Monetary policy review: Rs 17.2-trillion liquidity bazooka

Since the pandemic began, the RBI has made an announced liquidity injection of Rs 17.2 trillion, or 8.7 per cent of GDP, into the banking system (MPR report, pp82). Of this, the unconventional liquidity measures amount to approx. Rs 9.1 trillion, implying the residual Rs 8.1 trillion is mostly conventional liquidity injection like OMO at Rs 3.7 trillion. Juxtapose this with nominal GDP loss at Rs 6.1 trillion for FY21 implying the liquidity injection should ideally be at Rs 6 trillion (velocity is assumed at one). This indicates the enormity of RBI liquidity management and the markets need to appreciate