With increasing globalisation of the Indian economy, the global financial crisis impacts the domestic economy through trade and financial channels. The macro effect of the global crisis on the domestic economy has however been muted . Though there has been a moderation in growth with Gross Domestic Product at constant prices growing at 7.8 percent during April- September of 2008-09 as compared to a growth of 9.3 percent in the corresponding period of 2007-08, the growth potential of the economy as determined by the savings and investment ratios, is robust.

To safeguard the economy against adverse impact of the global financial crisis, the Reserve Bank of India has taken measures inter-alia for reduction in Cash Reserve Ratio and Statutory Liquidity Ratio, reduction in repo and reverse repo rates and for liberalising access to external commercial borrowings. The Government has announced a fiscal package which includes additional plan expenditures, reduction in the ad valorem Cenvat rate and measures to support exports. These measures have ensured the effective functioning of the financial system and improvement in liquidity in the money market.

This information was given by Shri Pawan Kumar Bansal, Minister of State for Finance in reply to a question raised by Shri Shantaram Laxman Naik in Rajya Sabha today. Monetary policy measures eased to bolster domestic liquidity and support growth amid global financial shock to the economy. Global financial turmoil moderated domestic growth-GDP at constant prices slowed to 7.8% for Apr-Sep 2008-09-while savings and investment ratios sustained growth potential. Authorities implemented monetary measures (reductions in Cash Reserve Ratio, Statutory Liquidity Ratio, repo and reverse repo rates; liberalised external commercial borrowings) and a fiscal package (additional plan expenditures, reduced ad valorem Cenvat rate, export support) to ensure financial system functioning and improved money market liquidity.