Monday, August 30, 2010
[IWS] RESERVE BANK OF INDIA ANNUAL REPORT 2009-10 [24 August 2010]
IWS Documented News Service
Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
Reserve Bank of India (RBI)
RESERVE BANK OF INDIA ANNUAL REPORT 2009-10 [24 August 2010]
[full-text, 199 pages]
Press Release 24 August 2010
RBI releases Annual Report for 2009-10
The Reserve Bank of India released today its Annual Report for 2009-10. This statutory Report of the Board of the Reserve Bank focusses on: (a) an analytical assessment of the key policy issues and macroeconomic challenges faced during the year, (b) the range of policy actions taken to address the challenges, besides initiatives launched during the year in relation to the broad macro-financial objectives of the Reserve Bank, and (c) how the operations of the Reserve Bank in pursuing the objectives were reflected in its financial accounts. The period since the middle of 2008-09 has been a particularly challenging one for the Reserve Bank, as it had to contend with balancing the concerns relating to financial stability, growth and inflation.
Highlights of the Report :
Overall Assessment of the Macroeconomic and Financial Conditions
Following the global financial crisis, the domestic macroeconomic environment changed significantly over four distinct half-yearly phases starting from the second half of 2008-09. Each phase posed various challenges for the Reserve Bank.
First, GDP growth decelerated in the second half of 2008-09, reflecting the impact of the global crisis. The Reserve Bank swiftly introduced a comprehensive range of conventional and unconventional measures to limit the impact of the adverse global developments on the domestic financial system and the economy.
Second, in the first half of 2009-10, weakness in the economic activity necessitated continuation of the monetary policy stimulus. The low (headline) inflation environment also created the space for continuing an accommodative monetary policy stance. But, by the middle of the year, a deficient South-West monsoon triggered renewed concerns for recovery as well as food inflation.
Third, despite the dampening pulls of the deficient monsoon and an adverse global economic environment, growth in gdp exhibited a robust recovery ahead of the global economy in the second half of 2009-10. Food inflation, that had started rising in response to the weak kharif production, turned out to be more persistent in the second half of the year. Rising and increasingly generalised inflation warranted withdrawal of the policy stimulus. Since the policy challenge for the Reserve Bank was to anchor inflationary expectations without harming the recovery, a calibrated approach to monetary unwinding was adopted.
Fourth, headline inflation remained at or close to double digits over four successive months of 2010-11 and the inflation process had also become more generalised. The balance of policy attention, thus, had to shift from recovery to inflation.
The Near-term Outlook
While the growth outlook for 2010-11 remains robust, inflation has emerged as a major concern. Going forward, as the monetary position is normalised, addressing structural constraints in several critical sectors is necessary to sustain growth and also contain supply side risks to inflation.
Improving the overall macro-financial environment through fiscal consolidation, a low and stable inflation regime, strengthening of the financial stability framework and progress on structural reforms will help sustain growth and boost productivity.
The Reserve Bank has stated its commitment to containing inflation through its calibrated monetary policy normalisation, with clarity on the direction of the policy rates in the near-term as well as timely actions in cautious steps based on careful assessment of risks to both inflation and growth.
The conduct of monetary policy of the Reserve Bank, while being driven by the domestic outlook, will have to recognise the possibility of sudden changes in the global outlook. While managing global shocks, India will also have to increase its resilience and productivity levels so as to strengthen its position in the global economy.
AND MUCH MORE....
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