The first quarter review of RBI Monetary Policy 2009-10 has been framed against the backdrop of signs of stability visible in the global economy after the severe meltdown last year. Domestically, also, growth is expected to pick up going forward, as the buoyancy in the economy is seen across sectors, sustained by domestic demand. To support the incipient recovery and ensure financial stability, RBI has already taken a number of measures since September 2008 which has resulted in augmentation of liquidity to the tune of Rs 5,61,700 crore. Currently, liquidity remains in surplus mode with RBI absorbing on an average Rs 1,20,000 crore under reverse repo window on a daily basis. Thus, RBI has chosen to continue its accommodative policy and ensure ample liquidity for productive purposes till there are firm signs of a turnaround.
As clearly articulated by the RBI governor, several challenges remain. A major concern is management of the government borrowing programme during 2009-10.
Improvement of the investment climate is another. There could also be some challenges on the inflation front as it is expected to rise from negative territory to about 5% by March 2010.
Taking all this into account and given the need to spur growth and investment in the economy, RBI has indicated adequate liquidity and credit for productive sectors, which should ensure credit off-take. Hence their estimates of the economy?s growth has been revised to 6% with a positive bias.
?(The writer is chairman,SBI)