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WELCOME

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E-governance2

“A study on effect of Inflation on Credit Policies adopted by RBI for

The Year 2009-2011”

Presented By:MADHAVI TIWARI

Guru Nanak Institute of Engineering & Technology

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About the presentation

Focus :- • Study focus on RBI credit policy during decades 2009-11.• It also focus on variables in Inflation Rate.• It also focus on effects on Policy in Inflation as well as on economy.

Objectives of the study

Methodology of the study

Introduction to Inflation

Introduction to RBI

Data analysis and interpretation

Conclusions

Suggestions

Hypothesis

Inflation,Monetary and credit policies

Scope of the study

Objectives of the study

The study is focuses on the term of inflation, what is inflation, its meaning, causes, direct or indirect effects on economy, how it will control?

To understand the credit policy and the monetary terms for controlling the inflation as well as money flow into the market.

To examine the effects on the banking sector or the RBI credit policy for control of money flow into the market.

To study the fundamental factors affecting the monetary value.

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To examine the factors of inflation,including effect on GDP,

inflation rate etc.

To learn about the monetary concept in inflation and their

instruments as control measures.

To make sure the positive as well as negative effects of inflation on

RBI credit policy.

To review the economy performance in the current financial year

and estimate the economy prospects for the coming year.

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HypothesisHypothesis Inflation is always good for the economy but over inflation affects the economy.

The credit policies are designed with the aim of controlling the money supply and balance the position of the economy.

Inflation is related to economical development of the nation.

To control the inflation RBI always try to get it controlled through the credit policies but it could be controlled by other factors also.

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Methodology of the study

This study is totally based on secondary data.

The sources of data are various economic surveys of India and RBI bulletin, online database of Indian Economy, Journals, articles, news papers and various books based on Indian Banking sectors.

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Introduction to Inflation

Inflation is a rise in the general level of prices of goods and

services in an economy over a period of time.

Inflation's effects on an economy are various and can be simultaneously positive and negative.

Most economists today use the term "inflation" to refer to a rise in the price level.

Inflation is largely dependent on supply and demand pressures in the economy.

Most economists today use the term "inflation" to refer to a rise in the price level

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Causes of inflation

Inflation comes in different forms and those at are familiar with the economic matters would observe that there are trends in the way that prices are moving gradual and irregular in relation to aggregate sections of the economy.

The main causes of inflation are:

Demand-pull Inflation

Cost push Inflation

Monetary inflation

Structural inflation

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Effects of inflation

Inflation can have positive and negative effects on an economy

Negative effects:Distortion of relative pricesIncreased risk - Higher uncertaintiesExisting creditors will be hurtLowers national saving

Positive effects:Mitigation of economic recessions

Debt relief by reducing the real level of debt.

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Introduction to RBI

The Reserve Bank of India was established on 1 April 1935 in acordance with provisions of Reserve Bank of India Act, 1934. Bank of India Act, 1934. The central office of Reserve Bank was initially established in Kolkata but was permanently moved to Mumbai in 1937. The central office is where the Governer sits and where policies are formulated.

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Monetary & Credit policy

Monetary policy is, by common agreement, the defining function of a central bank.

The Monetary and Credit Policy is the policy statement, traditionally announced twice a year, through which the Reserve Bank of India seeks to ensure price stability for the economy.

Monetary policy, which is usually understood to represent policies, objectives, and instruments directed towards regulating money supply and the cost and availability of credit in the economy.

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Data Analysis and interpretation

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 est 2011/12 est 2012/13 est0

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Money Supply (M3)

Money Supply (M3)

As per the above graph it is showing the updates of money supply (M3) in the market. As mention in the year 2005/06 the money supply is calculated at 21.2% which is increases in next year at 21.5% and the % of money supply is decreases in the year of 2007/08 at 21.2 after that it is calculated 13.3 % in 2009/10. And it is expected to be high money supply % in 2010/11 at 19.1 %.

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GDP Growth Rate

2007/08 2008/09 2009/10 2010/11 est 2011/12 est 2012/13 est0

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Real GDP (at factor cost, % change)

Real GDP (at factor cost, % change)

As per the Indian economy update year 2010 the above graph is showing about the GDP % change from 2007 to 10. In between 2007/08 to 2009.10 it is estimated to 8% & in 2007/08 the GDP is indicated at 9.2 % suddenly in 2008/09 it decreases at 6.7%. And the GDP is estimated to be 8.5 to 8% in the year of 2011 to 2013.

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Sectoral Deployment of personal loan housing

8-Feb 9-Feb 8-Feb 9-Feb 8-Feb 9-FebPublic sector bank Private sector bank Foreign bank

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-4

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Personal loan housing

Personal loan housing

As above graph is showing the significant variations in flow of credit to personal loan housing sectors by the three broad bank groups during 2008-09. credit growth to personal loans and services decelerated. 

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Sectoral Deployment of Small enterprises

Public sector bank

Private sector bank

Foreign bank

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100

150

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Small enterprises

As per the above graph in 2008 the credit ratio is decelerated from 49 to 36 %, by private sec bank it is decelerated at 23.2% , by foreign sec bank it is decelerated at 59%. All over we can say that the credit by all sector bank is decelerated to small enterprise.

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Scope of the study

It can help in to find out the causes behind inflation which shows the increasing or decreasing variables in inflation rate.

It can also help in to find the control measures for inflation,to control its variable effects on economy.

It also examines the positive as well as negative effects of inflation.

To review the direct or indirect effects of inflation on economy as well as in monetary and credit policy of RBI.

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Conclusions

Inflation if well controlled at certain level then it could be better for the economy

When demand increases and supply decreases then inflation increases. So industry should have a balance production so that demand and supply is equal and inflation decreases

Inflation remained the major concern during 20011-12 due to upsurge in global commodity price and crude oil through wholesale price index.

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Suggestions

RBI should take proper steps to control Inflation if it seems to come at certain level in economy

Monetary Policies should be framed by RBI by analyzing economic condition in the country’s economy.

Government should maintained balanced in sectoral development by providing proper circulation of fund.

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Courtesy

Web sites:www.moneycontrol.com

www.metacafe.com

www.google.com

www.rbi.org.in

Hindustan TimesThe Times Of India

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