Doc.Economics - Cashreserveratio

Economics

In the current scenario, it can be understood that the growth of the Indian economy is weakened with a slow movement in industrial activity and services. The growth has been below potential and the output level gap is widening.

As the fuel prices have been increasing compounded by a sharp depreciation in the rupee and rising prices of international commodities. It is no rocket science to judge that the RBI needs to take visible action to curb this disaster.

The crr has been stagnant since February 2013 , but the daily maintenance of crr has come down to 95% from 99%.

Seeing the trend of the cash reserve ratio, since January 2012 up till September 2013. It can be noted that since jam 2012 to march 2012 there was 1% decline in the crr which then was unchanged up till September last year. Only from October 2012 till February it was continuously slightly declining till it has become stagnant since then till the current September rate for this quarter which is 4%.

We can understand from the graph that since crr has remained unchanged this reflects that there has been no growth and nothing is being done to boost the economy.

Following he trend of repo rate with the help of this graph, it can be noted that the reportage was declining up till April last year and then it became constant till end of last year, and continued declining after that till September this year it picked up and currently is 7.50%.

The repo rate reduction is made to make credit available at cheaper rates. Which was the case till September, an increase in this rate states that there was excess liquidity which is being controlled by an increase in the repo rate.