India's Monetary & Credit Policy 2003

On April 29, Dr. Bimal Jalan, Governor of the Reserve Bank of India, announced India's Monetary & Credit Policy for the fiscal year 2003-04. In the past year, reserves were built at a low effective cost without adding to external debt. Low interest rates and strong forex position prompted prepayment of external debt. RBI projected the annual growth rate for 2003-04 at 6.0% (During the mid-term review in November, 2003 it was revised to 6.5 - 7.0%.)

Salient measures relevant to international business are as follows:
1. Cash Reserve Ratio (CRR) cut by 0.25%.
2. Transparent system to determine prime lending rate (PLR) of banks.
3. Flexibility allowed to overseas investors for flow of FDI (Foreign Direct Investment). Those making long term investments permitted to hedge forex exposures in India by entering into forward sale contracts with banks in India.
4. Indian corporates and resident individuals permitted to invest in rated bonds/fixed income securities of listed eligible companies abroad.