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First Quarter Review of the Monetary Policy for 2010-11
-Announced on the 27th July 2010 by Dr. D. Subbarao, Governor, Reserve Bank of India

Dr. D. Subbarao, Governor, in a meeting with Chief Executives of major commercial banks today presented the AFirst Quarter Review of the Monetary Policy for 2010-11

This First Quarter Review is being made in a macroeconomic environment that has changed significantly since our April policy announcement. At that time, there was some optimism about the sustainability of the global recovery, however modest the pace may be. This was reinforced by the International Monetary Fund (IMF) forecasts published earlier this month, which suggested that global growth would be marginally higher than their April 2010 projection. While most of that would come from emerging market economies (EMEs), the advanced economies would hold steady. However, in the aftermath of the Greek sovereign debt crisis and other visible soft spots in Europe and the US, there is renewed uncertainty about the sustainability of the recovery.

2. In contrast, on the domestic front, the recovery has consolidated and is becoming increasingly broad-based. There are rising concerns about capacity constraints being reached over a wide range of sectors. While inflationary pressures have also risen, the performance of the monsoon so far has been significantly better than during last year. While rainfall is still below the long period average at the all-India level, it has been enough to induce a significant increase in sown area across a range of crops, the high prices of which have been a source of great worry.

3. The dominant concern that has shaped the monetary policy stance in this review is high inflation. Even as food price inflation and, more generally, consumer price inflation have shown some moderation, they are still in double digits. Non-food inflation has risen and demand side pressures are clearly evident. With growth taking firm hold, the balance of policy stance has to shift decisively to containing inflation and anchoring inflationary expectations.

4. This policy review should be read and understood together with the detailed review in Macroeconomic and Monetary Developments released yesterday by the Reserve Bank. This statement is organised in four sections: Section I provides an overview of the 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.

This Review consists of four sections:

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

II. Outlook and Projections ... Click Here

III. The Policy Stance... Click Here

IV. Monetary Measures... Click Here

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

An analytical review of macroeconomic and monetary developments: First Quarter Review 2010-11, was issued on 26th July 2010, which serves as a background to the First Quarter Review of Monetary Policy 2010-11. ...Click Here

Highlights of First Quarter Review of the Monetary Policy for 2010-11....Click Here

Mixed reactions from Banks, Economists, India Inc on RBI First Quarter Review 2010-11 ....Click Here

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