(a)the details of monetary measures taken by the Government/Reserve Bank of India (RBI) to rein in inflation during each of the last three years and current year;
(b)the results achieved therefrom; and
(c)the steps taken or proposed in this regard?
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI NAMO NARAIN MEENA)
(a) to (c) According to Reserve Bank of India (RBI), there were three phases
of monetary measures during the last three years i.e., August 2008 to July
2011 as detailed below:
(i) From August 2008 till the mid-October 2008 the policy rates (repo and
reverse repo rate) were not changed. The repo rate was 9 per cent and the
reverse repo rate was 6 per cent.
(ii) In the wake of the global financial crisis triggered by the collapse of
Lehman Brothers, the RBI, beginning mid-September 2008, followed an
accommodative monetary policy stance. In addition to several other measures,
it also reduced the repo rate from 9.0 per cent to 4.75 per cent and the reverse
repo rate from 6 per cent to 3.25 per cent between mid-October 2008 to mid-April
2010 to mitigate the adverse impact of the global financial crisis on the Indian
economy.
(iii) Since mid-March 2010, the RBI has raised the repo rate eleven times by a
cumulative of 325 bps in view of inflationary pressures.
Inflation during most part of 2010-11 and the first quarter of 2011-12 has remained
persistently much above the comfort level of the RBI. Inflationary pressures have
persisted due to a combination of supply and demand factors. A series of supply
shocks, particularly global commodity prices, resulted in increase in input costs,
exerting pressure on inflation. Supply side shocks also spilled over into a
generalised inflationary process reflecting robust demand. Non-food manufacturing
inflation remained much above the trend growth of 4 per cent, particularly during
the second half of 2010-11 and 2011-12 Q1 indicating the producers capacity to pass
on rising commodity input prices and wage costs to consumers. The RBI, therefore,
needed to raise the policy rates to contain inflation and anchor inflationary
expectations. Monetary measures work with long and variable lags. The impact of
past monetary measures effected by the RBI is still playing out. According to the
projection of the RBI, inflation is expected to be 7 per cent by March 2012.