The RBI's surprise rate hike may have been prompted by its inability to convince the government to cut excise duty on petrol and diesel and take other supply-side measures to tame runaway inflation, sources aware of the central bank's thinking said on Thursday. There has been a record Rs 10 a litre increase in petrol and diesel prices in a matter of 16 days beginning March 22, which has further fuelled the already high commodity prices. The RBI, which is mandated to ensure inflation is under 6 per cent, acted with a 0.40 per cent increase in repo rate to check prices before they went completely out of hand.
India's consumer price index (CPI)-based inflation could ease in the coming months thanks to the arrival of kharif crops, lower international commodity prices, and a pass through of lower input costs to consumers, the finance ministry said in its Monthly Economic Review (MER) for October, which was released on Thursday. The MER, however, warned that the global macroeconomic situation remained precarious and a recession in many advanced economies would impact India's exports. "Easing international commodity prices and new Kharif arrival are set to dampen inflationary pressures in the coming months.
Reserve Bank Governor Shaktikanta Das on Wednesday said the country is at the doorstep of economic revival on the back of accommodative monetary and fiscal policies being pursued by the central bank and the government.
Elevated food price-led inflation could become a sore point for markets, which they seem to be ignoring at current levels, observe analysts. Retail inflation in India - as measured by the Consumer Price Index (CPI) - came in at a three-month high of 6.52 per cent in January 2023, compared with 5.72 per cent in December and 5.88 per cent in November 2022. The inflation print for February, according to Madan Sabnavis, chief economist at Bank of Baroda, will be critical for the Reserve Bank of India's monetary policy committee.
Equity indices made an emphatic comeback on Friday after falling for seven straight sessions after the RBI hiked interest rates by 50 basis points on expected lines and projected inflation coming under control from January next year. A strong recovery in the rupee added to the momentum, traders said. Overcoming a wobbly start, the 30-share BSE Sensex soared 1,016.96 points or 1.80 per cent to settle at 57,426.92. During the day, it rallied 1,312.67 points or 2.32 per cent to 57,722.63.
The Reserve Bank on Wednesday hiked key benchmark policy rate by 25 basis points to 6.5 per cent, citing sticky core inflation. This is the sixth time interest rate has been hiked by the Reserve Bank of India (RBI) since May last year, taking the total quantum of hike to 250 basis points. Announcing the bi-monthly monetary policy, RBI Governor Shaktikanta Das said the Monetary Policy Committee (MPC) by a majority decided to raise the policy repo rate by 25 basis points and keep a 'strong vigil' on inflation outlook.
There is a near consensus that at least a 25 basis points cut, if not 50, can be expected in the June policy.
If the concerns over risking political capital are overcome, the long-term gains for the Indian economy will be immense, asserts A K Bhattacharya.
The banking sector is set to move at a fast pace from hereon.
Given the pressure from India Inc and the banking fraternity, it is surmised that the portfolio rejig will take place before April.
Headed by Urjit Patel, MPC for the fourth straight time kept the repo rate unchanged, at which it lends to the banks, at 6.25 per cent. The reverse repo, at which RBI borrows, will be 6 per cent.
Are we adopting an idea whose time has come and gone? My feeling is, yes, says ex-banker C Joseph Chacko in the fourth article of the series on inflation targeting.
The Reserve Bank of India is likely to cut policy rates by 0.25 per cent and keep the cash reserve ratio unchanged at its policy review next week, on the back of slower-than-expected growth and more encouraging inflation readings, says a report by HSBC.
India's services sector activities improved further and expanded at strongest rate in over 11 years in May, supported by a substantial pick-up in new business growth, even as input cost inflation climbed to a record high, a monthly survey said on Friday. The seasonally adjusted S&P Global India Services PMI Business Activity Index jumped to 58.9 in May, up from 57.9 in April, amid better underlying demand and strong inflows of new work. For the tenth straight month, the services sector witnessed an expansion in output.
Mortgage lender HDFC Ltd on Wednesday announced an increase in its benchmark lending rate by 5 basis points (bps), a move that will make loans dearer for both existing and new borrowers. This is the third hike effected by HDFC in the last one month. "HDFC increases its Retail Prime Lending Rate (RPLR) on housing loans, on which its Adjustable Rate Home Loans (ARHL) are benchmarked, by 5 basis points, with effect from June 1, 2022," the housing finance company said in a statement.
India's manufacturing sector growth steadied in May, with new orders and production increasing at similar rates to those registered in the previous month, while demand showed signs of resilience and improved further in spite of another uptick in selling prices, a monthly survey said on Wednesday. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) stood at 54.6 in May, little changed from 54.7 in April, pointing to a sustained recovery across the sector. The May PMI data pointed to an improvement in overall operating conditions for the eleventh straight month.
Firms seem to have adopted a wait-and-see approach on their plans until public policies become clearer upon the formation of a government.
The S&P BSE Midcap and the S&P BSE Smallcap indices added 0.5% and 0.7%, respectively
However, the RBI is still not in a mood to issue an OMO calendar, which was the expectation in some sections of the market.
