...RBI & Its Monetary Policies Table of Contents NO. | Particulars | 1. | Introduction of RBI | 2. | Monetary policy | 3. | Monetary policy objectives | 4. | Monetary policy functions | 5. | Operations of Monetary policy * Quantitative credit control * Selective or qualitative methods | 6. | Operating procedures of Monetary policy * Liquidity adjustment facility (LAF) * Market stabilization scheme | 7. | Monetary policy tools | 8. | Recent changes in Monetary policy | 9. | Evaluation of Monetary policy | 10. | Limitations | 11. | Conclusion | 12. | Bibliography | 13. | | 14. | | 15. | | 16. | | INTRODUCTION OF RBI The central bank of the country is the Reserve Bank of India (RBI). It was established in April 1935 with a share capital of Rs. 5 crores on the basis of the recommendations of the Hilton Young Commission Reserve Bank of India was nationalized in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist of five members each Central Government...
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...Inflation in India: Docile or Defiant? Executive Summary ASSOCHAM study finds that inflation was structural in nature rather than being episodic. Farm prices are less responsive to the RBI’s monetary policy whereas manufactured goods prices were found to be more responsive to the policy. Manufactured goods prices are showing new dynamics: a) Highest price rise in primary and upstream products b) A moderate rise in intermediate goods prices c) Least hikes in prices of finished and consumer products In the light of these features and trends in inflation, ASSOCHAM suggests four pronged anti-inflationary package. These includes Structural Correction for Structural Inflation: This calls for a comprehensive action plan for the farm sector, involving among other measures, a programme for a “Horticultural revolution” for increasing productivity of fruits and vegetables, fish and poultry. Controlling form inflation is a joint responsibility of the union Government and RBI. Only monetary policy adjustment will not correct such trend price rises. 2 Hence, RBI need not raise policy rates every time form prices are rising, as analysis shows farm price are not responding to monetary policy changes. Manufactured good inflation is showing for greater responsiveness to monetary policy changes. RBI should concentrate more on controlling these prices Going into the disaggregated and Sectoral price behavior of manufacturing goods, we find the dynamics of change is more in upstream...
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...RBI'S MONETARY POLICY INITIATIVES SINCE 2008-09 AND ITS EFFECTIVENESS IN CONTAINING INFLATION PROJECT OF MACROECONOMICS ON “RBI’S MONETARY POLICY INITIATIVES SINCE 2008-09 AND ITS EFFECTIVENESS IN CONTAINING INFLATION” SUBMITTED BY ARPIT PANGASA (11DM032) GUNJAN GODWANI (11DM052) RIDHI PRASAD (11DM122) UNDER THE GUIDANCE OF PROF. JAGDISH SHETTIGAR BIRLA INSTITUTE OF MANAGEMENT TECHNOLOGY, GREATER NOIDA RBI'S MONETARY POLICY INITIATIVES SINCE 2008-09 AND ITS EFFECTIVENESS IN CONTAINING INFLATION RESERVE BANK OF INDIA It is the central banking institution of India and controls the monetary policy of the rupee. The institution was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of India Act, 1934. Reserve Bank of India plays an important part in the development strategy of the government. It is a member bank of the Asian Clearing Union. Reserve Bank of India was nationalised in the year 1949. The general superintendence and direction of the Bank is entrusted to Central Board of Directors of 20 members, the Governor and four Deputy Governors, one Government official from the Ministry of Finance, ten nominated Directors by the Government to give representation to important elements in the economic life of the country, and four nominated Directors by the Central Government to represent the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New Delhi. Local Boards consist...
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...1. Indian currency (INR) has depreciated close to 22% in the last 1 year. In the article we will try to study the concerns of a country facing depreciating currency, the factors that led to this depreciation and the measures government can take to stabilize the situation. Most importantly we will see if global economic uncertainty rides over all the other domestic factors to determine strength of a currency especially in developing economies. Why don’t we need a depreciating INR? The persistent decline in rupee is a cause of concern. Depreciation leads to imports becoming costlier which is a worry for India as it meets most of its oil demand via imports. Apart from oil, prices of other imported commodities like metals, gold etc will also rise pushing overall inflation higher. Even if prices of global oil and commodities decline, the Indian consumers might not benefit as depreciation will negate the impact. The depreciating rupee will add further pressure on the overall domestic inflation and since India is structurally an import intensive country, as reflected in the high and persistent current account deficits month after month, the domestic costs will rise on account of rupee depreciation. Exchange rate risk also drives away foreign investors which in turn depreciates the local currency. Indian Rupee is currently caught in this vicious cycle; it will have to find a stable level to regain investors’ confidence. The depreciating rupee has serious effects on the external debt...
