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What do you understand by sterilization? How does RBI stabilize the money supply against external shocks?
Sterilization refers to the process by which a central bank offsets the effects of foreign exchange interventions on the domestic money supply. When a central bank buys or sells foreign currency to influence exchange rates, it affects the amount of domestic currency in circulation. To neutralize thiRead more
Sterilization refers to the process by which a central bank offsets the effects of foreign exchange interventions on the domestic money supply. When a central bank buys or sells foreign currency to influence exchange rates, it affects the amount of domestic currency in circulation. To neutralize this impact and maintain control over domestic monetary conditions, the central bank conducts sterilization operations.
The Reserve Bank of India (RBI) uses sterilization to stabilize the money supply against external shocks. When there is an influx of foreign capital, leading to an increase in foreign exchange reserves, the RBI might sell government securities to absorb the excess liquidity. Conversely, if there is an outflow of foreign capital, causing a reduction in foreign exchange reserves, the RBI might buy government securities to inject liquidity into the system. This ensures that the money supply remains stable despite external capital flows.
By managing the liquidity through open market operations (OMOs), the RBI can control inflation and interest rates, thereby stabilizing the economy. This is crucial for maintaining economic stability, as uncontrolled fluctuations in the money supply can lead to inflation or deflation, adversely impacting growth and financial stability.
See less"True peace is not merely the absence of tension; it is the presence of justice." Martin Luther King Jr (150 words)
True peace transcends the mere absence of conflict; it is founded on the presence of justice. In today's world, the absence of war does not equate to genuine peace. Despite the lack of large-scale conflicts, corruption remains rampant, eroding the foundations of a truly peaceful society. Countless iRead more
True peace transcends the mere absence of conflict; it is founded on the presence of justice. In today’s world, the absence of war does not equate to genuine peace. Despite the lack of large-scale conflicts, corruption remains rampant, eroding the foundations of a truly peaceful society.
Countless innocents languish in jails, victims of a flawed justice system that often favors the wealthy and powerful. These individuals suffer unjustly while those who perpetrate corruption and exploitation remain unpunished. The presence of corrupt people in positions of power exacerbates this issue, as they manipulate systems for personal gain, perpetuating inequality and injustice. This concentration of power in the hands of a few undermines democratic principles and denies fair opportunities to the majority.
A true state of peace requires a robust and equitable justice system that protects the rights of all individuals, regardless of their socioeconomic status. It demands the dismantling of corrupt networks and the establishment of transparent governance. Only by addressing these deep-rooted issues can we hope to create a society where peace is not merely the absence of tension but the embodiment of justice.
When justice prevails, trust in institutions is restored, and communities thrive. True peace is achieved when every individual can live without fear of oppression, and their rights are upheld with integrity and fairness. Thus, peace and justice are intrinsically linked, and one cannot exist without the other.
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