The Reserve Bank may be hitting the end of its tolerance for high inflation and will most likely hike interest rates in the first half of 2022, analysts said on Friday. The central bank will also start rolling back its accommodative policies which have led to easy liquidity conditions, they said. The view from analysts came even as inflation cooled down to 5.6 per cent for July, after two months of breaching the upper end of the RBI's tolerance band of 6 per cent.
The broader 50-issue NSE Nifty too slipped from its record high, shedding 10.30 points or 0.09 per cent to end at 11,346.20.
RBI is expected to discuss about the impact of GST in its monetary policy.
In the current fiscal so far, retail inflation stabilised around 5 per cent, while wholesale price-based inflation averaged around 2.9 per cent during April-December.
Priorities include the amendments of the Companies Act and the Motor Vehicle Act
India's services sector activity witnessed a sharp upturn in August on the back of stronger gains in new business, ongoing improvements in demand conditions and job creation, a monthly survey said on Monday. The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from July's four-month low of 55.5 to 57.2 in August, amid a quicker upturn in business activity and the sharpest rise in employment for over 14 years. For the thirteenth straight month, the services sector witnessed an expansion in output.
The recovery in the Indian services sector was sustained in November as new work orders supported business activity growth and the first rise in employment in nine months, a monthly survey said on Thursday.
Kotak Bank was the biggest loser in the Sensex pack, falling 3.71 per cent, followed by RIL, HDFC Bank, Bajaj Finance, PowerGrid, IndusInd Bank, Asian Paints, HDFC and ITC.
The government's total liabilities rose to Rs 128.41 lakh crore in December quarter from Rs 125.71 lakh crore in the three months ended September 2021, according to the latest public debt management report. The increase reflects a quarter-on-quarter increase of 2.15 per cent in October-December 2021-22. In absolute terms, the total liabilities, including liabilities under the 'Public Account' of the government, jumped to Rs 1,28,41,996 crore at the end of December 2021.
This is contrary to the expectations of a majority of analysts predicting for another hike given the rise in inflation lately, including domestic ratings agency Icra
Crisil Research expects retail inflation to rise 60 basis points to 4 per cent this fiscal from 3.4 per cent in 2018-19.
The stock markets, which had opened in the green on rate cut hopes, tumbled after the monetary policy announcement.
Retail inflation softened to 6.71 per cent in July due to moderation in food prices but remained above the Reserve Bank's comfort level of 6 per cent for the seventh consecutive month. With retail inflation continuing to remain high despite a fall in prices of vegetables and edible oils, among other commodities in July, the Reserve Bank of India (RBI) might go for another rate hike in September. The Consumer Price Index (CPI) based retail inflation was at 7.01 per cent in June and 5.59 per cent in July 2021. It was above 7 per cent from April to June this fiscal.
Five of the six external members had suggested that the central bank should reduce the policy rate.
Analysts at Bank of America Merill Lynch said that fears of inflation getting "generalised" are overdone, as only two sub-categories of fuel and light and housing (accounting for 22 per cent of the basket) have seen a price-rise above the headline 5.2 per cent.
Reserve Bank of India Governor Urjit Patel on Saturday exhorted banks to reduce their lending rates to push credit demand in laggard segments, saying banks have benefited from influx of low-cost deposits and its previous repo rate cuts.
Reserve Bank Governor Shaktikanta Das has pitched for policy support from all sides -- fiscal, monetary and sectoral -- to nurture recovery of the economy hit by the second wave of the coronavirus pandemic. The dent on economic activity due to the second wave of the pandemic during April-May necessitated continuation of monetary measures to support the process of economic recovery to make it durable, Das had said while participating in the meeting of the Monetary Policy Committee (MPC) earlier in the month. "Overall, the second wave of COVID-19 has altered the near-term outlook, and policy support from all sides - fiscal, monetary and sectoral - is required to nurture recovery and expedite return to normalcy," Das said, as per the minutes of the meeting released on Friday.
The Governor said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if the need arises.
The MPC states that the 4 external members will have a tenure of four years each.
Rising crude oil prices, traction in China equities and inflation concerns back home are casting a shadow on the Indian equity markets in the short term, believe analysts at Jefferies. They said this could see the markets remaining range-bound in the near term before the next leg up.
For all its claims to economic glory, the majority of India's population lives vulnerable lives, a situation that has only worsened over the past 15 years, to the extent that the government now fears to release economic data or even conduct a proper Census, notes Rathin Roy.
On one hand, Operation Greens should help to smoothen volatility in the prices of vegetables, whereas the proposal to enhance and extend minimum support prices to augment farmer incomes, may emerge as an inflation risk.
Reversal in the declining economic growth trajectory is clearly the need of the hour and all steps should be taken to bring about this change.
They have also called for giving cash to the poor, so that demand is generated in the economy.
Both the indices closed at five-month highs, led by financial services, IT and metal stocks, amid persistent foreign fund inflows.
M V Subramanian says there is an imperative need for collective responsibility to tackle inflation, prices and availability of essential commodities, and not rely on inflation targeting alone.
The main reason was that CPI inflation would likely remain below 4 per cent till July.
RBI governor Das flags growth slowdown, deputy raises alarm on inflation
Deficits could come under more pressure in coming years as states implement their own Pay Commissions.
Growth impulses, while improving, remain fragile, and a rate hike will be disruptive to interest costs.
Concerned over elevated inflation, Reserve Bank of India on Friday decided to leave the benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying more rate cuts in the future if need arises to support the economy hit by the Covid-19 pandemic.
In case the repo rate keeps trending downwards, borrowers can expect a downward revision of their MCLR-linked loans.
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.
Slowdown in industrial production notwithstanding, a marginal increase in inflation raised the clamour for another round of rate cut by the Reserve Bank on April 4 to boost economic activity.
The RBI was not party to the decision to demonetize 500 and 1,000-rupee notes, which was taken at the highest level of India's political leadership.
DBS called Rajan's decision not to seek an extension as a 'negative surprise'.
Here is some background on the candidates seen as potential successors to Rajan at the RBI
The government should not go in for an 'aggressive fiscal consolidation' in the upcoming Budget as global risks have not abated, RBI Monetary Policy Committee (MPC) Member Ashima Goyal said on Wednesday. Goyal further said subsidies are expected to come down as food and energy inflation moderates. WPI inflation in food articles in November was 1.07 per cent against 8.33 per cent in the previous month.
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.
The central bank had revised its inflation forecast significantly downward in the last policy
© 2026 Rediff.com - Investor Information - Advertise with us - Disclaimer - Privacy Policy - Sitemap - Feedback - About us - Terms of use - Grievances