Rajan's exit will neither affect the RBI's de facto independence nor its working.
As the MPC is mandated to target CPI inflation rate at 4 plus minus 2 per cent, any measurement error in CPI is likely to have grave consequences for monetary policy.
Analysts say RBI will cut rates because the liquidity crunch that began this time last year is still hurting the economy and also with an eye on the August industrial production numbers, which showed a contraction by 1.1 per cent -- the steepest in seven long years.
RBI also retained its GDP growth forecast at 7.6 per cent
SBI was the top gainer in the Sensex pack, rallying over 10 per cent, followed by Kotak Bank, Dr Reddy's, UltraTech Cement, ITC and HDFC Bank. On the other hand, Axis Bank, Bharti Airtel, ICICI Bank, Maruti and HCL Tech were among the laggards.
'Banks are being encouraged to lend instead of parking their resources with the RBI and earn risk-free interest income,' points out Tamal Bandyopadhyay.
The RBI governor-designate may be economical with spoken words, but is known for his sharp and critical writings
'Concerns about India's future are hampering private investment.' 'If the private sector sees strategy, teams and execution on these issues, this will inspire confidence in India.' 'This should be our main strategy for 2017,' says Ajay Shah.
The Reserve Bank of India (RBI) on Friday decided to leave the benchmark interest rate unchanged at 4 per cent but maintained an accommodative stance, implying rate cuts in the future if need arises to support the economy hit by the Covid-19 pandemic.
Consumer prices rose an annual 5.11 per cent (2012 base) in January.
The headline seasonally adjusted Nikkei India Composite PMI Output Index, that maps both the manufacturing and services sectors, rose from 53.3 in June to 54.1 in July.
Lower inflation, FCNR(B) outflows likely to influence central bank decision
Given the various risks to growth, one could argue for rate cuts to be deeper than the 5 per cent terminal repo rate that we are projecting at this stage, says Kaushik Das.
After consumer price index jumped the 6.3-per cent mark in May and wholesale inflation set a record of 12.94 per cent, house economists at Swiss brokerage UBS Securities have warned that the country is facing more upside risks on the inflation front that is set to averaging at 5 per cent for the year. Rising prices of edible oils and protein rich items pushed retail inflation to a six-month high of 6.3 per cent in May, breaching the comfort level of the Reserve Bank and thus rendering reduction in interest rates a difficult proposition in the near term. Led by petrol price, that has crossed the Rs 100-mark in many states, wholesale inflation too accelerated to a record 12.94 per cent in May. While crude oil has crossed $70 a barrel on account of rising prices of crude oil and manufactured goods due to spike in commodities, and the low base of last year due to the lockdown.
India needs foreign exchange buffer reserves to insulate itself from exchange rate volatility as we have "no friends" for swap lines and Japan was the only country that helped during the taper tantrum in 2013, former RBI Governor Raghuram Rajan said on Tuesday. Participating in a virtual event organised by economic think tank NCAER, Rajan said during the taper tantrum in 2013, India asked for swap lines, and only country who helped was Japan. "We need this (foreign exchange) reserve buffer to insulate ourselves because we have no friends.
By no means do economists see the Reserve Bank of India stop at just a 25-bp cut. Some of the economists such as Soumyakanti Ghosh of State Bank of India are of the firm view that rates have room to fall by a total of 75 bps in the current financial year, starting with 25 bps in the August 7 policy.
Finance Minister Nirmala Sitharaman has said the recent interest rate hike by the Reserve Bank was not surprising for her but the timing was, asserting that the rising cost of funds will not impact the government's planned infrastructure investments. For the first time since August 2018, RBI had on May 4 delivered a blunt 40 basis points increase in key repo rate to 4.40 per cent, and also hiked the cash reserve ratio by 50 basis points to 4.5 per cent after an unscheduled meeting of the rate setting panel, citing increased inflation pressures following the Ukraine war and the resultant spike in crude oil prices. Retail inflation printed at 6.9 per cent in March and the April reading is forecast to top 7.7 per cent.
It is time for the three finance ministers of the 1990s to reveal the real hero, says T C A Srinavasa-Raghavan.
Chances of a rate cut in April improve if core inflation continues to ease, growth falling below the projected 7.2% for FY19 and if the global trade slowdown exacerbates.
Fed keeps rates unchanged, sets up possible December hike
'He is positive and likes to get work done,' is how a retired bureaucrat described him. 'I assume he will push the reform agenda with strength.'
There is a narrow chance that the central bank may cut rates in the future, according to a poll of 15 economists and treasurers.
The IHS Markit India Manufacturing PMI rose from 51.2 in November to 52.7 in December. Factories benefited from a rebound in demand, and responded by scaling up production to the greatest extent since May. As per the survey, new work orders witnessed marked improvement, with the pace of expansion picking up to the fastest since July.
Costlier vegetables and eggs pushed up retail inflation to a nearly six-and-a-half year high of 7.61 per cent in October, keeping it significantly above the comfort zone of the Reserve Bank.
'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.
S&P expects India to grow at 7.4 per cent in 2015, similar to the central bank's forecast for the fiscal year ending in March.
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
The Reserve Bank (RBI) resisted a 'raid' planned by some in the government to extract Rs 2-3 lakh crore from its balance sheet in 2018 to meet populist spending in run-up to general elections, Viral Acharya, who was deputy governor at RBI at that time, has written.
While efforts are being mounted on a war footing to arrest its spread, COVID-19 will impact economic activity in India directly through domestic lockdown. The second-round effects, it said, would operate through a severe slowdown in global trade and growth.
The Committee of Administrators (COA) on Saturday said the finance committee, which is currently headed by Jyotiraditya Scindia, will cease to exist once the new constitution of the Board of Control for Cricket in India is adopted.
Common use products like hair oil, soaps and toothpaste will be charged with a single national sales tax or GST of 18 per cent instead of present 22-24 per cent
'People know if inflation is not within the tolerance band, then action will be taken so they do not expect inflation to rise above that.'
A V Rajwade wonders if the Modi sarkar is pursuing price stability at the cost of potential social instability in both rural and urban India.
However, it may still not change its stance on the policy rate as inflationary pressures are coming from high commodity prices.
There is nothing wrong with government and RBI having conflicting opinions.
The Nikkei Markit India Manufacturing Purchasing Managers' Index (PMI) -- a gauge of manufacturing performance -- fell to 52.3, down from October's 22-month high of 54.4.
'If the RBI now only prints Rs 100 in small denomination notes and the remaining amount is printed in Rs 500 and Rs 2,000 denominations, then by March-end the central bank can completely normalise the cash crunch situation.'
Fed is still concerned about weak export growth.
The central bank tweaked the retail inflation range to 4.8-4.9 per cent in the first half of 2018-19, and 4.7 per cent in the second half.
In a business friendly move, the Reserve Bank of India on Friday said that Real Time Gross Settlement System (RTGS), used for large value transactions, will be made available round-the-clock from December. In December 2019, the National Electronic Funds Transfer (NEFT) system was made available on a 24x7x365 basis. Currently, RTGS is available for customers from 7.00 am to 6.00 pm on all working days of a week, except second and fourth Saturdays of every month.
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