Assignment 1

Macro Economics

On

Review of the Annual Monetary Policy 2009-10

Submitted to
Mrs.G.Nisha Malini,
Senior Lecturer,KSM

Submitted by
J.Rees (09BA128)
Mohammed Rasith (09BA270)
Review of the Annual Monetary Policy 2009-10

The Review of the Annual Monetary Policy 2009-10 is notable in terms of the intricate
analysis of the economy in the backdrop of insidious global developments. The Policy
Review retains a cautious stance, highlighting concerns as to- “whether the aggressive and
unconventional measures taken so far globally are adequate and appropriate and when, if at
all, they will start showing the desired results” and also “whether the measures taken so far,
responding as they are to short term compulsions, are eroding long-term sustainability.” The
Review highlights the extent of global compulsions stating- “Given the erosion of the
monetary policy transmission mechanism, there are concerns about when and to what extent
monetary response, admittedly aggressive, will begin to have an impact on reviving credit
flows and spurring aggregate demand.”

Key Highlights:
· Repo rate cut by 25bps to 4.75%
· Reverse Repo rate cut by 25bps to 3.25%
· CRR kept unchanged at 5%
· SLR kept unchanged at 24%
· Bank rate kept unchanged at 6%
· GDP growth projection revised to 6.5-6.7% for 2008-09 and 6% for FY 09-10
· FY 10 March end WPI inflation projected at around 4%