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...cause and the impact of rupee depreciation on the Indian economy. Since last few months Indian rupee came under great stress as overseas investors are paring their exposure to Asia’s third-largest economy amid international uncertainty and mounting worries over the domestic economy. In 2009 – 2010 the exchange rate was hovering around the 43 – 45 rupees per US Dollar level. And now it is around 55 – 56 levels, the main reasons to examine are increase in import bill, higher inflation, fiscal mismanagement and all resulting in higher cost of borrowing. The rupee has lost more than 15% of its value this year, making it one of the worst performing currencies in Asia. This paper reviews the probable reasons for this depreciation of the rupee and the outlook for the same. It also reflects on the policy options to help prevent the depreciation of the Rupee. This paper will firstly discuss about the economy of currency to give an overview of the problem and the factors related to it. Afterwards it will be examining the causes of the Indian rupee depreciation with respect to the Indian economy and the global economy. And after that it will analyse the impact of the same on trade and business. Finally, recommending the policy actions in response of the falling currency. II. LITERATURE REVIEW: These papers include the work which have been used as a basis or reference for formulating the policies regarding ‘The Indian Rupee Crisis’. Singhal, Shelly (2011), “AN ANALYTICAL STUDY ON INDIAN...
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... Question 1: History of Devaluation of Indian Rupee & its Impacts The Indian rupee, which was on par with the American currency at the time of Independence in 1947, has depreciated by a little more than 65 times in the past 66 years. At the time of independence, there were no foreign borrowings on India's balance sheet. After independence, India had chosen to adopt a fixed exchange rate currency regime. The rupee was pegged at 4.79 against a dollar between 1948 and 1966. Two consecutive wars, one with China in 1962 and another one with Pakistan in 1965; resulted in a huge deficit on India's budget, forcing the government to devalue the currency to 7.57 against the dollar. The rupee's link with the British currency was broken in 1971 and it was linked directly to the US dollar. In 1975, value of the Indian rupee was pegged at 8.39 against a dollar. In 1985, it was further devalued to 12 against a dollar. In 1991, India faced a serious balance of payment crisis and was forced to sharply devalue its currency. The country was in the grip of high inflation, low growth rate and the foreign reserves were not even worth to meet three weeks of imports. Under these situations, our currency was devalued to 7.90 against a dollar. So far two major rupee devaluations occurred in 1966 and the early 90s and the present one. The reasons for these devaluations are CAD, Fiscal deficit, soaring inflation, insufficient foreign exchange reserves, decontrol and liberalization...
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...opinions that went a long way in helping us gather information and analyse issues for the report. And, a special mention of Professor Latha Ravindran, whom we cannot thank enough for having given us the opportunity and her total support for working on this project and completing our report. Thank you. INtroduction For the last several years the GDP of India has been growing rapidly. The real GDP growth of India averaged 8.5% in the five years ending March 2010. But at the same time food price inflation and consumer price inflation too have been on the increasing curve. The relationship between fiscal deficit and inflation which is measured by WPI in India is an important issue in macroeconomics study. The main purpose of the study is to analyze the relationship between budget deficit and Whole Sale Price Index. The fiscal deficit influences demand and thereby inflation management of any country. So any increase in fiscal deficit will impact the management of inflation and WPI. Fiscal deficit It is government's total expenditures minus the total revenue that it generates (excluding money from borrowings). Deficit is different from debt, which is an accumulation of yearly deficits. The total borrowing requirement...
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...Case Study Indian Rupee Crisis of 2013 Assignment 1. If oil prices stay at these levels, China and India would benefit the most because China is the second largest oil importer in the world. It will be able t consume more oil with the drop of prices. Oil accounts for a third of India’s imports. 2. Tapering in QE was attributing this strong inflationary force in India, threatening a BoP crisis. It was also argued that inflation was due to supply constraints. I think their inflation issues can be “solely” managed through monetary means. 3. Some of the measures RBI took during the 2008 financial crisis were, it sharply reduced policy rates and the CRR. The repo rate and CRR were reduced four times. The RBI also created a potential provision of primary liquidity of 5.6 trillion. Interest rates on foreign currency were raised deposits made by non-resident Indians were raised as well. These measures were taken in order to increase the supply of dollars in the foreign exchange market to devaluate the U.S dollar against the Indian rupee. 4. Tapering of QE announced in 2013 caused a depreciation of the Rupee because it led to weakening the dollar against the rupee because of the increased demand of the latter. This money was invested in India in the form of foreign direct investment; this happen in midst of weak corporate fundamentals and deteriorating economic issues. This had a huge impact in India, making it crash along with the bond market. 5. Weak BoP can affect...
