RBI MONETARY POLICY: 2011-12 (Apr-Mar)

MEASURES * RBI Policy shifts to single rate regime * Operating target of policy to be weighted average call money rate * Hikes Repo Rate 50 bps to 7.25% with immediate effect * Ups Reverse Repo Rate 50 bps to 6.25% with immediate effect * Keeps Bank Rate unchanged at 6.0% * Keeps Cash Reserve Ratio unchanged at 6.0% * Ups savings bank rate to 4.0% from 3.5% with immediate effect * Starts marginal standing facility for banks at 8.25% * To foster price stability, sustain medium-term growth . PROJECTIONS * Projects FY12 GDP growth in 7.4-8.5% range * Projects Mar-end inflation at 6.0% with upward bias * Projects FY12 money supply growth at 16% * Projects banks' FY12 credit growth 19% * Projects banks' FY12 deposit growth at 17% * See Apr-Dec inflation close to Mar-end level * Inflation projection factors in fuel price hike

. STANCE * Steps to curb inflation, anchor inflationary expectations * Policy steps to rein in demand pressures * Policy steps to sustain growth medium-term . INFLATION * Inflation persistently above comfort level * Surge in non-food inflation suggests firm demand pressure * Global commodity price uncertainty risk to India inflation * Surge in crude oil yet to pass to domestic prices * Impact of monetary tightening still unfolding * Clear need to persist with anti-inflationary stance * Signs of growth moderation emerged in late FY11 * Growth moderation to ease demand-side inflation * Demand pressure to ease H2 on growth slowdown, monetary steps * To maintain liquidity situation in balance * Inflation was primary macroeconomic concern FY11 * Inflation driven by structural, transitory factors * Food, fuel, power group added 60% to WPI rise Apr-Jul * WPI surge Dec-Mar on fuel, power, non-food manufactured goods * Inflationary pressure from food clearly became generalized * Money supply growth eased FY11 on slow deposit growth