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RBI CREDIT AND MONETARY POLICIES (1999-2010) click here
First Quarter Review of its Monetary Policy 2009-2010
-Announced on the 28th July 2009 by Dr. D. Subbarao, Governor, Reserve Bank of India
Dr. D. Subbarao's, Governor, in a meeting with Chief Executives of major commercial banks today presented the First Quarter Review of its Monetary Policy 2009-2010
The global economy is showing
incipient signs of stabilisation, albeit not
recovery. The pace of decline in economic
activity in several major advanced
economies has slowed, frozen credit markets
have thawed and equity markets have
begun to recover. Recent months have
witnessed industrial activity reviving in a
number of emerging market economies
(EMEs) such as China, Korea, Brazil and
India. Notwithstanding some positive signs,
the path and the time horizon for global
recovery remain uncertain. Consumption
demand remains subdued as unemployment
levels have risen. Business and consumer
confidence are yet to show definitive signs
of revival. Global trade, according to the
International Monetary Fund (IMF), is
projected to shrink by over 12 per cent in
2009; private capital flows are also expected
to decline. The continuing process of
balance sheet adjustment by both households
and businesses is inhibiting recovery in
many economies. Reflecting these several
uncertainties, the IMF, in its latest World
Economic Outlook (WEO) update released
in July 2009, has further revised downwards
the global growth forecast for 2009 to (-)1.4
per cent from its April 2009 forecast of
(-)1.3 per cent.
2. The crisis, which affected the
global financial system and engulfed most
countries of the world, had all the
ingredients for a severe disruption of the
world economy on the scale of the Great
Depression. However, it was mitigated by
bold, large and decisive actions taken in
concert by governments and central banks
in each country, and which came to be
increasingly co-ordinated across countries.
Consequently, while the financial sector
appears to be stabilising, economic
recession in the real sector persists.
3. The Indian economy experienced
a significant slowdown in 2008-09 in
comparison with the robust growth
performance in the preceding five years,
largely due to the knock-on effect of the
global financial crisis. The worst hit has
been the export sector, which has been
recording negative growth since October
2008. This, in turn, impacted the
manufacturing sector. Investment demand
was also dented by the decline in corporate
profitability and increased uncertainties
about future prospects. Private
consumption decelerated significantly. The
services sector, which has been the main
driver of growth for more than a decade,
also slowed down. The financial sector,
however, remained relatively unaffected
despite the severe stress caused by the
global deleveraging process, which
triggered capital outflows in the second half
of 2008-09.
4. Quick and aggressive policy
responses both by the Government and the
Reserve Bank mitigated the adverse impact
of the global financial crisis. The large
domestic demand bolstered by government
consumption, provision of forex and rupee
liquidity coupled with sharp cuts in
policy rates, a sound banking sector and
well-functioning financial markets helped
cushion the economy from the worst impact
of the crisis. There are now signs of an
upturn in industrial production and revival
of credit demand, though the delayed
5. This First Quarter Review of
Monetary Policy for 2009-10 is thus set in
the context of a stabilising global economy
and gradually recovering domestic economy.
It is organised in three sections. Section I
provides an assessment of the Macroeconomic
and Monetary Developments; Section II
delineates the Stance of Monetary Policy;
and Section III sets out the Monetary
Measures. This review should be read and
understood together with the detailed review
of Macroeconomic and Monetary
Developments released yesterday.
This Review consists of three sections:
I. Assessment of Macroeconomic and Monetary Developments... Click Here
II. Stance of Monetary Policy... Click Here
III. Monetary Measures... Click Here
An analytical review of macroeconomic and monetary developments was issued a day in advance as a supplement to this Review, providing the necessary information and technical analysis ... Click Here
Click Here For Highlights of First Quarter Review of its Annual Policy Statement for 2009-10
Click Here For Press Statement by Dr. D. Subbarao, Governor on First Quarter Review
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