Monetary Policy

CD Deshmukh The First Indian Governor ofReserve Bank of India (RBI)

Dr. D. SubbaraoPresent Governer ofPresent Governer of

Monetary policy- Meaning

The part of the economic policy which regulates the level of money in the economy in order to achieve certain objectives.

In INDIA,RBI controls the monetary policy. It is announced twice a year, through which RBI,regulate the price stability for the economy.

1.slack season policy April-September

2.Busy season policy October-March

Importance of Monetary Policy

Gross National Product (GNP) = C + I + G + X

Where: C = Private Consumption expenditure I = Private Investment Expenditure

G = Government Expenditure X = Net Exports

C, I, X can be influenced by the monetary policy which can also influence the private consumption and investment spending and exports and imports.

∫ Economic Growth

∫ Full Employment

∫ Flow of credit in all sectors of economy

∫ Price Stability

OBJECTIVES

Exchange rate stability

Equilibrium in balance of payments

Greater equality in the distribution of income and wealth

ELEMENTS OF MONETARY

POLICY

Qualitative Measures

Quantitative Measures

Bank rate Open market operations Cash reserve ratio (CRR) Statutory liquidity ratio (SLR)

Quantitative measures

Ω Rationing of creditΩ Moral SuasionΩ Direct ActionΩ Regulation in consumer creditΩ Changes in margin requirements

Qualitative Measures

IF :Bank Rate

Bank Rate

CRR/SLR

CRR/SLR

LIMITATION OF MONETARY POLICY‡ Non-monetized sector‡ Non-banking financial institution‡ Unorganised financial markets

¤ Higher liquidity¤ Non-appearance of money¤ Time tag¤ Lack of coordination between

monetary and fiscal policy

Monetary Policy Of 2011-2012

•2.9%

Inflation

•9.50%

Bank Rate

•4.75%

CRR•2

4%

SLR

•8.50%

Repo Rate

•7.50%

Reverse Repo Rate

•11.5 to 12%

PLR

•51.27%

Re/$

Current Rates

ConclusionAs articulated in the June 16th policy statement, RBI will continue to maintain liquidity conditions such that neither surplus liquidity dilutes the monetary policy stance nor large deficit chokes off fund flows to productive sectors of the economy. The market at present has discounted the rise of 25 bps in interest rates but global concerns still continue to weigh on the market.

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6376

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=5 602

http://stockthoughts.wordpress.com/2008/04/05/what-is-cash-reserve-ratio-and-how-will-the-crr-hike-impact-you/

http://www.banknetindia.com/http://www.investopedia.com/terms/m/

monetarypolicy.aspwww.ask.com/Economics+Definitions

Bibliography

PRESENTED BY: Amrita Hemrajani (17)Pearlene Jasavala (24) Niharika Kulkarni (30) Khyati Nandu (38) Sanaya Patel (40) Krishma Sandesra (42) Vatsal Shah (50)