Indian Monetary economics

RBI Governor presented the First Quarter Review of Annual Statement on Monetary Policy for the Year 2006-07 today.
The following important changes have been made. I have included only those which I found relevant. You can read the others at their website.

1) Reverse Repo Rate and Repo Rate, each raised by 25 basis points to 6.00 per cent and 7.00 per cent, respectively.
2) Bank Rate and Cash Reserve Ratio kept unchanged.
3) GDP growth projection for 2006-07 retained at 7.5-8.0 per cent.
4) Real GDP growth during January-March 2006 is placed at 9.3 per cent as against 8.6 per cent in the corresponding quarter a year ago.
5) Inflation, measured by variations in the wholesale price index (WPI) on a year-on-year basis, rose from 4.1 per cent at end-March 2006 to 4.7 per cent as on July 8, 2006.
6) While petroleum, oil and lubricants (POL) import growth rose sharply to 39.0 per cent from 31.0 per cent reflecting the steep rise in international crude oil prices.
7) India’s foreign exchange reserves increased by US $ 11.0 billion over their end-March, 2006 level to US $ 162.7 billion as on July 14, 2006.
8) A large number of central banks have raised their official interest rates, inter alia: the US Federal Reserve, the European Central Bank, the Bank of Japan, the Bank of Canada, the Reserve Bank of Australia, the People’s Bank of China, the Bank of Korea and the Banco Central de Chile.

Monetary terms simplified
Reverse Repo rate (6%) is the rate at which the RBI borrows from the Commercial Banks.
Repo rates (7%0 are the rates at which the RBI lends to Commercial banks.

My views
As far as the statement is seen, it puts forward a very good picture of the Indian Monetary System, which is true. The RBI has been efficient in this regard.

GDP growth in Real terms at 9.3 % is unbelievable. Cheers to the Government! Let the GoI wake up to the cry of the masses. In a study which recently came in Economic and Political Weekly, the percentage of people below the poverty line was about 56%. How can an individual consciously pat the Government for the present growth in GDP?

Inflation, like I mentioned in one of my earlier posts, has made life difficult for the poor and marginal households. The middle class has adjusted, though there had been some outbursts during the initial hike in Petrol and Diesel prices.

POL imports have shown an increase just as the Government promised. How much these imports have helped the common man is yet to be known. They have enabled the Government to somewhat stabilise the price hikes, at least the newspapers have reported likewise.

India, in the eyes of the global world is striding forward with its belly bulging with its precious foreign reserves. What has been done with this foreign exchange? I used to wonder why the GoI is not using this Foreign exchange for the development of infrastructure in our country. It has been invested in low yielding foreign bonds abroad. What a pity!

Those who are just concerned about the Monetary Policies cannot understand what needs to be done to have a more equal society. I am not an advocate for a perfectly equal society, which is impractical and impossible. I want to see equal opportunities given to all. I want to see the empowerment of the masses, the common people!