money credit and prices 3 1 monetary conditions continued to remain easy during 2003 04 driven by persistent capital inflows despite sterilisation operations the sheer volume of accumulation reserve bank s net foreign assets nfa expanded at rate 18 per cent highest since 1994 95 broad m3 expansion was also late 1990s as a consequence financial markets operated in ample liquidity interest rates short end market continuum persistently ruled below adjustment facility laf repo generally softened across maturity spectrum beginning june 2002 exchange appreciated through year nominal terms against us dollar offtake remained weak relation initial expectations finance substituted internally generated funds cheaper raised overseas demand for picked up only latter half with virtual absence pressures from aggregate inflation eased albeit haltingly second on account transient supply emanating localised drought pass hardening
