state of indian economy by rbi i governor

7/29/2019 State of Indian Economy By RBI i Governor

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1

Reserve Bank of India

India - Macroeconomic Situation

Assessment and Prospects

Indian Merchants Chamber

Mumbai

June 19, 2012

Dr. Duvvuri SubbaraoGovernor

Reserve Bank of India 1


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2

India

Macroeconomic Situation

Cause for Concern?

2


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33

India - Macroeconomic SituationTrends in Growth Rate

6.2

5.6

8.7

7.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Perce

nt

Long-Term Trend

9.6

6.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

Percent

Recent Trend


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4

What drove Indias growth in

the pre-crisis period and what

explains the current

moderation?

4

India Growth Story


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55

What is the inflation story?

-2

1

3

5

7

9

11

Oct/09

Jan/10

Apr/10

Jul/10

Oct/10

Jan/11

Apr/11

Jul/11

Oct/11

Jan/12

Apr/12

percen

t

Year-on-Year Inflation Rates

WPI - Headline WPI- Non-food Manufactured Products


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66

Moderation in WPI not transmitted to CPI

6

7

8

9

10

11

Jan/12

F

eb/12

M

ar/12

A

pr/12

M

ay/12

percent

Year-on-Year Inflation Rates

WPI - Headline CPI (New)- Combined


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7

What is driving Inflation?

Food (structural)

Fiscal deficit

Demand pressures

Commodity prices + depreciation

7


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888

What has RBI done

to control inflation?


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9

Has RBI succeeded in

controlling inflation?

9


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10

Has RBIs tight monetary

policy hurt growth?

10


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11

Is it the high interest rate that is

inhibiting investment?

0

2

4

6

8

10

12

14

16

18

0

1

2

3

4

5

6

7

8

9

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

Gro

wthinPrivateFixedCa

pitalFormation

(Percent)

RealWeightedAverage

LendingRate

(Percent)

Real Weighted Average Lending Rate and

Growth in Private Fixed Capital Formation

Growth in Private Fixed Capital Formation (Right Scale) Real Weighted Average Lending Rate (Left Scale)


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12

If inflation is caused by

supply side pressures, is tight

monetary policy anappropriate response?

12


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13

What is required to revive

growth?


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How much has the rupee

depreciated and why?

1414

100

102

104

106

108

110

112

114

116

118

12030

35

40

45

50

55

60

Apr-

11

M

ay-1

1

Jun-1

1

Ju

l-11

Aug-1

1

Sep-1

1

Oc

t-11

Nov-1

1

Dec-1

1

Jan-1

2

Fe

b-1

2

Mar-

12

Apr-

12

M

ay-1

2

June

2012(so

far)

R

EER

Rsp

er

US$

Month-wise Trend in Rupee-dollar Exchange Rateand REER 6 Currency

Rs/US$ REER 6 Currency (RHS)

Nom

ina

lExc

hange

Ra

te


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15

What is causing rupee

depreciation?

15


16/24

Is the rupee depreciation entirely due to

global factors?

.

16

-24.4

-20.6

1.0

-16.2

-20.7

-30.0

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

Brazilian Real South African Rand Chinese Yuan Russian Ruble Indian Rupee

Percen

t

Depreciation/Appreciation of BRICS Currencies(June 12, 2012 over End-July 2011)


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17

What has RBI done to contain

the movement in the exchange

rate?

17


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18

What is RBIs policy on

exchange rate?

18


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What drives the exchange

rate?

19


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20

Why 2012 is not 1991?

20


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21

Is there a new normal for

inflation?

21


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22

Has Indias potential

growth rate declined?

22


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23

What are the risks to the growth-

inflation outlook?

23


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24

Is the India Growth Story

still credible?

24

state of indian economy by rbi i governor

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