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Third Quarter Review of Monetary Policy 2011-12
-Announced on the 24th January 2012 by Dr. D. Subbarao, Governor, Reserve Bank of India

On the basis of current assessment and in line with the policy stance outlined in Section III, the Reserve Bank of India has decided to reduce the cash reserve ratio (CRR) of scheduled banks by 50 basis points from 6.0 per cent to 5.5 per cent of their net demand and time liabilities (NDTL) effective the fortnight begining January 28, 2012. As a result of the reduction in the CRR, around Rs 320 billion of primary liquidity will be injected into the banking system.


Since the Second Quarter Review (SQR) of Monetary Policy in October 2011, there have been significant changes in the global scenario. On the one hand, concerns over the sustainability of sovereign debt problem in the euro area have intensified. On the other, there are modest signs of improvement in the US. In the emerging and developing economies (EDEs), growth has been moderating, reflecting the sluggishness in the advanced economies and the impact of earlier monetary tightening. Overall, notwithstanding the signs of recovery in the US, global growth prospects have weakened since the SQR.

2. Growth in India has also moderated. In particular, investment activity has decelerated sharply, reflecting heightened global uncertainty and domestic fiscal, monetary, political and administrative conditions.

3. Inflation is beginning to moderate as projected, despite the significant depreciation of the rupee. In particular, the higher than expected deceleration in food inflation has provided some relief, even though this was caused largely by a seasonal decline in vegetable prices. Consistent with the Reserve Bank’s earlier projections, inflation is likely to decelerate further to 7 per cent by March 2012.

4. Non-food manufactured products inflation, however, continues to remain high and well above the comfort zone. While indicators of pricing power suggest that the moderating trend will continue, upside risks remain significant. The momentum indicator of non-food manufactured products inflation is yet to show a discernible downward trend. Accordingly, while the Reserve Bank’s policy stance has to become more sensitive to growth risks, it also needs to guard against persistent inflation risks.

5. This policy review is set in the context of ahighly uncertain global environment and a delicately poised domestic balance between growth and inflation. It should be read and understood together with the detailed review in Macroeconomic and Monetary Developments released yesterday by the Reserve Bank.

6. This Statement is organised in four sections: Section I provides an overview of global and domestic macroeconomic developments; Section II sets out the outlook and projections for growth, inflation and monetary aggregates; Section III explains the stance of monetary policy; and Section IV specifies the monetary measures.

I. The State of the Economy ... Click Here

II. Outlook and Projections ... Click Here

III. The Policy Stance... Click Here

IV. Policy Measures... Click Here

Click Here For Press Statement by Dr. D. Subbarao, Governor on Third Quarter Review

RBI has released Macroeconomic and Monetary Developments: Third Quarter Review 2011-12 document to serve as a background to the Third Quarter Review of Monetary Policy 2011-12 . ...Click Here

Highlights of Third Quarter Review of Monetary Policy 2010-11....Click Here

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