Pragmatism and flexibility is a virtue. An untethered and short-term approach to policymaking is a flaw, argues Mihir S Sharma.
CLSA says government actions to facilitate investment more important for revival than a token monetary easing.
Fed seen holding rates steady as investor confidence shakes
Bankers said high interest rate could make Indian economy sluggish given that inflation is around 5%
Since December 2018, monetary policy has been eased substantially by RBI with policy rates being cut by 75 bps and policy outlook being changed to 'accommodative'.
The Nikkei India Services Purchasing Managers' Index, which tracks services sector companies on a monthly basis, stood at 52 in September, down from August's 43-month high of 54.7, pointing to a slower and moderate rate of expansion.
Economic growth projected at 8.5 per cent for 2007-08; Inflation to be close to 5 per cent.
The IMF expressed its opposition to any move that compromises the independence of central banks anywhere in the world.
India builds up record FX after Fed hints rate hike in future.
All public sector banks have moved to such a regime voluntarily, while private banks are yet to. The state-run banks have introduced repo-linked products for floating-rate home and auto loans, but the RBI said loans to micro, small and medium enterprises (MSMEs) should also be linked to an external benchmark.
The central bank can directly print money and finance the government, but it should avoid doing so unless there is absolutely no alternative, former RBI governor D Subbarao on Wednesday said while pointing out that India is 'nowhere' near such a scenario. In an interview with PTI, Subbarao suggested that to deal with the second wave of COVID-19 induced slowdown in the economy, the government can consider Covid bonds as an option to raise borrowing, not in addition to budgeted borrowing, but as a part of that.
After opting for status quo in policy rates, Reserve Bank Governor Raghuram Rajan on Tuesday said any more cut will depend on further transmission of previous rate cuts by banks, softening in inflation and progress of monsoon.
The new rates, effective Wednesday, is the third reduction by SBI in this financial year having cut the rates by 5 bps each in April and May, while its home loan rates has come down by 20 bps during this period.
The cutback on export credit refinance facility is another step towards a shift away from sector-specific liquidity allocations.
Amid imminent phasing out of the fiscal stimulus by US Federal Reserve, Prime Minister Manmohan Singh on Wednesday called for an "orderly exit" from unconventional monetary policies being pursued by the developed world for the last few years to avoid damaging growth prospects of the developing world.
The move may release funds locked in government securities and add to liquidity. With inflation expectations lowered, this should not impact bond sentiment in the short run
The Sensex has hit its lowest level since August 29, 2016 whereas the Nifty hit its lowest level since Sep 12, 2016
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.
IThe fiscal deficit target for 2020-2021 was originally set at 3.5 per cent of GDP. But the government's revenues have collapsed and its expenditure burden will only increase over the Budget estimates.' With the government having already planned for an additional borrowing of over Rs 4 trillion, the fiscal deficit for the current year would be much higher than the Budget estimate, notes A K Bhattacharya.
Banks have raised concerns over the new international trade settlement in rupee, fearing that facilitation of such a mechanism could result in them facing the ire of economic sanctions by the West, people aware of the matter said. Large banks with overseas operations have sought clarity and assurance from the Reserve Bank of India (RBI) that they will not be targeted with sanctions for facilitating rupee trade with a sanction-hit country such as Russia. The present payment mechanism is a shift from earlier such arrangements, like the one with sanction-hit Iran, which involved banks facilitating settlement of international trade that did not have business in the sanctioned nation.
In refusing to accept its failure, the government has sowed the seeds of further damage: by keeping India short of cash; reducing the headroom for responses to seasonal spikes in cash demand; and increasing the chances that groups will panic at temporary cash shortages, says Mihir Sharma.
If providing a stimulus to growth is the objective now, that would be best served by moving rates as quickly as possible to the bottom.
RBI seen cutting repo rate 25 bps on Sept 29, says a poll
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%
Retail sales of overall vehicles in India grew by 15.28 per cent to 2,11,20,441 units in 2022 led by record sales of passenger vehicles and tractors, Federation of Automobile Dealers Associations (FADA) said on Thursday. In 2021, total retail sales of vehicles in India were at 1,83,21,760 units, FADA said in a statement. Two-wheelers retail sales stood at 1,53,88,062 units last year, a growth of 13.37 per cent from 2021 when sales stood at 1,35,73,682 units.
A series of interest rate cuts in India has failed to lead to cheaper commercial lending, leaving Asia's third largest economy to grow at only 6 per cent this year, the central bank said on Tuesday.
The S&P BSE Sensex shed 119 points to close at 27,977 and the Nifty50 dropped 45 points to finish at 8,591.
The rupee has dropped by 60 paise or 0.89 per cent in the last three trading days.
The RBI Governor brought down retail inflation to 3.8% in July.
The repo rate has been unchanged since January, when the RBI increased it by a quarter percentage point.
Equity markets will look for directions from global trends, ongoing quarterly earnings and investment patterns of foreign institutional investors (FIIs) in a holiday-shortened week ahead and may encounter volatility amid the scheduled monthly derivatives expiry, according to analysts. Equity markets will remain closed on Wednesday on account of 'Republic Day'. "This week is a holiday-shortened one and it's going to be critical due to the list of events and data that are lined up.
Raghuram Rajan rejected the argument that inflation has come down largely because of "good luck" stemming from low oil prices.
In the RBI's monetary policy statement review, Governor Raghuram Rajan said banks could extend timelines for large stalled projects by bringing in new 'promoters', or owners.
IMF attributes the slower growth rate to supply-side bottlenecks.
At the World Bank Banga will be replacing David Malpass, a former Trump treasury official, reports axios.com. Malpass had already announced that he will resign by July, months ahead of his term expired. "Ajay is uniquely equipped to lead the World Bank at this critical moment in history," President Biden said in a statement. Banga, 63, currently serves as vice chairman at General Atlantic.
Here are the key decisions announced by the Reserve Bank of India on Thursday.
According to the Third Advance Estimates for 2007-08, the total foodgrains production is slated to reach an all-time high at 227.3 million tonnes, recording an increase of 4.6 per cent over the previous year (217.3 million tonnes). The production during 2007-08 would exceed the target set earlier (221.5 million tonnes) by 5.8 million tonnes. Notwithstanding the moderation, the growth performance was in tune with the high average real GDP growth of 8.7 per cent.
SBI is the third state-run lender to lower the lending rates after Indian Overseas Bank Tuesday and Bank of Maharashtra which also lowered their loan prices by 5 bps on loan tenors of one year and above, effective April 10.
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
Asian emerging market stock prices did see a bounce post Fed-talk.
