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 C O N O M IE S P O LIC IE SC O N O M IE S P O LIC IE S

A n k u r

 b h in a v S a re e n

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FY2009-10 :eneral Outlook -Policy of 2009 10 assumed that the

 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

- :onetary Indicators of 2009 10

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conom c o c es2009-10

 The RBI set its WPI inflation projection for March end FY2009-10 at 4%.

The cash reserve ratio was increased by 75 basis pointsfrom 5.0 to 5.75 to absorb excess liquidity of Rs.36000crores from the market in the 3rd quarter of 2009-10.

GDP growth accelerated from 6.1 per cent in Q1 to 7.9 percent in Q2 due to revival in industrial growth, pick-up inservices sector growth and Sixth Pay Commission Award.

Repo rate was cut back by 25 bps to 4.75% and the ReverseRepo 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.

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FY 2010-2011General 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 withthe GDP Growth at 7.4% in the 3rd Quarter of FY 2009-2010. TheIIP had recorded at growth of  15.1% in February, 2010. Hence,Industrial Production and the Economy in general was vibrant. ButInflation was a cause of worry with Headline Inflation measured ona 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 to53.8% of the WPI.

Quarterly Monetary Measures taken by the RBI:

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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 wasn’t 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 totame inflation.

Despite the increase in the policy rates by 75 basis points cumulatively, real policy ratesare 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. India’s fuel price indexhas galloped to 12.79% (in the year to March 5, 2011) as coking coal prices jumped from 9.48% aweek earlier.

GDP: The recent release of GDP growth estimates of 8.6% by the CSO (Central StatisticalOrganisation), which was also indicated by the following:

India’s 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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