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Role of Rbi in Controlling Inflation

The document discusses the Reserve Bank of India's role in controlling inflation through monetary policy. It provides background on RBI, defining inflation and describing fiscal and monetary macroeconomic policies. It then outlines some key monetary policy measures RBI uses like increasing repo, reverse repo, and cash reserve ratios. Charts show movements in these rates from 2010-2020. The document also discusses limitations of monetary policy and notes it cannot work in isolation from other government actions like fiscal policy.

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Mukesh Kumar
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5K views13 pages

Role of Rbi in Controlling Inflation

The document discusses the Reserve Bank of India's role in controlling inflation through monetary policy. It provides background on RBI, defining inflation and describing fiscal and monetary macroeconomic policies. It then outlines some key monetary policy measures RBI uses like increasing repo, reverse repo, and cash reserve ratios. Charts show movements in these rates from 2010-2020. The document also discusses limitations of monetary policy and notes it cannot work in isolation from other government actions like fiscal policy.

Uploaded by

Mukesh Kumar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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The role of RBI in controlling

INFLATION

PRESENTERS:
Patrick Anthony
Debarati Bose
Abhinav Saha
Mukesh Kumar
Anando Mukherjee
RESERVE BANK OF INDIA


ESTABLISHED: April 1, 1935

HEADQUARTERS: Mumbai, Maharashtra

NATIONALIZED: 1949
 CURRENCY: Indian Rupee
 SYMBOL:

GOVERNOR: Dr. Duvurri Subbarao
INFLATION

Inflation is the supply of excess money


and credit relative to the goods and
services produced resulting in the
increased price.
MACROECONOMIC POLICIES

Fiscal Policy Monetary Policy


Related to budget, government Related to money supply, exchange
expenditure, taxation rate control and bank rate control
FISCAL POLICY

 Use of ‘Government Expenditure’ and ‘taxation’ to


manage the economy.
 Stabilise economic growth
 Variables affected by Fiscal Policy in the economy
o Aggregate demand & level of economic activity
o The pattern of resource allocation
o The distribution of income.
MONETARY POLICY

 Regulation of supply of Money & Cost, Availability


of Credit in the economy

 Maintain price stability, ensure adequate flow of


credit to the productive sectors of the economy and
overall economic growth

 Variables affected by Monetary Policy in the economy


o Interest Rates
o Liquidity
o Credit Availability
o Exchange Rates
MEASURES ADOPTED BY RBI

Increase the REPO RATE


Increase the REVERSE REPO RATE
Increase the CASH RESERVE RATIO
Purchasing dollars from bank and
exporters
REPO RATE MOVEMENTS
5.8
5.7
5.6
5.5
5.4 REPO RATE
5.3
5.2
5.1
5
Apr. 2010 Jul-10 Aug-10

REPO RATE IS INCREASED TO


MINIMIZE LIQUIDITY
REVERSE REPO RATE MOVEMENTS

4.6
4.4
4.2
4
3.8 REVERSE
REPO
3.6
3.4
3.2
APR. 2010 JUL. 2010 AUG. 2010

INCREASED RATES TO CONTROL


THE LIQUIDITY
CRR MOVEMENT
9
8
7
6
5
4
3
2
1
0
2002 2003 2004 2005 2006 2007 2008 2009 2010

* average for each year

Stable CRR from CRR hikes to CRR Cuts to boost economy


2004 to 2006 curb inflation after recession
TAMING FOOD INFLATION:

o Improving irrigation facilities


o Improving the food distribution channel
o Hoarding of crops
o Improving cold storage facilities
LIMITATIONS – MONETARY POLICY
 Less effective due to minimal financial
inclusion
 Stunts the growth pattern of the economy &
reduce investment activity
 Unemployment rate is unaffected
 Housing activity will suffer an impact
 Monetary policy is restricted by the impact of
other govt. actions, esp. Fiscal policy

Monetary Policy cannot work in isolation!!


THANK YOU!

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