Monetary Policy Main Ppt

RBI

•RBI was established on April 1,1935, in accordance with the provisions of the reserve bank of india,1934.•RBI governor is Dr. Subbarao.•Office- Mumbai.•Once privatized ,RBI became government owned bank in 1949.

WHAT IS RBI

"...to regulate the issue of Bank Notes and keeping of reserves with a view to securing monetary stability in India and generally to operate the currency and credit system of the country to its advantage." 

RBI CENTRAL BOARD

RBI governed by the central board of director.

• official director:One governor and 4 are deputy governor.• Non official director: ten Directors from various fields and one

government Official• Others: four Directors - one each from four

local boards• Functions : General superintendence and

direction of the Bank's affairs

OBJECTIVES

maintaining price stability ensuring adequate flow of credit to productive sectors. Monetary Authority:

� Issuer of Currency� Banker and Debt Manager to Government� Banker to Banks� Regulator of the Banking System� Manager of Foreign Exchange � Developmental Role Research, Data and Knowledge Sharing:

RBI APPROACH

They monitor and analyze the movement of a number of indicators .

Interest rates, inflation rate, money supply, credit, exchange rate, trade, capital flows and fiscal position, along with trends in output as we

develop our policy perspectives.

MAIN ACTIVITIES

Cash Reserve Ratio (CRR) Statutory Liquidity Ratio (SLR)� Refinance facilities � Open Market Operations (OMO) � Repo Reverse repo rate� Bank rate

MONETARY POLICY

MONETARY POLICY announced twice in the year first in April and second in October.

Monetary policy is a policy statement

through which the central bank(RBI)

targets key sector of indicators to

ensure price stability in the economy.

These indicators includes.

Money supply(m3)

Inflation

Interest rate

IMPACT OF MONETARY POLICY

MONEY SUPPLY IN THE

ECONOMY

INFLATION

JOBS AND WAGES

EXPORTERS AND

IMPORTERS

INTEREST RATE AND SAVING

GROWTH DURING THE LAST FISCAL YEAR

15.92 20.0915.43

4.11

24.422.85 26.5 24.216.23 18.34

Chart Title

Feb-10 Feb-11

FOOD INFLATION

TOTAL POPULATION OF INDA

DEPENDENCY ON AGRI.(OF TOTAL POPULA)

CONTRIBUTION IN GDP(AGRI)

FOOD INFLATION

110 CRORE 58.2% 14.2% 9.5%

2007-08 2008-09 2009-10 2010-11

16.4

15.7

14.614.2

AGRICULTURE SECTOR'S CONTRIBUTION IN GDP

AGRICULTURE SECTOR'S CONTRIBUTION IN GDP

EXTENT OF MONEY

• EXTENT OF MONEY

The central measures the extent of money and credit available in the economy using the indices like m0,m1,m2,m3.

Expansion of money policy

•Money supply in the economy will be increased by RBI through issue of currency, budgetary operations and borrowings by governments from foreign countries•Growth in money supply more than the growth in real national income. If money supply is exorbitantly more ill results in economy.

TOOLS OF THE MONETARY POLICY

OMO

CRR

REPO

SLR

BANK RATE

KEY RATE NOV 2ND 2010

JAN 25TH 2011

MAR 17TH 2011

CRR 6 6 6

REPO RATE 6.25 6.50 6.75

REVERSE REPO

5.25 5.50 5.75

BANK RATE 6 6 6

CRR AND INTEREST RATES PERCENTAGE PER ANNUM

FISCAL POLICYFiscal policy is the policy of government concerned

with raising of revenue through taxation and other means and deciding on the level and pattern of expenditure.

objectives1. To accelerate rate of investment.2. Achieving rapid economic development.3. Achieving full employment.4. Promoting foreign trade.5. Establishing welfare trade.

Fiscal policy operated through budget.

INSTRUMENT OF FISCAL POLICY

TAXATION

PUBLIC EXPENDITURE

.PUBLIC DEBT.

DIRECT TAX

PERSONAL INCOME TAX

CORPORATION TAX

INHERITANCE

WEALTH TAX

INDIRECT TAX

EXCISE DUTY

VAT

CUSTOMS DUTY

SALES TAX

PUBLIC EXPENDITURE

RISE IN PUBLIC EXPENDITURE WILL INCREASE THE STANDARD OF LIVING

PUBLIC EXPENDITURE IS DONE THROUGH BUDGET

THE GOVERNMENT WILL MAKE FOLLOWING CHANGES ON PUBLIC EXPENDITURE

SIZE OF PUBLIC EXPENDITURECOMBINATION OF PUBLIC EXPENDITUREDIRECTION OF PUBLIC EXPENDITURE

BUDGET

BUDGET MEANS AN ESTIMATE OF REVENUE AND EXPENDITURE.

IMPORTANCE

IN INDIA,THE TOTAL BUDGETARY EXPENDITURE OF BOTH CENTRE AND STATE IS 50% OF GDP.

1. IT ACCELERATES ECONOMIC DEVELOPMENT2. IMPROVES PRODUCTION IN PRIVATE SECTOR3. IMPROVE INCOME DISTRIBUTION4. PROMOTE EXPORT AND IMPORT DISTRIBUTION

BUDGET

UNION BUDGET MAKE BY THE CENTRAL GOVERNMENT IMPORTANT ASPECTS OF 2011-12 BUDGET

Income-tax exemption limit raised to increase the exemption limit of Income tax

liability from 1.6 lakhs to 1.8 lakhs. This measure has assured a saving of at least Rs. 2000 to every tax payer in this slab.

Defence budget hiked to Rs 1.54 lakh croreThe Finance Minister announced that the Defence sector will get more than 1.64 trillion (1.64 lakh crore rupees) for defense budget. It's an increase of more than 4% from last year.

Excise duty on 130 new itemsPranab Mukherjee announced 1% Excise duty on 130 new items. These items exclude food products clothes and daily utilities.

STATE BUDGET MAKE BY THE STATE GOVERNMENT

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