However, it may still not change its stance on the policy rate as inflationary pressures are coming from high commodity prices.
The HSBC/Markit purchasing managers index for the manufacturing industry stood at 50.1 in July, slightly more than 50.3 in June, indicating a broad stagnation of manufacturing operating conditions in India.
With Deputy Governor Viral Acharya and another member Chetan Ghate voting for a status quo, RBI governor Shaktikanta Das and three others outvoted them for reduction in repo rate to 6.25 per cent from the existing 6.50 per cent.
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The rupee is set to breach the Rs 60-a-dollar mark again this week as the Street expects foreign institutional investors to continue pulling out of domestic markets. According to the street, this would result in government bond yields rising.
Ahead of RBI policy meet, India Ratings said an interest rate hike of 0.50 per cent in the remaining part of the fiscal will throw the BSE 500 companies into a quandary.
SBI Chairperson Arundhati Bhattacharya said any rate cut by the bank would depend on a lot many factors.
The index monitoring new business fell to a six-month low of 51.6 from March's 53.5, prompting some firms to cut jobs.
To a specific question on the change in RBI's stance from "neutral" to "accommodative", Das said it means that there will not be any rate hike from here on.
The decisive election victory for the Narendra Modi-led National Democratic Alliance has created a conducive environment for policy actions and should help in economic recovery, Reserve Bank of India Governor Raghuram Rajan said on Tuesday.
The retail inflation rate breached the 6 per cent upper tolerance limit of the RBI for the first time in seven months in January, while the wholesale price index stayed in double-digits for the 10th month in a row, showed two sets of data released by the government on Monday. Retail inflation, the key input for the RBI while reviewing the repo rate every two months, soared during the month mainly because of a spike in certain food items. The previous high for retail inflation was 6.26 per cent in June 2021.
RBI seen cutting repo rate 25 bps on Sept 29, says a poll
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As many as nine respondents said RBI would hold the repo rate at 8% till March-end, 2015
RBI Governor Shaktikanta Das said the central bank saw economic growth slowdown in February, prompting it to cut rates ahead of the curve and wondered why markets were surprised with the decision to pause rate reduction. Noting that there is a need for an "informed and objective discussion" on the country's economy, Das said the RBI would do "whatever is necessary" to address growth slowdown, spikes in inflation as well to ensure good health of banks and non-bank lenders. The apex bank went for five consecutive rate cuts starting in February this year, making it a cumulative reduction of 1.35 per cent.
During the month, inflation in vegetables shot up to 35.99 per cent, as against 26.10 per cent in October. Likewise, the prices of cereals and eggs grew at a faster pace of 3.71 per cent.
India's central bank kept its key repo lending rate unchanged at 6.75 percent on Tuesday.
Elections may be a few months away, but the government may get into election mode much earlier than that, predicts A K Bhattacharya.
India's GDP may turn positive at 1.3 per cent in the third quarter of 2020-21, having witnessed contraction in the previous two quarters due to the coronavirus pandemic, as the number of cases is falling and public spending has started rising, according to a report. The government will release the GDP numbers for the October-December quarter of the current fiscal on Friday. Projecting that the gross domestic product (GDP) may have returned to the black in the last quarter of the calendar year 2020, DBS Bank in the report said the full-year growth in real terms may be at a negative 6.8 per cent.
Finance Minister Nirmala Sitharaman will kick start the customary pre-Budget consultation exercise with stakeholders from Wednesday by holding the first such meeting with experts of agriculture and agro-processing industry. She will be seeking inputs from various stakeholders, including industry bodies, farmer organisations and economists for reviving consumption and boosting growth hit by the COVID-19 pandemic. The growth this year is expected to be in the double-digit during the current fiscal.
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The global brokerage firm in March had trimmed the growth forecast to 6 per cent and in June again it revised the growth estimate to 5.8 per cent.
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
The Nikkei India Services PMI posted above the critical 50.0 level, which separates growth from contraction, for the fourth month running in May.
With the Budget-making exercise in full swing, RBI Governor Shaktikanta Das on Friday said Budget 2021-22 is expected to be prudent and growth oriented. Das before donning the hat of RBI Governor was a career bureaucrat and was directly involved in crafting of about 10 Budgets for the country including one in the aftermath of global financial meltdown in different capacities at the finance ministry. In view of unprecedented pandemic and its impact on the economy, he said the government has maintained fiscal prudence in the response to deal with the crisis.
RBI's intention to keep its target inflation rate at 5% was the main reason behind keeping rates unchanged, says Adhil Shetty, CEO of BankBazaar.com.
Calling out the high real interest rates -- the differential between the policy rate and headline inflation -- as an impediment to investment, the SBI report said the RBI can cut rates by 0.35-0.50 per cent at its next policy announcement.
Earlier, the RBI cut its policy interest rate to 6.75 per cent.
RBI Governor has been under pressure from Finance Ministry.
India's industrial production contracted by 3.6 per cent in February, official data showed on Monday. According to the Index of Industrial Production (IIP) data released by the National Statistical Office (NSO), manufacturing sector output declined by 3.7 per cent in February 2021. Retail inflation rose to 5.52 per cent in March, mainly on account of higher food prices, government data showed on Monday. The consumer price index (CPI) based retail inflation stood at 5.03 per cent in February.
The government plans to bring down its stake to 26 per cent in these two banks, which are yet to be identified. This may not come in the way of getting investors for these banks, provided the government is willing to step back rather than run them the way it had been doing for over five decades since these banks were nationalised, points out Tamal Bandyopadhyay.
Reserve Bank of India (RBI) Governor Raghuram Rajan's decision to cut rates last week surprised even top officials.
The RBI's reluctance to cut rates should be seen as a case of inability in the face of inflation.
For a long time, the Indian economy has been drifting without a credible monetary anchor.
The RBI cited lower-than-expected inflation, weak crude prices and weak demand, as well as the government's commitment to sticking to a fiscal deficit target as reasons.
The central bank dashed hopes of any steep interest rate reduction.
The 30-share Sensex ended lower by 61 points at 29,122 mark and the 50-share Nifty slipped by 12 points to close at 8,797.
Broader markets are outperforming the benchmark indices- BSE Midcap and Smallcap indices are up 0.8%-1%.
The RBI governor-designate may be economical with spoken words, but is known for his sharp and critical writings
"The theme of tomorrow's meeting is 'Economic Policy Reform, Road Ahead'. The prime minister will make opening remarks. There are 15 invitees who will make their presentations before the prime minister," a senior government official said.
The consumer durables segment declined by 23.4 per cent in June, as against a dip of 10.1 per cent a year ago.
The repo rate has been unchanged since January, when the RBI increased it by a quarter percentage point.
The move will to a large extent speed up the monetary transmission process--which is banks passing on the rate cuts that the Reserve Bank announces to their borrowers without much delays--something that has been missing all these while and something that the RBI has been unhappy with.
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