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...Macro economics Project on INFLATION -SUBMITTED BY CHIKKAM.SAI ALEKHYA DANNY VARGHESE DEEPAK SAKTHIVEL DEEPTHI MOHAN GIRISH GANGADHARAN TABLE OF CONTENTS * Inflation * Measures of inflation * Measures of inflation in India * CPI Types * WPI * Calculation of WPI * New series of CPI * CPI Urban/Rural * How Inflation is related with GDP? * Relationship between broad money supply and WPI/CPI * Announcement of hike in DA for government employees cause inflation? * Impact of elections on inflation * Hypothesis testing for elections and inflation * References INFLATION An increase in the average level of prices of goods and services. Primarily, two types of price indices used are – Wholesale Price Index (WPI) and Consumer Price Index (CPI). Inflation measured through wholesale price index is called wholesale price inflation or headline inflation and inflation measured through consumer price index is called consumer price inflation. CONSUMER PRICE INDEX (CPI): It is more relevant to the consumer, since it measures changes in retail prices. The Consumer Price Index represents the basket of essential commodities purchased by the average consumer – food, fuel, lighting, housing, clothing, articles etc. Inflation measured by using CPI is called consumer price inflation. There are three measures of CPI, which track the cost of living of three different categories of consumers— Industrial workers (IW) Agricultural...
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...Study of Economics - Micro & Macro Economics The study of economics is divided by the modern economists into two parts viz. Micro economics and Macro economics. This division is shown in the figure / chart above. Micro economics and Macro economics, both the terms were used in 1933 by Prof. Ragnar Frisch from Oslo University of Norway. The word micro has been derived from the Greek word `Mikros' i.e. small and the word macro has been derived from Greek word `Makros' i.e. large. What is Microeconomics ? Meaning & Definition Micro means small. Thus, micro economics analyses individualistic behaviour. It studies an individual consumer, producer, price of a particular commodity, household, etc. According to Prof. K. E. Boulding, "Micro Economics is the study of particular firm, particular household, individual prices, wages, incomes, individual industries and particular commodities." Subject Matter or Scope of Microeconomics Micro Economics is concerned with the following topics :- 1. Commodity Pricing: Prices of individual commodities are determined by market forces of demand and supply. So micro economics makes demand analysis (individual consumer behaviour) and supply analysis (individual producer behaviour). 2. Factor Pricing: Land, labour, capital and entrepreneur, all factors contribute in production process. So they get rewards in the form of rent, wages, interest and profit respectively. Micro economics deals with determination of such rewards i.e. factor...
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...INDIAN INSTITUTE OF MANAGEMENT KOZHIKODE EXECUTIVE EDUCATION PROGRAMME – EEPSM 04 MFSA – PROJECT B; GROUP-2 |Prepared by |Jyothy Subashchandra Bose - EEPSM-04-019 | | |Flex Rajan - EEPSM-04-012 | | |Godavarma C K - EEPSM-04-014 | | |Kulkarni Dilip Shridhar – EEPSM-04-022 | | |Krishnan N - EEPSM-04-021 | | |Kamaleshwaran S- EEPSM-04-020 | | |Hena Damodaran - EEPSM -04- 015 | | |Jupudi Venkata Narasimha Rao –EEPSM-04-018 | | |Jaspreet Kaur Rekhi – EEPSM-04-016 | Objective: The objective of this project...
