Economic Survey 2009-10 has said that while fiscal issues, including fiscal discipline are important, the transmission of the monetary policy stance to the monetary and real sectors is equally critical.
?It would therefore also be incumbent on the policy authorities not only to address the inflationary expectations but also monitor and ensure that the growth in money supply and credit to productive sectors is at the envisaged levels so that the growth prospects in the near to medium terms are sustained on an even keel, without jeopardising the price scenario,?? the Survey said.
Highlighting trends in monetary aggregates, the Survey has said during 2009-10, the growth rates in reserve money and narrow money have been higher, compared to the preceding year, while broad money growth has been lower. The moderation in growth of broad money is largely on account of the deceleration in growth of bank credit to the commercial sector.
During 2009-10, on a financial-year basis, reserve money increased by 3.8 % (up to January 15, 2010), compared to a decline of 3.7 % during the corresponding period of the preceding year. Net RBI credit to the Centre increased by Rs 29,638 crore during the financial year (up to January 15, 2010).
This was mainly on account of unwinding of the Market Stabilisation Scheme balances and open market operations of the RBI offset by increase in the cash balances of the central government and reverse repo operations.
On a year-on-year basis, increase in the net RBI credit to the Centre, as on January 15, 2010, was Rs1,19,895 crore as against a hike of Rs1,27,184 crore during the corresponding period a year ago.