1. CHANGING TRENDS
Discussion on GDP, Inflation and Monetary policies of INDIA

2. SUGAR INDUSTRY

3. Factors
India is the world’s largest consumer of sugar at 23.0 million
metric tons (MMT) raw value in the 2008/09
(October/September) marketing year. Human consumption of
sugar in India is up 35 percent from 10 years ago and double
the consumption of 20 years ago. India is also the second or
third largest producer behind Brazil and trades positions year-
to-year with the EU. It had a record large crop in 2006/07 at
30.8 MMT and its second largest crop in 2007/08 at 28.6
MMT before a decline to 16.8 MMT in 2008/09 due to poor
monsoon rainfall. Higher acreage in 2009/10 was expected to
lead to a recovery in production to 20.6 MMT according to
earlier estimates from the Foreign Agricultural Service (FAS)
of USDA. The latest projections from government officials and
private market analysts are 15-17 MMT.

4. Sugar Price
RS 30/kg in 2010
RS 18/kg in 2000
SOURCE : http://www.indiaonestop.com/sugar/sugar.htm

5. WHY ???

6. THE ANSWER IS :
INFLATION

7. What is INFLATION?
In economics, inflation is a rise in the
general level of prices of goods and services in an
economy over a period of time.
OR
The overall general upward price movement of
goods and services in an economy (often caused
by a increase in the supply of money), usually as
measured by the Consumer Price Index and the
Producer Price Index.

8. CHANGING INFLATION RATES
in INDIA
october 2010 9.697 %
october 2009 11.486 %
october 2008 10.448 %
october 2007 5.512 %
october 2006 6.917 %
october 2005 4.183 %
october 2004 4.573 %
october 2003 3.285 %
october 2002 4.060 %

9. Graphical Representation

10. IMPACT
 Higher inflation would lead to a spurt in interest rates and hit the
home, car and other retail loans market, besides hampering the
expansion and launch of projects planned by corporates.
 GOVERNMENT changing monetary policies to liquify money in the
market
 Larger inflow of money in the market and increase in GDP

11. CHANGES IN MONETARY
POLICIES by RBI

12.  2001
Bank rate 6.5%
CRR rate was 7.25%
GDP = 3.885

13.  2002
The Reserve Bank of India announced a cut in Bank Rate by 0.50 percentage
point, from 7.0 per cent to 6.50 per cent to touch its lowest since May 1973.
The RBI reduced CRR by 2.0 percentage points from 7.50 per cent to 5.50 per
cent, releasing on additional liquidity of Rs 60 billion to banks.
Interest rate paid on eligible CRR balances increased further to the level of Bank
Rate i.e. 6.5 per cent (from 6.0 per cent since April 21, 2001 and 4.0 per cent
earlier).
GDP = 4.558
INFLATION = 4.060%

14. 2003
 Inflation - 4.5% GDP – 6%
 Objective: To increase the money supply in the market.
Implications:
 Bank rate was decreased from 6.25% to 6%.
 Repo rate was retained at 4.5%

16. 2004
 Inflation: 5.1% Gdp:6.5%
Implications:
 Bank rate: 6%
 Repo rate: 4.5% per annum
 Reverse repo rate: 6%
 CRR: 4.5%, remained constant.

17.  2005
In the mid-term Review of October 2004, the Bank Rate was kept unchanged at
6.0 per cent
To increase the fixed reverse repo rate by 25 basis points under the liquidity
adjustment facility (LAF) of the Reserve Bank effective from April 29, 2005 to
5.00 per cent from 4.75 per cent.
The repo rate will continue to be linked to the reverse repo rate, as at present.
However, the spread between the reverse repo rate and the repo rate is
reduced by 25 basis points from 125 basis points to 100 basis points with
effect from April 29, 2005.
The cash reserve ratio (CRR) of scheduled banks is currently at 5.00 per cent.
While the Reserve Bank continues to pursue its medium-term objective of
reducing the CRR to the statutory minimum level of 3.0 per cent, on a review
of the current liquidity situation, it is felt desirable to keep the present level of
CRR (5.00 per cent) unchanged.
GDP = 9.211
INFLATION 4.1%

18.  2006
The Bank Rate has been kept unchanged at 6.0 per cent.
In view of macroeconomic enviornment and overall monetary conditions, it
was considered desirable to keep the reverse repo rate unchanged at 5.5 per
cent.
GDP = 9.817
INFLATION = 5.9

19.  2007
Bank Rate, Repo Rate, Reverse Repo Rate, Cash Reserve Ratio kept
unchanged. Statutory Liquidity Ratio restored to 25%
RBI hikes Cash Reserve Ratio (CRR) by 0.75%
GDP = 9.372
INFLATION = 7.8

20.  2008
The Bank Rate has been kept unchanged at 6.0 per cent.
The repo rate under the LAF is kept unchanged at 7.75 per cent.
The reverse repo rate under the LAF is kept unchanged at 6.0 per cent.
Scheduled banks are required to maintain cash reserve ratio (CRR) of 7.75 per
cent with effect from the fortnight beginning April 26, 2008 and 8.0 per cent
with effect from the fortnight beginning May 10, 2008 as announced on April
17, 2008.
GDP = 7.346
Inflation = 0.8%

21. 2009
 The Bank Rate has been retained unchanged at 6.0 per cent
 Reduction of repo rate under the Liquidity Adjustment Facility
(LAF) by 25 basis points from 5.0 per cent to 4.75 per cent with
immediate effect.
 Reduce the reverse repo rate under the LAF by 25 basis points
from 3.5 per cent to 3.25 per cent with immediate effect.
 The cash reserve ratio (CRR) of scheduled banks has been
retained unchanged at 5.0 per cent of net demand and time liabilities
(NDTL).
 GDP = 5.355
 INFLATIOn = 12%

22.  2010
increase the repo rate under the Liquidity Adjustment Facility (LAF)
by 25 basis points from 5.0 per cent to 5.25 per cent with immediate
effect.
increase the reverse repo rate under the LAF by 25 basis points
from 3.5 per cent to 3.75 per cent with immediate effect.
increase the cash reserve ratio (CRR) of scheduled banks by 25
basis points from 5.75 per cent to 6.0 per cent of their net demand
and time liabilities (NDTL) effective the fortnight beginning April 24,
2010.
INFLATION =9.7 %
GDP = 8.9%

23. INFERENCE
The expected outcomes of the actions are:
(i) Inflation will be contained and inflationary
expectations will be anchored.
(ii) The recovery process will be sustained.
(iii) Government borrowing requirements and the
private credit demand will be met.
(iv) Policy instruments will be further aligned in a
manner consistent with the evolving state of the
economy.