Wednesday, October 26, 2005

RBI Midterm Review of Annual Policy

On 25 October 2005, RBI announced its mid term review of annual policy 2005-2006. With a raised forecast for the GDP growth rate this year coupled with some other forward looking statements, the announcement by Y V Reddy turned out to be a boon for the stock market with the markets performing bullishly. Sensex ended close to 1 % up after the announcement.
Usually I keep the PDF of the policy statement but this time I thought that will post some of the highlights of the policy here on the blog. Here they are
  1. Upward Revision in the Gross Domestic Product growth for 2005-06 to 7.0-7.5 from 7.0 %
  2. The Bank rate was kept unchanged at 6.0 %.
  3. The reverse repo rate was hiked by quarter percentage point to 5.25 per cent. This was necessary to keep the year-end inflation within the 5.0-5.5 per cent projection made in April. The repo rate was changed from 6.0 tp 6.25 %
  4. The banks' exposure to capital market raised to 20 % of their net worth from the 10 % earlier on a consolidated basis.
  5. Annual inflation receded from 6.0 % in April 2005 to 4.6 % in October 2005.
  6. Inflation will continue to be in the projected range of 5.0 -5.5 %.
  7. Foreign exchange reserves stood at US$ 143.4 billion as on October 14, 2005, increasing from US$ 141.5 billion as at end-March 2005.
  8. CRR remains unchanged at 5.0 %.
  9. The Reserve Bank has constituted a new department named as Financial Markets Department (FMD) in July 2005 with a view to moving towards functional separation between debt management and monetary operations.

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