Monetary Policy review –First quarter FY10

Highlights:

Bank Rate kept unchanged at 6%.

Repo rate and Reverse Repo Rate kept unchanged at 4.75%& 3.25%
respectively.

Cash Reserve Ratio (CRR) kept unchanged at 5%.

Real GDP growth projection for FY10 is placed at 6.0%.

WPI inflation is projected at around 5% by end-March 2010 vs. 4.0%
projected earlier. The base effect, which is generating negative inflation is
projected to completely wear off by October 2009.

Macroeconomic and Monetary Developments
The Real Economy
The Indian economy grew by 6.7% in 2008-09 according to the revised estimates of
the Central Statistical Organisation (CSO) lower than the growth of 9.0 %in 2007-08.
The deceleration in GDP growth was largely due to the adverse impact of the global
economic crisis.
Price Situation
The WPI inflation, which was on a path of sharp decline from the high peak level of
August 2008, turned negative in June 2009, and since then the negative inflation
continues (-1.17 per cent as on July 11, 2009). The decline in the year-on-year
inflation essentially reflects the statistical factor of high base that emanated from
sharp increases in commodities prices during the first half of 2008-09.
Financial Markets
During 2009-10 so far, the domestic equity markets have been on the rise reflecting
the global trend and increased optimism regarding the Indian economy. FII’s have
made net investment of US$ 7.8 billion in 2009-10 (up to July 22, 2009) as against net
disinvestments of US$ 4.0 billion during the corresponding period of 2008-09.
(Source:RBI)
Events Ahead
The Second Quarter Review of Monetary Policy for 2009-10 will be undertaken on
October 27, 2009.


Policy Rates
Bank Rate 6%

Reverse Repo Rate 3.25%

Repo rate 4.75%

Reserve Ratio
CRR 5%