The document contains data on India's inflation rate from 2000 to 2010. Inflation increased substantially from 2006 to 2010, with a peak of 13.18% in 2010. Some key factors that contributed to rising inflation in India over this period included increases in global crude oil prices, as India relies heavily on oil imports; a slowdown in productivity growth; and structural issues in India's banking and rural finance sectors that limit access to credit. Monetary policy tightening by the Reserve Bank of India through higher interest rates and reduced money supply aimed to curb inflation, but other supply-side shocks and global commodity price rises made reducing inflation challenging.

2. Inflation is the rate at Inflation, average
which the general level Year Percent Change
of prices for finished
consumer prices
goods and services
rises over a given 2000 4.009 -14.15%
period of time.
2001 3.779 -5.74%
Current Inflation Rate 2002 4.297 13.71%
is 8.62% as on July
2011
2003 3.806 -11.43%
2004 3.767 -1.02%
2005 4.246 12.72%
2006 6.177 45.48%
2007 6.372 3.16%
2008 8.349 31.03%
2009 10.882 30.34%
2010 13.187 21.18%
http://www.indexmundi.com/india/inflation_rate_(consumer_prices).ht

3. Inflation, average consumer prices
14
12
10
8
Inflation, average consumer prices
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
http://www.indexmundi.com/india/inflation_rate_(consumer_prices).ht

5. • Rise in prices of Food items & cereals
Agriculture • (Due to monsoon effects, Supply declined; Prices Shot
up)
• Rising Global crude oil prices (India’ dependence of
75% on crude oil imports since 2009)
Policy
• Banking & Financing Sectors are not structured esp in
Rural Areas.
• Slowdown in Productivity & Rising Incomes
Supply contributing to high pricing of items for common
population
http://petroleum.nic.in/petstat.pdf, Ministry of Petroleum & Natural
Gas, GOI

6. Monetary policy contraction
Increasing rates relevant to bank lending and
commercial rates to discourage borrowing
 Repo rate: Short term rates against securities
 Reverse repo rate: Reverse lending rates
 Bank rates: Long term lending rates
Reducing liquidity
• Cash reserve ratios (CRR)
• Statutory Liquidity Ratios (SLR)
• Marginal Standing Facility (MSF)

7. 2008 2009 2010 2011
Inflation 8.30% 10.90% 13.18% 8.95%
Bank Rate 6% 6% 6% 6%
5.5% to
9% to 6.5% 5% to 6.25% 6.5% to 8%
Repo Rate 4.75%
Reverse 3.5% to
5% 4% to 3.25% 7%
Repo Rate 3.75%
Cash
Reserve 5.5% to 9% 5% 5.50% 6%
Ratio (CRR)
Statutory
Liquidity 24% 25% 24% 24%
Ratio (SLR)
Referencing Required

8. Working of RBI’s Policy
Ideal
Consumption
Situation Increase in
Decreases
Interest Rate
Investment Aggregate Inflation
Decreases GDP
demand rate
Money Supply Decreases
Decreases Decreases
Export
Decreases
Increase in
Currency Rate
Import
Increases Disparity in
Purchasing,
Actual Supply
Shocks, Agri
Situation Consumption cultural
Increases Shocks
Increase in
Interest Rate
Investment
Aggregate
Decreases GDP
Money Supply demand Inflation
Increases
Export Increases
Decreases
Increase in
Currency Rate
Import
Increases
Rise in
Global
Crude Oil
Prices

9.  Fiscal Policies in tandem with Monetary
Policies
 Supply Side Constraints
 Agriculture Sector
 Infrastructure
 Development of SME Sectors
 Relative downward inflexibility in the
commercial interest rate structure

10. Thank You