In all, RBI has cut interest rates by 110 bps this year. But this has not yet led to a boost in economic activity. While the growth rate has slowed to a five-year low, consumer confidence is waning and foreign direct investment has plateaued.
Growth in the third quarter (October-December) is expected to be the weakest in years, with spending hit due to unavailability of enough replacement currency.
Shifting its stance of monetary policy towards targeting retail inflation as it is an "inequitable tax", RBI today said it may exceed 8 per cent by March end and efforts will continue to bring it down.
In its scheme of things, tackling inflation now comes ahead of ensuring growth in the world's sixth largest economy, points out Tamal Bandyopadhyay.
Revising up inflation bands for the central bank will hurt the poor, former deputy governor of RBI Viral Acharya said on Wednesday, terming the current 4 per cent midpoint on price-rise as a "reasonable target".
He warned low interest rates globally could distort markets and would be difficult to abandon
'We are not able to manufacture even low-end products as cheaply as China.' 'We are not buying Chinese goods today out of any love for China.'
While Arun Jaitley remains part of the decision making process, Piyush Goyal, who was given additional charge on May 14, attends cabinet meetings and takes the day-to-day decisions.
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.
In case the repo rate keeps trending downwards, borrowers can expect a downward revision of their MCLR-linked loans.
'The RBI is something like a seat belt. As a driver, the driver being the government, it has the possibility of not putting on a seat belt but of course if you do not put on your seat belt you get into an accident and the accident can be quite severe,' Raghuram Rajan told CNBC TV18. 'The aim of the board is to be Rahul Dravid -- sensible, thoughtful and not, with due respect, Navjot Sidhu,' he added.
The opposition made it clear during the meeting that it will press for a joint parliamentary committee to probe the Rafale jet deal and raise several issues, including the "misuse" of probe agencies and the autonomy for Reserve Bank of India.
RBI said inflation in the second half of the current fiscal is projected at 2.7-3.2%. It retained its GDP forecast for the current fiscal at 7.4%
To do so, the government will have to tackle a number of broad development challenges successfully, says Shankar Acharya
If the new governor can think out of the box even as he signals that he can bat for the RBI cadre and respect its institutional memory, that will go a long way in getting out of the current impasse.
RBI data show one-fifth of all the infrastructure loans are stressed and the share of such loans in overall stressed assets is nearly a third.
A staunch defender of demonetisation, it would be interesting to see how he handles the government's increasing demand for more cash from the RBI, and letting some weak banks get out of prompt corrective action.
All old notes of these denominations will continue to be legal tender
'His (Das) approach to work seems that of working as a team with ease in communication.'
Market breadth depicted gains with 1,476 advances over 1,403 declines on the BSE. 140 stocks remained unchanged.
'People always short-change the resilience of the economy.'
The final and most significant reset in the relations between the government and the RBI is the manner in which the process of appointing the governor and deputy governors of the central bank has been changed.
Government looking at cushioning slowdown due to demonetisation with sops and higher outlay for micro, small and medium enterprises, agriculture, and affordable housing.
The windfall from RBI may be used to trim borrowing, help fund Rs 3.3 lakh crore capex plan, capitalise banks and provide fiscal stimulus to some stressed sectors, experts and economists said.
'...Unless we muck up our policies.' 'We have to become a modernised economy.' 'Our institutions should be stronger. And that is most important.' 'The rule of law should prevail and contracts should be enforced.' 'Above all, we have to recognise the importance of globalisation.' 'It is in our favour at this stage. We should grow and become globally competitive.'
Only Rs 16,050 crore out of the Rs 15.44 lakh crore of the old high denomination notes have not returned.
Be it bad loans resolution or his uncanny focus on inflation fighting which earned him criticism of being a policy hawk, Acharya was at the centre of it all and deftly steered the policy machinery.
T C A Srinivasa-Raghavan recalls a tussle between the government and RBI when Rajiv Gandhi was prime minister and how it was resolved.
The unity by the opposition parties is likely to reflect inside Parliament as well.
In the broader markets, the BSE Midcap and Smallcap indices extended gains and were up over 1% each
India's growth, he said, remains resilient with low inflation, fiscal prudence and low current account deficit, talking about robust structural reform measures.
A three-year validity of an inflation target is, perhaps, more reasonable and practicable.
'Rajan brought in a healthy air of competition in the banking sector.'
Given the macro setting, the outlook remains positive for each of the four key parameters - inflation, current account deficit, fiscal deficit and currency stability, says Rahul Bhushkute.
Reserve Bank of India Deputy Governor Viral Acharya is the eighth economist to quit since the Modi government took office.
This is the highest closing level since May 11, 2016 when the rupee had finished at 66.56
A two-year extension at the helm of the RBI still looks a real possibility
That's all it takes to protect an institution -- just one person with no past and no greed for the future, says Shekhar Gupta.
Piyush Goyal, who held the post of finance minister when Arun Jaitley was undergoing treatment, told the Confederation of Indian Industry's annual session: "All stakeholders, including the RBI, should introspect on their respective roles (on low economic growth)."
The HR challenge seems to be one of the most important issues that RBI Governor Shaktikanta Das will have to tackle.
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