key rationale for this distinct shift in the stance of monetary policy, even as unseasonal rains caused temporary spikes in food inflation in the second half of 2019 – 20. consistent with this policy stance, liquidity conditions were also kept in ample surplus all through since june 2019. the lagged impact of these measures was about to propel a cyclical turnaround in economic activity when covid - 19 brought with it calamitous misery, endangering both life and livelihood of people. 5. given the uncertainty regarding the evolution of the covid curve, it was absolutely critical to anticipate the emerging economic risks and take pro - active monetary policy actions of sizable magnitude, using a comprehensive range of policy instruments to optimise policy traction. the fast - changing macroeconomic environment and the deteriorating outlook for growth necessitated off - cycle meetings of the monetary policy committee ( mpc ) – first in march and then again in may 2020. the mpc decided to cumulatively cut the policy repo rate by 115 basis points over these two meetings, resulting in a total policy rate reduction of 250 basis points since february 2019. liquidity measures 1 / 6 bis central bankers'speeches 6. the conventional and unconventional monetary policy and liquidity measures by the reserve bank have been aimed at restoring market confidence, alleviating liquidity stress, easing financial conditions, unfreezing credit markets and augmenting the flow of financial resources to those in need for productive purposes. the broader objective was to mitigate risks to the growth outlook while preserving financial stability. the liquidity measures announced by the rbi since february 2020 aggregate to about ₹9. 57 lakh crore ( equivalent to about 4. 7 per cent of 2019 – 20 nominal gdp ). ii. financial stability and developmental measures 7. heading into the pandemic, the financial system of the country was in a much improved position, owing mainly to various regulatory and supervisory initiatives of the reserve bank. we had put in place a framework for resolution of stressed assets in addition to implementing multiple measures to strengthen credit discipline and to reduce credit concentration. for the five years between 2015 – 16 and 2019 – 20, the government had infused a total of ₹3. 08 lakh crore in public sector banks ( psbs ). as a result of the efforts by both the reserve bank and the government, the overhang of stressed assets in the banking system had declined and capital position had improved. as per available numbers ( some of which are provisional

government borrowings and the fiscal dominance, administered interest rates and the large size of unorganized sector. deregulation and liberalization of the financial markets combined with increasing openness of the economy during this period necessitated some changes in this framework. consequently, a multiple indicator approach was announced in 1998 - 99, wherein interest rates or rates of return in different markets ( money, capital and government securities markets ) along with such data as on currency, credit extended by banks and financial institutions, fiscal position, trade, capital flows, inflation rate, exchange rate, refinancing and transactions in foreign exchange available on high frequency basis are juxtaposed with output data for drawing policy perspectives. such a shift was gradual and a logical outcome of measures taken over the reform period since early nineties. thus the ‘ exclusive ’ use of broad money as an intermediate target was de - emphasised, but the growth in broad money ( m3 ) continues to be used as an important indicator of monetary policy. in a deregulated financial environment with reasonably open capital account, monetary policy has to respond to unexpected changes on short - term basis. the switchover to a multiple indicator approach provided necessary flexibility to the reserve bank to respond to changes in domestic and international economic and financial market conditions more effectively. in a medium to long - term perspective, the impact of money supply on inflation, however, cannot be ignored and for purposes of policy, the reserve bank still continues to announce projections of money supply compatible with the outlook on growth of gdp and expected inflation. fifth, the institutional context in which monetary policy was conducted was vastly different till very recently. since 1997, a major change has taken place with the discontinuation of the process of automatic monetisation of government deficit. although the mutually agreed ways and means advances ( wma ) sought to put a limit on direct short - term access of funds from the reserve bank to the government, the continued high fiscal deficit made it difficult for the government to reduce its requirement of borrowings from the banking sector. in the process, the reserve bank had to manage liquidity in the system in such a way that the impact of the high fiscal deficit on monetisation as also on interest rates is minimized. in effect, while the fiscal impact on monetisation has been reduced significantly, the interplay between fiscal and monetary operations continued to be significant in the post - 1997 scenario. the overall monetary management becomes difficult with a large and growing borrowing programme of the government