Economy capsule.

RBI raises key Rates

For putting a further check on rising inflation in the country, RBI on July 2, 2010 raised its key overnight rates by 0.25 percentage points. RBI raised repo rate 5.5 per cent and th reverse repo rate to 4 percent with immediate effect. RBI had Last raised repo and reverse repo rate to 0.25 percentage points on March 19 and April 20, 2010, lifting repo rate t 3.75 percent.

RBI has taken this decision due to demand side inflationary pressure in the country. According to RBI sources, raising key rates is a part of the calibrated exit from the expansionary monetary policy.

RBI hasalso extended measures to ensure the banking system would not be choked of liquidity. RBI extends the measure to ensure the bank’s holding 0.5 per cent less the bonds required for bank’s statutory liquidity ratio up to July 16, 2010 to ensure adequate liquidity in the system. This facility was to end on July 2, 2010,

Exports Gain 35% in May 2010

Exports in the country registered an impressive jump of 35.1% in May 2010 and reached the level $ 16.1 billion. In may 2009 exports grew on a low base of $ 11.95 billion due to the recessionary trend appearing an US and several other advanced economies.

On the other side of trade, imports also jumped by 38.5 per cent in May 2010 to reach $ 27.4 billion level. As a result, trade deficit widened to $ 11.29 billion in May 2010 from $ 7.8 billion of May 2009.  During May 2010 , oil imports jump 66.7% to $ 8.8 billion while non oil imports rose by 32.3 percent to $ 18.6 billion.

Food inflation shows sgnificant decline

Whole sale price index based food inflation declined significantly by 3.89 percentage point to 12.92 percent for the week ended June 19, 2010. On the week ended June 12, 2010 food inflatin was estimated to be 16.9 due to fall in prices to cereals, pulses, poultry etc This decline was the highest in about two years.

The inflation rate for cereals and pulses stood 5.36 and 31.57% respectively as against 13.42 and 18.52% during the corresponding week of 2009. On an annual basis, prices of potatoes and onions declined by 39.61 percent and 7.86 percent respectively. The inflation rate for fruits and vegetables stood at 8.74 percent and 1.17% respectively as compared to 5.09 and 25.19% during the same week of the year 2009.

Food inflation rate further slowed down to 12.6 % for the week ended June 26, 2010. However, fuel price index rose 18.02 per cent as compared with last weeks level of 12.9 per cent.

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