Both the Government and the Reserve Bank responded to the challenge strongly, and in close coordination and consultation. The Reserve Bank shifted its policy stance from monetary tightening in response to the elevated inflationary pressures in the first half of 2008-09 to monetary easing in response to easing inflationary pressures and moderation of growth engendered by the crisis.
The Reserve Bank’s policy response was aimed at containing the contagion from the global financial crisis while maintaining comfortable domestic and foreign exchange liquidity. Taking a cue from the Reserve Bank’s monetary easing, most banks have reduced their deposit and lending rates. The Government launched three fiscal stimulus packages between December 2008 and February 2009.