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E C O N O M IE S P O L IC IE S

A n ku r A b h in a v S a re e n

General Outlook : Policy of 2009-10 assumed that the

FY2009-10

risk of inflation had abated and was aimed at accelerating the Indian economy which had slowed down post global slowdown in 1st and 2nd quarter of 2009 , though actual impact was felt in 3rd quarter of 2009

Monetary Indicators of 2009 - 10 :

Economic Policies 2009-10


The RBI set its WPI inflation projection for March end FY

2009-10 at 4%. The cash reserve ratio was increased by 75 basis points from 5.0 to 5.75 to absorb excess liquidity of Rs.36000 crores from the market in the 3rd quarter of 2009-10. GDP growth accelerated from 6.1 per cent in Q1 to 7.9 per cent in Q2 due to revival in industrial growth, pick-up in services sector growth and Sixth Pay Commission Award. Repo rate was cut back by 25 bps to 4.75% and the Reverse Repo rate too was marked by a similar reduction to stand at 3.25% starting 1st quarter 2009-10. The CRRwas kept unchanged at 5% while the SLR was maintained at 24%. The Bank Rate kept unchanged at 6% throughout the fiscal.

General Outlook at the Beginning of FY-2010-2011: The


Global Economy was recovering with EMEs (Emerging Market Economies) leading the pack. The Indian Scenario looked robust with the GDP Growth at 7.4% in the 3rd Quarter of FY 2009-2010. The IIP had recorded at growth of 15.1% in February, 2010. Hence, Industrial Production and the Economy in general was vibrant. But Inflation was a cause of worry with Headline Inflation measured on a Y-o-Y Variation in the WPI accelerated from 0.5% in September, 2009 to 9.9% in March, 2010 with Non- Food items contributing to 53.8% of the WPI.

FY 2010-2011

Quarterly Monetary Measures taken by the RBI:

The key Macroeconomic Agenda of the RBI was:


With the economy firming, filing a growth of 7.4% in the previous quarter, it was necessary to

ensure growth wasnt thwarted. With rising oil prices , esp. due to the Libyan Crisis and rising prices of food articles, inflation had exacerbated, especially after the 2nd quarter. Hence, it was necessary to tame inflation. Despite the increase in the policy rates by 75 basis points cumulatively, real policy rates are not consistent with the strong growth that the economy is now witnessing.

Inflation: Rise in fuel prices is at present causing inflation to remain sticky. Indias fuel price index

has galloped to 12.79% (in the year to March 5, 2011) as coking coal prices jumped from 9.48% a week earlier.

GDP: The recent release of GDP growth estimates of 8.6% by the CSO (Central Statistical
Organisation), which was also indicated by the following: Indias Purchasing Managers Index (PMI) Direct and indirect tax collections Increase in merchandise exports Increase in bank credit

The year saw GDP Growth on Projected tracks, but High Inflation due to rising crude prices are still troubling the RBI to maintain a stable Financial environment.

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