Indian Economy

In the month of may 2007 some unexpected incident happened suddenly USD is very lower in comparison to INR, and no major step had been taken by the RBI or government of india. earlier in 2006 the prices of all most all metals iron, copper, zinc, aluminum, raised due to high domestic demand. All most all sector of economy was showing tremendous growth, real estate, construction, automobile, trade, industries, stock market also shown a record high, foreign companies made a huge investment foreign currency reserve reached at a new high, companies were depositing more money in their advance taxes but at the other hand agriculture production was decline buffer stock of wheat was going down, production of major crops like wheat, rice, pulses was going down, due to all this inflation raised sharply and when the prices of basic commodities raised sharply then government took some steps to control the inflation. as a control measure, first of all RBI increased its repo and reserve repo rate to control the flow of money in market but these step were minute to control the inflation. then to as a major control the flow of money in the market RBI had to increased its SLR and CRR. but as a effect of slr and crr money sweep out from the market but the prices of basic commodities remained unchanged, instead of going down prices remained stable at that label. due to increase in slr and crr banks also faced shortage of money and they compel to increase the interest rate due to this now borrowing were also gone costly and result of this would be seen in the near future but as a increase in rate of interest of housing loan, those person who took loan earlier at flexible interest rate option were now in difficulty now they had to pay more installment on their housing loan so it was extra burden on there pocket. they were already in trouble due to increased price of basic needs commodities, now this created more trouble for them. now banks are increasing their deposit rates to attract the deposit to meet out their money demand, this action of bank will also against the stock market.