Almost a decade after India shifted to a formal inflation-targeting regime under the Monetary Policy Committee (MPC) framework of the Reserve Bank of India (RBI), a high-level panel of economists said that the flexible inflation targeting has largely worked in keeping it under control and no major revamp is required.
Job creation, improving farm productivity, and mobilising public funds for infrastructure development were some of the issues that figured during the interaction between Prime Minister Narendra Modi and economists ahead of the 2025-26 Union Budget. The prime minister on Tuesday met eminent economists and sectoral experts at NITI Aayog to hear their views and suggestions for the upcoming Budget. Union Finance Minister Nirmala Sitharaman is scheduled to present the Budget for 2025-26 in the Lok Sabha on February 1, 2025.
The government on Tuesday appointed three external members -- Ram Singh, Saugata Bhattacharya and Nagesh Kumar -- to the RBI's rate-setting Monetary Policy Committee for four years. The central government has reconstituted the Monetary Policy Committee (MPC) of RBI, the finance ministry said in a statement. Ram Singh is the director of the Delhi School of Economics, Saugata Bhattacharya is an economist, and Nagesh Kumar is the director and Chief Executive, Institute for Studies in Industrial Development, New Delhi.
The MPC headed by RBI Governor Urjit Patel said that the recent excise duty cut by the government on petrol and diesel will help contain inflation.
Chetan Ghate, Pami Dua and Ravindra Dholakia have been appointed for 4 years
The government on Monday appointed three eminent economists Ashima Goyal, Jayanth R Varma and Shankanka Bhide as members of the rate-setting Monetary Policy Committee of the RBI
With Deputy Governor Viral Acharya and another member Chetan Ghate voting for a status quo, RBI governor Shaktikanta Das and three others outvoted them for reduction in repo rate to 6.25 per cent from the existing 6.50 per cent.
These are the highlights of the seventh bi-monthly monetary policy statement for 2019-20 by the RBI amid COVID-19 pandemic:
Sentiments were also bearish largely in tandem with a sell-off in global markets as US Treasury yields surged to multi-year highs on robust economic data and comments from the Federal Reserve, sparking fears of accelerating inflation, brokers said.
Although there is headroom for further monetary policy action, at this juncture it is important to keep our arsenal dry and use it judiciously: RBI's Das.
Minutes of the MPC meeting show Das felt economy needs more monetary stimulus as inflation outlook remains uncertain.
RBI governor Das flags growth slowdown, deputy raises alarm on inflation
Das favoured shifting the stance of monetary policy from neutral to accommodative to send a clear signal, indicating that more measures could be taken in the near future to boost growth.
'Overall, domestic demand has moderated significantly. 'The weakening of private consumption, which for long has been the bedrock of aggregate demand, in particular, is a matter of concern,' RBI Governor Shaktikanta Das said in the MPC meetings, in October.
Relations between the Mint Road and North Block have often been frosty, with the former's calls for lowering rates being the biggest point of difference
The fourth consecutive rate cut is expected to lower equated monthly instalments (EMIs) for home and auto buyers, and borrowing cost for corporate.
RBI unsure whether to cut rates or not in its next monetary policy.
This time the all-powerful interest-rate setting panel, whose constitution was notified by the government on Thursday, will take call on interest rate. But that's not the only change. The Reserve Bank of India has also decided to change the timing of announcement of its policy review, due next Tuesday, to mid-afternoon.
All-out efforts are needed to mitigate the adverse impact of the Covid-19 pandemic, and the RBI will use any instrument necessary to revive growth and preserve financial stability, according to the minutes of the central bank's policy meeting.
North Block and Mint Road seem likely to now stick to the earlier convention of the RBI governor coming to Delhi and being the only MPC member meeting the finance minister and senior bureaucrats on pre-policy meetings
RBI said at the current juncture, the all-out effort is to maintain and sustain, with the hope that when life is secure, resources, energy and time can be marshalled to rebuild and revive.
Pressure has been mounting on the Reserve Bank of India to cut interest rates in the wake of declining retail inflation and the need to fuel growth momentum. However, the RBI will have to do a tightrope walk as globally interest rates are inching upwards.
The Governor said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if the need arises.
A combination of farm loan debt waivers by state governments and the implementation of the pay commission award could entail some fiscal slippages and pose a risk to inflation
Probably in August. We can argue whether RBI is dovishly neutral or neutrally dovish but the telltale signs of at least one more rate cut are strewn all over the policy statement, points out Tamal Bandyopadhyay.
'The no-rate cut policy and preference to wait for the Budget and clarity on the fiscal front demonstrate RBI Governor Shaktikanta Das is maturing in his new role,' notes Tamal Bandyopadhyay.
The career bureaucrat-turned-central banker walked into the 19th floor corner room of the Reserve Bank on December 12, 2018. Since February 2019, the Das-led RBI has cut the repo rate by a whopping 135 basis points to support the sagging growth, including an unprecedented 35 bps reduction in August. As he completes one year at the helm, woes in the NBFC sector, overall health of the banking sector and steeply falling economic growth are among the major challenges that needs to be tackled sooner than later.
Lower inflation, FCNR(B) outflows likely to influence central bank decision
RBI in wait and watch mode as several risks to inflation continue to exist including a sudden reversal of food prices and oil price volatility.
The banking sector in India is reeling under Rs 8 lakh crore of non performing assets (NPAs) or bad loans, of which PSU banks alone account for over Rs 6 lakh crore.
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