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...A Study of Monetary Policy Impact on Stock Market Returns (With Special Reference to Nifty and Bank Nifty) A PROJECT REPORT Submitted by Chintan Divetia (1011416026) Submitted to Mr. Raviraj Gohil Assistant Professor Department of Finance In partial fulfilment for the award of the degree of POST GRADUATION DIPLOMA IN MANAGEMENT in Finance Shanti Business School, Shela, Ahmedabad. ACKNOWLEDGEMENT It was a great opportunity for me to work with Sharekhan Ltd., pioneers in the field of Stock Market. I am extremely grateful to all those who have shared their expertise and knowledge with me and without whom the completion of this project would have been virtually impossible. Firstly, I would like to thank my Company Mentor Mrs. Raina Vashi who has been a constant source of inspiration for me during the completion of this project. I would also like to thank Mr. Henal Bardoliwala, Relationship Manager of Sharekhan Ltd., for supporting me to complete my project. I am thankful to all staff of Sharekhan Ltd for their valuable support and cooperation during the entire tenure of this project. I thank my faculty guide Mr. Raviraj Gohil who helped me out at every critical situation that i faced in my project and gave us his valuable advice to solve problems. EXECUTIVE SUMMARY I feel great pleasure by presenting this project. As a student of PGDM of ‘Shanti Business School Ahmedabad’, there is a subject of partial training followed...
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...What is Banking Ombudsman (BO)? * He hears customers’ complaints against banks. * BO was first setup in UK. * In India, RBI started this scheme in 1995. Appointment & Tenure * Earlier RBI used to appoint reputed persons from banking, finance, management, legal etc. sectors as Banking Ombudsmen (BO). * But now RBI has reserved this BO post for its own Chief General Managers and General Managers. * Tenure: 3 years at a time. * Reappointment: yes possible. Jurisdiction * Banking Ombudsman (BO) Scheme applies to whole of India (including Jammu and Kashmir). Banking Ombdusmen have jurisdiction over 1. All commercial banks (scheduled and non scheduled, public and private) 2. Regional rural banks 3. scheduled primary co-operative banks 4. NBFCs (BO’s Jurisdiction limited to “loan” part.) * BO is not a replacement of Consumer forum/courts. He merely supplements them. * BO deals with matters less than or equal to Rs.10 lakhs. * Here are some examples situation where BO can help you: Regular banking 1. Demand draft, cheques, pay orders etc. not issued on time. (or not paid on time) 2. Credit card related complaints (e.g. bank putting hidden charges. Your credit card was stolen but bank did not disable it even after you called them.) 3. You asked the bank to close your account / credit card but they are not doing it. 4. Bank refuses to open your account without giving valid reasons. 5. Bank closes down your account without valid...
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...INFLATION INDEXED BONDS INTRODUCTION: The importance of Policy analysis for business students Being a Business Student the importance of Policy analysis is to understand the Inflation Indexed bonds as it is a unique asset class and it is one of the few that offers a nearly perfect (direct) hedge against inflation, while also having a low correlation to other risk assets. Inflation protection is one of the central goals of strategic asset allocation, and not only since the beginning of the hyper-expansive monetary policy witnessed during the financial crisis of the past five years. Given the current indebtedness of many governments because of the global financial crisis and rising inflation, it is necessary to study the inflation-linked government bonds in order to remove the uncertainty of future inflation rate. Also it is important to analyze the opinion of the academic community towards policy framework and understand the perspective and vision of implication of policy, to focus and highlight the recommendations and suggestions based on the policy framework, implications, and functioning keeping in mind each and every section which may have positive or negative impact of the policy. Rationale for selecting the project (policy) Traditionally, in uncertain times, gold was considered the safest investment option - a liquid asset which promised better returns than most instruments. As India's policies started faltering, investors started flocking to gold. This gold rush has...
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...EUROZONE CRISIS ABSTRACT Euro crisis was not fortunate. It was something that could be avoided if proper care was taken. The European sovereign debt crisis has emerged out of a situation that has made it difficult or impossible for some countries in the euro area to re-finance their government debt without the assistance of third party. It was not only the government sector that lead to this crisis but major cause of it was the private sectors taking up too much of loans. The report also states the impact of euro zone crisis on the world and the India. The Eurozone crisis is systemic in nature. It is a result of policy failures in the way European Monetary Union (EMU) was designed, constructed and implemented. In particular, the crisis is a consequence of the failure to put in place certain necessary institutional components. INTRODUCTION The global economy has experienced slow growth since the U.S. financial crisis of 2008-2009, which has exposed the unsustainable fiscal policies of countries in Europe and around the globe. Greece, which spent heartily for years and failed to undertake fiscal reforms, was one of the first to feel the pinch of weaker growth. When growth slows, so do tax revenues – making high budget deficits unsustainable. The result was that the new Prime Minister George Papandreou, in late 2009, was forced to announce that previous governments had failed to reveal the size of the nation’s deficits. In truth, Greece’s debts were so large that they actually exceed...
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