Background:
The WPI Inflation was at 3.22% at the start of October 2007 which was well within the range of 4-5% that the RBI wanted to maintain. However, there was a growth in the broad money (M3) by 22.4% year-on-year. The RBI had started increasing the CRR rate in order to absorb the keep the M3 growth at levels that was acceptable for them (17-18%). From December 2006 till October 2007, the RBI had already increased the CRR by a total of 150 basis points from 5% to 6.5%