The wholesale price-based inflation accelerated to a record high of 12.94 per cent in May, on rising prices of crude oil and manufactured goods. Low base effect also contributed to the spike in WPI inflation in May 2021. In May 2020, WPI inflation was at (-) 3.37 per cent. This is the fifth straight month of uptick seen in the wholesale price index (WPI)-based inflation. In April, 2021, WPI inflation hit double digit at 10.49 per cent. "The annual rate of inflation, based on monthly WPI, was 12.94 per cent for the month of May, 2021 (over May, 2020) as compared to (-) 3.37 per cent in May 2020.
'Government of India has the right to give directions to RBI'.
Shaktikanta Das is a master of the finest balancing act who listens to all but takes his own decisions, discovers Tamal Bandyopadhyay.
Wednesday's was the first MPC meeting that had a dissent note.
investors will look to the new governor to continue the banking sector clean-up with the same urgency as Mr Rajan, who was targeting fully cleaned-up and provisioned balance sheets by March 2017
Financial markets are under stress and require steps by the central bank for market stability and revival of economic growth, he said while announcing the decisions taken by the Monetary Policy Committee in Mumbai.
India has been relatively insulated from the severe headwinds in the West. However, with a third of the global economy expected to slip into recession in calendar year 2023, the impact will strongly be felt on India's exports and trade economy, leading economists said in a panel discussion at the Business Standard BFSI Insight Summit in Mumbai on Wednesday. The panel comprised former Reserve Bank of India executive director and former Monetary Policy Committee member Mridul Saggar, State Bank of India Chief Economic Advisor Soumya Kanti Ghosh, Citibank India Chief Economist Samiran Chakraborty, ICRA Chief Economist Aditi Nayar, and IndusInd Bank Chief Economist Gaurav Kapoor. The topic of the panel discussion was No recession in sight: Is India decoupled from developed economies?
'There are occasions when the prices of individual items like food raise inflation; then supply-side measures must be taken.' 'But if there is continued inflation, it means liquidity is aggravating the situation.'
'The rising cost of construction, the cost of doing business, high compliance, and inflation/interest rates going up have already reduced returns to single digits.'
However, growth is expected to bounce back to an average of 7.3 per cent in the second half of 2017 and 7.7 per cent in 2018
The Indian equity market is likely to remain under pressure and rangebound over the next few months. This comes as global central banks, led by the US Federal Reserve look at a possibility of hiking rates aggressively to tame inflation. Back home, the Reserve Bank of India, too, remains data dependent in its endeavour to keep inflation in check and pursue an aggressive monetary policy stance.
Financials emerged as the top gainers while auto shares rallied on robust September sales
The Reserve Bank remains laser-focused to bring back retail inflation to 4 per cent over a period of time in a non-disruptive manner, Governor Shaktikanta Das stressed while voting for status quo in interest rates, as per minutes of the October policy meeting released on Friday. The central bank has been mandated by the government to ensure the Consumer Price Index (CPI) based inflation is at 4 per cent, with a band of 2 per cent on either side. The retail inflation, which was above 6 per cent during May and June, has started moving down and stood at 4.35 per cent in September.
Domestic macroeconomic data, RBI policy and developments related to the Russia-Ukraine war would be major driving factors for the stock market this week, analysts said. Moreover, FPI investment and trends in crude oil would also influence the trading sentiment, they added. "This week, the RBI credit policy will be a critical factor for Indian markets.
India's macroeconomic situation is improving fast and the country's GDP growth will turn positive in the third and fourth quarters of the current financial year, eminent economist Ashima Goyal said on Sunday. Goyal in an interview to PTI said the management of the COVID-19 pandemic and gradual unlocks announced by the government have helped in avoiding multiple COVID-19 peaks. The growth estimates by different agencies are being continuously revised, she said.
'They can transition from short to long-duration funds when the yield curve normalises.'
Foreign flows into Indian equities are expected to pause in the short to medium term, say analysts. The outlook is influenced by multiple factors, including rising oil prices, actions from global central banks, climbing bond yields, and the dollar index gaining prominence. "Valuations appear rich with the markets at record highs.
Data suggests that households too are expecting inflation to subside, with the three-month-ahead and the one-year-ahead expectations declining by 40 basis points, reports Abhishek Waghmare.
Amid uncertainties arising out of the second wave of COVID-19, the Reserve Bank on Thursday said that a durable revival of private consumption and investment would be critical for sustaining economic growth post-pandemic. Observing that 2020-21 has left a scar on the economy, RBI in its annual report said, "in the midst of the second wave as 2021-22 commences, pervasive despair is being lifted by cautious optimism built up by vaccination drives." The second wave of the pandemic has prompted revision of growth projections for the current fiscal and the consensus appears to be gravitating towards RBI's forecast of 10.5 per cent, the report added.
Heightened geopolitical uncertainties will lead the Reserve Bank's rate-setting panel to opt for a status quo at the next week's meeting, Axis Bank's chief economist Saugata Bhattacharya said on Monday. Bhattacharya said he had earlier expected a tightening action at the policy meet scheduled for April 6-8 but the increased uncertainties on the geopolitical front due to the Russian invasion of Ukraine and its impact on commodity prices makes him now think that RBI will defer such an action. He said the central bank's Monetary Policy Committee (MPC) may hike rates in the second half of FY23 by up to 0.50 per cent.
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