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 is the process a ~
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monetary policy.
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government borrowingà spending and taxation

3
  
  

 






¦inance Minister Pranab Mukherjee today said the Reserve Bank of India (RBI) will try to
strike a balance between growth and inflation at its monetary policy review next week.

"The RBI is trying to find a balance between the need of growth and the need to contain
inflationÃ" Mukherjee told reporters after laying the foundation stone of I¦ I-promoted
Management Development Institute's new campus here.

Howeverà he refused to give any guidance on the steps likely to be taken by the central bank
at its November 2 monetary policy review.

"We have to wait till monetary review by RBIÃ" he said.

The RBI is expected to increase short-time lending and borrowing rates by 25 basis points
each at the forthcoming quarterly monetary policy review.

The economy is giving conflicting signalsà with inflation still at high levelsà whereas core
sector growth has slowed down considerably.

Despite moderationà the high levels of inflation have emerged as a major political issue.
Overall inflation was 8.6 per cent in September. HoweverÃfor the week ended October 16Ã
food inflation stood at a high 13.75 per centà even though this was down 1.78 percentage
points vis-a-vis the previous week on the back of improved food supplies.

The ¦inance Minister said that prices of certain items generally go up in the rainy seasonà but
admitted that this time aroundà the upward spiral had persisted for a longer duration than
usual. "No doubtà inflation is a concern."
Howeverà he added that the inflation numbers have started coming down and all three
consumer price indexes and wholesale price-based inflation numbers were in single digits for
the first time in sixteen months.

He asked states to revamp the public distribution system to protect the poor from inflation.

Mukherjee said the government programme for providing subsidised rice and wheat to 6.5
crore below poverty line (BPL) familiesà including 2.5 crore Antyodaya Anna Yojana (AAY)
cardholdersà can be successfully implented only if the public distribution system is revamped.

Mukherjee today laid the foundation stone of I¦ I-promoted Management Development

Institute's new campus in Murshidabad.

Management Development Institute (MDI) was set up by I¦ I in 1973 for the development
of management education and is a premier institute in the country. MDI is expanding its
campus. The B-school presently has a campus at Gurgaonà in the National apital Region.

Highlighting the importance of MDI business schoolà Mukherjee saidà "Murshidabad district
is geo-politically very importantà as it is near Bangladeshà Bhutan and Nepal."

Mukherjeeà a ongress stalwartà represents Jangipur in the Lok Sabha.

The new campus at Murshidabad is spread over 13 acres and is expected to be completed in
two years. The campus is being built by I¦ I Infrastructure Developmentà which is also
developing a financial city in Bangalore.

I¦ I Infrastructure Development is a wholly-owned subsidiary of I¦ I.

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Definition Of Monetary Policy

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Monetary policyis the process a
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Need for Monetary Policy

In today's global trade it is very necessary to have a monetary
policy which directly affects the growth of a country's economy and
inflation.
International monetary policy coordination based on considerations
of structural asymmetries across countries.
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each countryà optimal independent monetary policy cannot replicate
the natural-rate allocations.
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Theory of Monetary Policy
Theory of Monetary Policy
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PI change

Achieving low level of inflation

Policymakers must have credible announcements;

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 credit quality;

 bonds and equities (corporate ownership and

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spending/savings;
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scales;
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futures contractsà etc.

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ONTROLLED EXPANSION
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T here are two kinds of tools:
Quantitative tools ±control the volume of
credit and inflationà indirectly.
Qualitative tools ±they control the supply
of money in selective sectors of the economy.

Quantitative tools
Bank Rate
Bank Rate is the rate at which RBI allows finance to commercial banks.




 


 
 
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ommercial banks enjoy specific refinance facilities.

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Qualitative tools