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MONETARY POLICIES AND ITS IMPACT ON INDIAN ECONOMY

ISHPREET SINGH BAGGA BBA 4TH SEM -B

What is Monetary policy ??


The term monetary policy refers to actions taken by central banks to affect monetary magnitudes or other financial conditions. Monetary Policy operates on monetary magnitudes or variables such as money supply, interest rates and availability of credit. In other words affects liquidity and by affecting liquidity, and thus credit, it affects total demand in the economy

How does Monetary policy affect the economy ?


Money Supply in the Economy. Inflation Jobs/Wages Exports/Imports Interest Rates/Savings

Tools of the Indian Monetary Policy

Measures to Control Inflation


These measures are adopted by the central bank of the country to control Inflation:1. 2. 3. 4. 5. Increased re discount rates Sale of government securities in the open market Higher reserve requirements Consumer credit control Higher margin requirements

RBI has cuts CRR (cash reserve ratio) by 0.25% (4.00%) and repo rate also by 0.25%(7.75%).
Due to the reduction in CRR BY 0.25% liquidity of Rs. 18000 crore being created in the market. Now banks would circulate more credit or would create more credit control to common man ,business houses.

Impact on business
The rates would proved to be great benefit to the real estate sector and automobile industry due to reduction of burden of EMI .

Due to the cheaper interest rates the demand in various sectors will increase.

Impact on government
It would certainly improved the economic environment of the country and would initiate FDI and FII. The government would fetch more credit from the market.

Main Focus
Industrialization
To improve the standard of living of people.

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