Abstract:

The current economic scenario of various countries across the world is hugely suffering from the setback issues such as War incidents, global recession, the downward trend of economic growth, and uncertainty caused due to COVID-19. The outlook for growth and inflation are both at risk from lingering conflict and sanctions, high oil and commodity prices, protracted supply-chain disruptions, amplified global financial market volatility resulting from monetary policy changes in significant economies, and new COVID-19 outbreaks in India. During 2021–2022, excess liquidity conditions and the external benchmark-based pricing of variable rate loans significantly improved monetary transmission. The bulk of the industries saw increased interest rates on existing loans. With the support of conventional and unconventional liquidity measures, RBI has supported the banks to maintain orderly market conditions while boosting the mood in the financial markets. In view of the existing scenario, the research paper critically examines the trends in instruments used by RBI to control the flow of deposits and money circulation among the banks with the main aim to reduce the negative effects of an economic downturn.  In this paper, an attempt is made to evaluate the impact of the financial instruments of RBI on the Indian Economy.  The paper further examines the influence of the special instruments (i.e., Repo Rate, Reverse Repo Rate, Cash Reserve Ratio) on the Inflation rate, GDP, and Unemployment rate.  The study is descriptive and research-oriented.  Secondary sources of data extracted from RBI; World Bank data hold a significant part of the present research paper.

Keywords: CRR, GDP, Inflation, Repo Rate, Reverse Repo Rate.