A notable feature of 1996-97 was that the money and foreign exchange markets were generally calm in contrast with the turbulence witnessed in these markets in the previous year. A strong growth in bank deposits, coupled with substantial reduction in cash reserve requirements resulted in abundant liquidity in the system. However, the off-take of bank credit was subdued.
Our own inflation scenarios will be unveiled on 13 October, together with the growth scenarios. Despite these developments, in August contractual wage growth was broadly stable, at 1.0 per cent year-on-year in the non-agricultural private sector. Looking ahead, forceful action to reduce inflation is essential to preserve the purchasing power of households and avoid 'pointless wage-price spirals' 1.