MUMBAI, July 10: The Reserve Bank of India (RBI) has prescribed ``diametrically opposite'' solutions to tackle problems associated with the glut in the foreign exchange inflows during this fiscal compared to the policies it adopted to overcome the similar trends in 1995.The RBI effected a credit squeeze and placed curbs on domestic companies raising funds abroad when faced with a money supply growth of over 22 per cent, resulting from burgeoning forex inflows, according to the Centre for Monitoring Indian Economy(CMIE) . Now, the RBI wants massive credit off-take to the commercial sector and has progressively eased the norms for capital outflows, to tackle the problems associated with the forex reserves crossing the $25 billion mark and a near 17 per cent growth in money supply, CMIE said.

Though the other parameters accompanying the spurt in money supply were different in the two periods under consideration, the factors leading to the money supply overshoot were same-massive inflows of foreign capital. In 1994-95, though the domestic bourses were buoyant, corporates accessed overseas markets though euro equity and debt issues.

Now, between March-May this year, an average of $ 1,490 million per month were added to the RBI's coffers taking the forex reserves over $ 25 billion, according to Centre for Monitoring Indian Economy (CMIE).As compared to the overall `squeeze' in 1995, enroute the road to capital account convertibility (CAC), the RBI has been progressively easing the norms on capital outflows from India.

The exporters are now allowed to make investments upto $15 million from their exchange earnings foreign currency accounts.

The more funds can be released for basic travel quota (BTQ) and corporates can use 50 per cent of their global depository receipts (GDR) proceeds to pick up equity in overseas joint ventures.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.