Most economists feel the RBI has room for a 25-basis point cut, having met inflation targets comfortably
Stressing that economic growth will only move upwards, the Reserve Bank of India Governor Shaktikanta Das on Friday pegged the GDP growth rate for the next financial year at 10.5 per cent, though a tad lower than the government's projection of 11 per cent. The projection is in line with the estimates in the Union Budget 2021-22 presented in Parliament earlier this week. The Economic Survey, tabled by the government in Parliament recently, has projected that the economy will grow at 11 per cent, up from an estimated historic decline of 7.7 per cent in 2020-21, on account of the COVID-19 pandemic.
He has had a productive first year at the RBI -- one which saw, also, India's economic imbalances improve and the unexpectedly strong general election outcome.
Jaitley said inflation has been under control for long and is likely to remain so on the back of good monsoon and unlikely spike in oil prices.
The fourth consecutive rate cut is expected to lower equated monthly instalments (EMIs) for home and auto buyers, and borrowing cost for corporate.
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Industry's demand for a reduction in the repo rate, currently 8 per cent, has gained momentum after wholesale and retail inflation eased in February.
Reserve Bank, in its mid term review of the monetary policy on Friday, decided to hike short term policy rate by 0.25 per cent after a gap of two years and ease liquidity by reducing the marginal standing facility rate for banks.
He argued that if inflation is low, stable and moving towards the 4 per cent target, why has the RBI not revised downward the bank rate fixed in June 2023?
Referring to the proposed new monetary policy framework, it said in the weeks ahead, government and RBI will work towards it.
There hasn't been any dramatic moment in the first act (the Budget) but nobody would complain. It's par for the course as long as the figures don't change in the main Budget, which will be presented after general elections.
The economic growth is likely to moderate to 6.1 per cent, slowest in over seven quarters, from 6.6 per cent last year same period.
If imputed inflation for April and May is used, then you have inflation of over 6 per cent for two consecutive quarters, which is a worrying signal for the RBI.
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 employment situation remains dire. Whatever can be done to promote greater low-skill employment should be pursued aggressively, advises former chief economic adviser Shankar Acharya.
The US Federal Reserve's interest rate decision, global market trends and trading activity of foreign investors are the major factors that would dictate terms in the equity markets in a holiday-shortened week ahead, analysts said. Equity markets will remain closed on Tuesday on account of Ganesh Chaturthi. From the global front, interest rate decisions from the Bank of England and Bank of Japan would also influence market trends.
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CII hopes that the RBI would not wait for the next quarterly review but intervene sooner if the economic condition warrants a mid-course correction.
RBI retained the GDP growth for the financial year 2018-19 at 7.4 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.
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.
The main reason was that CPI inflation would likely remain below 4 per cent till July.
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Raghuram Rajan said the passage of the GST Bill augurs well for the growing political consensus for economic reforms.
There is little scope for significant monetary easing even in the next fiscal year.
In April, RBI had projected retail inflation to be around 5 per cent.
The RBI projection of 6.9 per cent GVA growth for the current fiscal comes on the back of the Economic Survey last week forecasting economic growth of 6.5 per cent.
Wholesale price-based inflation rose to an eight-month high of 0.26 per cent in November, driven by a sharp jump in food prices, especially onion and vegetables. The WPI inflation was in the negative or deflationary zone for the past seven months since April and was at (-)0.52 per cent in October. The last positive WPI inflation was recorded in March at 1.41 per cent.
Terming the RBI action on Wednesday as a "pleasant surprise", analysts today cautioned that possibility of a rate hike in the future cannot be ruled out. Urijit Patel committee's report on monetary policy would clear the air on RBI's future stand, they added.
'Will President Dissanayake calibrate his foreign policy taking into account India's immediate security concerns? We need to watch.'
The Reserve Bank of India on Wednesday retained the economic growth projection for the current financial year at 10.5 per cent, while cautioning that the recent surge in COVID-19 infections has created uncertainty over the economic growth recovery. In its last policy review, the RBI had projected a GDP growth rate of 10.5 pc for FY'22. Taking various factors into consideration, it said, "the projection of real GDP growth for 2021-22 is retained at 10.5 per cent consisting of 26.2 per cent in Q1, 8.3 per cent in Q2, 5.4 per cent in Q3 and 6.2 per cent in Q4."
Retail inflation fell to a five-month low of 4.35 per cent in September from 7.27 per cent in the year-ago period as prices of vegetables and other items declined, according to government data released on Tuesday. The moderation in Consumer Price Index-based inflation is in line with the assessment of Reserve Bank Governor Shaktikanta Das who recently projected substantial softening of retail inflation. The CPI inflation was at 5.3 per cent in August and at 7.27 per cent in September 2020.
External Affairs Minister S Jaishankar on Sunday concluded a crucial visit to Male, assuring the country's top leadership that the Maldives remains an important partner of India in maintaining peace, stability and prosperity in the Indian Ocean region.
The first task before him is to get used to the idea of working with the Monetary Policy Committee
The rate of price rise in vegetables stood at 15.15 per cent in August as against 16.88 per cent in the previous month.
For July-September, it pegged CPI-based retail inflation at 4.2 per cent which it saw firming up to 4.8 per cent in the second half of the current fiscal.
The wholesale price-based inflation declined for the fourth consecutive month to 10.7 per cent in September on softening in prices of food, fuel and manufactured items. The Wholesale Price Index-based inflation was 12.41 per cent in August and 11.80 per cent in September last year. This year, the Wholesale Price Index (WPI) touched a record high of 15.88 per cent in May. September is the 18th consecutive month of double-digit WPI inflation.
A likely easing in inflationary pressures in the forthcoming months will reopen the window for the RBI to once again prioritise growth and ease its interest rates.
The Reserve Bank will go for a "dovish pause" at Wednesday's policy review announcement amid developments such as a rise in inflation, government maintaining the inflation target band and a likely impact on growth due to local lockdowns on rising COVID-19 infections, analysts said on Monday. Economists at American brokerage Bofa Securities said price stability, growth and financial stability will become the prime focus areas for the central bank going forward. "The RBI MPC (Monetary Policy Committee) should deliver another dovish pause on Wednesday," it said. The policy announcement, the first for the fiscal, will come days after the government maintained the RBI's target to ensure inflation to be within 2-6 per cent band for five more years.
The methodology will be announced later this week.
He has also said that the overall mood of the Indian consumer remains subdued
The rupee plunged 90 paise to close at an all-time low of 80.86 (provisional) against the US dollar on Thursday after the US Federal Reserve's interest rate hike and its hawkish stance weighed on investor sentiments. Forex traders said the US Fed's rate hike and escalation of geopolitical risk in Ukraine sapped risk appetite. Moreover, the strength of the American currency in the overseas market, a muted trend in domestic equities, risk-off mood and firm crude oil prices weighed on the rupee.
