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: Dr Y Venugopal Reddy, Governor, in a meeting with Chief Executives of major commercial banks on Tuesday presented the annual policy Statement for 2004-05. At the outset, Governor mentioned that the Statement follows the pattern already set in the previous years. Broadly, the Statement covered a review of macroeconomic and monetary developments with several analytical and structural issues concerning financial sector and monetary policy.
It delineated and elaborated on various areas in which RBI has been taking measures from time to time and provided a focus on broad policies that are intended to be pursued for the year 2004-05, while retaining the flexibility to take specific measures promptly and effectively as the evolving circumstances warrant. He announced a number of measures for strengthening the financial system, improving the credit delivery mechanism and indicated measures addressing institutional improvements to support growth consistent with stability in a medium-term perspective. He also underscored the need to deepen the consultative process to achieve further social good.
Domestic Developments
GDP Growth in 2003-04
Reviewing GDP growth for 2003-04, Governor said that the advance estimate released by the CSO in February 2004 has placed the GDP growth much higher at 8.1 per cent as against 4.0 per cent in the previous year reflecting, inter alia, a rebound in agricultural production.
Inflation Rate
The annual inflation rate as measured by variations in the wholesale price index (WPI), on a point-to-point basis, declined from 6.5 per cent at end-March 2003 to 4.5 per cent by end-March 2004. The annual rate of inflation during 2003-04, on an average basis, was, however, higher at 5.4 per cent as compared with 3.4 per cent in the previous year. The point-to-point inflation declined to 4.2 per cent as on May 1, 2004 as compared with 6.9 per cent a year ago. On an average basis, it was 5.2 per cent as compared with 3.9 per cent.
Monetary Indicators
Referring to monetary developments, Governor said that money supply (M3) increased by 16.4 per cent during 2003-04 as compared with 12.8 per cent in the previous year, net of mergers. The growth in aggregate deposits of scheduled commercial banks at 17.3 per cent was higher than that of 13.4 per cent in the previous year, adjusted for mergers. The increase in reserve money during 2003-04 at 18.3 per cent was higher than that of 9.2 per cent in the previous year essentially because RBI’s foreign currency assets increased by Rs.1,41,428...
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