In its mid – year review for 2009-10, which was tabled in Parliament by Finance Minister Pranab Mukherjee, the Govt. said the Reserve Bank needs to withdraw the easy money policy gradually so as to ensure sustained economic recovery and contain inflationary expectations.
The review stated, “the exit from the current expansionary policy stance has to be so calibrated that the recovery process is sustained and inflationary expectations remain well anchored.” The review also added that the timing and the pace of the exit from accommodative policies should depend upon the strength of the recovery of the economy.
It was in the backdrop of the global financial meltdown in September last year that the RBI took a host of measures to make available liquidity to the fund-starved industry.
However, with the economy showing signs of recovery and also inflationary pressure becoming evident, RBI had initiated the first phase of exit by raising statutory liquidity ratio by one percentage point to 25 per cent and withdrawing some other steps this October. A January review of the country’s monetary policy is widely expected by most bankers and analysts.