The Police- Brutalisation and Corruption

January 25, 1986 closer examination. For instance, why should interest rates on short-term or working capital advances by way of cash credit or bill finance be linked to the expected long-term inflation rate and not to'the expected short- term inflation rate as in the case of treasury bills? The Committee appears to have not taken into account sufficiently that operating a flexible interest rate regime efficiently presupposes a sophisticated institutional structure which responds with the least time- lag to changes in the level of government expenditure, trends in output and prices, movements in the balance of trade and payments, etc. The monetary authority will need to be able to interpret quickly and reasonably accurately developments in these areas. Considering the inordinate time-lags after which essential data on commercial bank lending currently become available, it is evident that the Reserve Bank wilt have to strengthen and sharpen its data gathering and analysing capabilities very considerably before it can undertake the required policy formulation exercises.