitating faster paced growth of all other sectors. Connectivity has been accorded a high priority in powering the country’s growth. However, it needs to be strengthened further, as the pace of development of vital sectors such as agriculture, manufacturing and services, largely depends on greater and better connectivity. Better infrastructure can give the necessary fillip to the faster growth of MSMEs. Infrastructure can become a game changer if private capital flows can bridge the massive funding gap that exists for its development.

Hyderabad