All through the financial year of 2009-10 India saw surplus cash condition. It started easing out in the beginning of 2010-11 as normalization of monetary policy was calibrated by the Reserve Bank of India.

In the year of 2010-11, rise of inflation in general and the motion of the changing inflationary growth, that has been impacted by the massive speed of growth, have governed the normalization of monetary policy by the RBI.

As the concern of monetary recovery getting lower still prevailed and risk of inflation in general is increasing the monetary policy has to be normalized by calibrating it.

In the month of June of 2010, with the governmental auction of 3G BWA spectrum there was a huge increase in the cash balances of the Indian government.

RBI stuck to the process of calibrated monetary tightening, to justify the pressure of liquidity on the nation, but RBI was never oblivious of the higher level of inflation.

Non-food growth in credit to the private sector remained optimistic and reflected that there is an increasing demand of credit which is linked with recovery of growth.

Since February 2010 headline WPI inflation has always been in double digits and it has become risingly generalized in each subsequent month.

Inflation in the non-food manufacturing sector had gone up to seven decimal three percent in the month of June 2010, from zero, which was there in the month of November 2009. It happened due to the increased costs in input, private demand getting recovered and collective return of pricing power.

Forty two percent of the overall increase in WPI, since the month of November 2009 has happened due to changes made in administered prices and improper reporting of past hike in prices.

The monetary unwinding which started in the month of October 2009 should continue as long as the inflation is growing.