In fact, the half-yearly credit policy is now an anachronism, given that changes in the financial environment require immediate responses and we can hardly afford to have the luxury of policy inaction for as long as six months at a time. Changing cash reserve ratios, increasing or lowering the bank rate, and altering rules in the forex market are all part of the armoury of weapons now used by the RBI as and when the need for them arises.

However, the policy statement can be used by the RBI not merely to signal policy directions, which each CRR cut or bank rate change does in any case, but also to make known its position on the broader, structural aspects of monetary policy.

Structural change has beeninterpreted to mean a continuation of measures aimed at further liberalising the financial sector. There can be little quarrel with that objective, and the building of bridges between the country's compartmentalised financial markets needs to continue. Why should badla finance rates, for example, rule as high as 48 per cent, when rates on far riskier investments in the debt markets are much lower? Or why are interest rates in the construction industry markedly different from the rest of the markets? Special efforts need to be made to ensure that credit is directed to the software sector, where lack of tangible security inhibits credit sanction.

Infrastructure and exports, too, need special attention. But while removing inefficiencies in financial markets is welcome, caution should be exercised on indiscriminate liberalisation. There is a move, for example, to lower the percentage earmarked for priority sector lending. In times of trouble, big companies typically refuse to pay their small suppliers on time,and the burden of adjustment is shifted to small businesses. Reducing priority sector allocations now will only exacerbate the problem. Furthermore, the path charted out by the Committee on Capital Account Covertibility needs to be trod with circumspection, in the light of the experience of the SE Asian nations. This is not the time for further liberalisation. Lowering the cost of credit is the need of the hour, and any worries on the rupee front should be addressed by physical controls, as Jalan has done so successfully in the past. Given the benign inflation scenario, the RBI has the leeway to go in for an easier monetary policy, which will also, of course, help push through the government's massive borrowing requirements.