The RBI said in recognition of Indias evolving integration with the global economy and societal preferences, going forward, the resolve would be to condition policy and perceptions for inflation in the range of 4-4.5%. This objective would be conducive for maintaining self-accelerating growth over the medium term.
The headline inflation as measured by the wholesale price index (WPI) eased to 4.4% as on July 14, 2007 from 4.6% a year ago. The central bank also said the increase in asset prices has been higher than that in inflation based on WPI and consumer price index.
The growth in broad money (M3) was 21.6% (Rs 6,09,610 crore) year-on-year (y-o-y) as on July 6, 2007 compared with 19% (Rs 4,51,636 crore) a year ago and well above the indicative trajectory of 17%-17.5% for 2007-08 set in the annual policy statement. The reserve money expanded by 29.1% (21.7% adjusted for the first round impact of the increase in the cash reserve ratio) y-o-y as on July 20, 2007 compared with 17.2% a year ago.
RBIs attempt to slow down credit growth seems to have paid off as reflected in the growth of bank credit which moderated after rising in the preceding three years. The non-food credit by scheduled commercial banks (SCBs) moderated to 24.4% (Rs 3,67,258 crore) y-o-y as on July 6, 2007 from 32.8% (Rs 3,70,899 crore) a year ago. As a consequence, the incremental credit deposit ratio decreased to around 70% as on July 6, 2007 from over 100% in the previous period.