Huge liquidity surplus unlikely to be inflationary, say economists

Instead of pushing up inflation, the huge surplus liquidity, bordering at Rs 7 trillion daily, is helping in policy rate transmission and aiding govt to borrow at a cheaper rate

The banking system continues to remain flush with liquidity, and the Reserve Bank of India (RBI) is in a no hurry to neutralise it. 

High system liquidity is generally a cause for concern as it can stroke inflation, but the situation now is quite different. Instead of pushing up inflation, the huge surplus liquidity, bordering at around Rs 7 trillion daily, is helping in policy rate transmission and aiding the government to borrow at a cheaper rate.

Therefore, analysts expect this liquidty surplus mode to continue well into the next year as well, till such time the economy starts