Monetary Policy in Action.ppt

Monetary Policy in Action Shrirang ShirodkarAlok JadhavJohn KatiSandeep Shelke Under the guidance of Prof. K. Narayanan Agenda Introduction Annual Policy Statement First Quarter Review Mid Term Review Third Quarter Review Recent developments References Introduction What is Monetary Policy? Types of Policies Objectives Monetary Measures Objectives Inflation Control Credit Growth Employment Price Stability Economic Growth Measures Least Inflation Policy Interest Rates CRR and SLR Monetary Base Reserve Requirements Annual Statement of Monetary Policy 2005-06 Monetary developments in 2004-05 GDP placed at 6.9% Annual inflation rate stood at 5% Money supply (M3) increased by 12.8% Increase in non-food credit Financial markets generally stable Widening of trade deficit Increased risks in global financial markets Stance of Monetary Policy Factors to be considered Adequate credit growth needs to be ensured Trends in capital market indicate surplus Growth may get moderated by oil markets Significantly higher borrowings Heavy growth in non-food credits Stance of Monetary Policy GDP growth placed at 7% Inflation rate at 5-5.5% Projected expansion of M3 at 14.5% Credit increase by 19% Key Points Provision of suffice liquidity for credit growth Emphasis on price stability Interest rate conducive to stability and growth Monetary Measures Bank rate kept unchanged at 6.0% Reserve Repo Rate increased by 25 basic points to 5.0% Cash Reserve Ratio (CRR) kept unchanged at 5.0% Quarterly Reviews The Annual Policy Statement, proposed quarterly reviews of Monetary Policy. Benefit To take specific measures as the evolving circumstances warrant. Mainly consist, Review of Macroeconomic and Monetary Developments in the previous quarter. Stance of Monetary Policy for the remaining part of year. First Quarter Review 2005-06 Key Developments Increase in index of Industrial Production. Continued good performance of corporate sector.