The services sector growth in India fell to a one-year low in November on softer expansions in new work intakes and output, despite receding price pressures, a monthly survey said on Tuesday. The seasonally adjusted S&P Global India Services Business Activity Index fell from 58.4 in October to a one-year low of 56.9 in November. Despite witnessing a month-on-month decline, the rate of expansion was stronger than its long-run average.
India's economic growth will be above 6 per cent in the current fiscal as the country has managed to strengthen its macroeconomic stability and performance even in a period of large global shocks, RBI Monetary Policy Committee (MPC) Member Ashima Goyal said on Monday. Goyal further said that a global slowdown reducing India's export growth, geopolitics fueling oil and food prices, and erratic weather are some of the continuing risks that the country faces. "India has managed to strengthen its macroeconomic stability and performance even in a period of large global shocks.
Global trends, macroeconomic data, and the outcome of the US Fed policy meeting are the major factors that will drive the movement in the domestic equity markets this week, analysts said. "In the upcoming data-centric week, the focus will be on crucial releases, including inflation data from India and the US. "Indian inflation is expected to rise, while US inflation will remain steady.
'Banks are being encouraged to lend instead of parking their resources with the RBI and earn risk-free interest income,' points out Tamal Bandyopadhyay.
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.
A combination of farm loan debt waivers by state governments and the implementation of the pay commission award could entail some fiscal slippages and pose a risk to inflation
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.
A lot depends upon the composition of the monetary policy committee.
The central bank had revised its inflation forecast significantly downward in the last policy
Sahil Kapoor of Edelweiss Retail Capital Market Research says that setting up a monetary policy committee should have been the first step. And the central bank could have moved towards a formal inflation targeting mechanism after the processes and data sets are in place.
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 governor Das flags growth slowdown, deputy raises alarm on inflation
Retail inflation fell to a 15-month low of 5.66 per cent in March, mainly due to a decline in food prices, government data showed on Wednesday. The inflation figure in March is within the RBI's comfort zone as it is below 6 per cent. The retail inflation based on Consumer Price Index (CPI) was 6.44 per cent in February 2023 and 6.95 per cent in the year-ago period.
Reserve Bank of India (RBI) Governor Shaktikanta Das had stumped the market in the previous two policies - in August and in October - first with action and then with words. In August, it was the introduction of an incremental cash reserve ratio (I-CRR) to take out excess liquidity, which took the markets by surprise. In October, there was no action. Rather, what is known as "open mouth operation", Das' comment that the central bank might conduct open market operations (OMOs) by selling bonds tempered the euphoria in the bond markets after JP Morgan's inclusion of India in its Emerging Market Bond Index.
In the Union Budget for Financial Year 2023-24 (FY24), Finance Minister Nirmala Sitharaman had held forth on the need for better governance and investor protection in the banking sector. She had proposed certain amendments to the Reserve Bank of India Act (RBI Act), 1934; the Banking Regulation Act (BR Act), 1949; and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.
The Reserve Bank on Wednesday retained the GDP growth forecast at 9.5 per cent for the current fiscal but cautioned that the economic recovery is not yet strong enough to be self-sustaining and durable.
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.
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 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.'
Retail inflation declined to a three-month low of 5.1 per cent in January, mainly due to subdued prices of vegetables, fruits and other food items, according to government data released on Monday. The fall indicates that retail inflation is inching towards the Reserve Bank's comfort level of 4 per cent. The Consumer Price Index (CPI) based inflation was on the rise for two straight months after touching a trough of 4.9 per cent in October 2023. In December, it stood at 5.69 per cent.
The finance ministry expects a broad-based moderation in inflationary pressures on the back of an anticipated reduction in food prices as a result of the uptick in summer sowing. The retail inflation rate remained stubbornly clung to the 5 per cent mark in seven of the past eight months. "Core inflation is trending downwards, indicating a broad-based moderation in price pressures... Driven by strong domestic growth and benign global commodity prices, core inflation is declining continuously.
Firms seem to have adopted a wait-and-see approach on their plans until public policies become clearer upon the formation of a government.
Whether this remains under control in the coming months will depend on the future intensity and spread of the Russia-Ukraine war, and the effectiveness of the Indian government's response, points out A K Bhattacharya.
Das favoured shifting the stance of monetary policy from neutral to accommodative to send a clear signal, indicating that more measures could be taken in the near future to boost growth.
With retail inflation surprising on the upside, the six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) is expected to increase the repo rate by 35-50 basis points (bps) in the review scheduled for September 28-30. According to economists, the central bank will continue to focus on bringing inflation down even though economic growth has remained sluggish. Data released by the government on Monday showed that the consumer price index (CPI)-based inflation increased by 7 per cent year-on-year (YoY) in August, thus, staying above the upper tolerance limit of the central bank for all the eight months of 2022.
RBI also retained its GDP growth forecast at 7.6 per cent
The Governor said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if the need arises.
The seasonally adjusted Nikkei India Services Business Activity Index fell to 50.2 in May, from 51.0 in April, pointing to the slowest growth rate in the current 12-month stretch of expansion.
'If you see another 1000-point correction, people may start panicking.'
The wholesale price-based inflation rose for the second consecutive month in February to 4.17 per cent, as food, fuel and power prices spiked. The WPI inflation was 2.03 per cent in January and 2.26 per cent in February last year. After witnessing months of softening of prices, the food articles in February saw 1.36 per cent inflation. In January it was (-) 2.80 per cent.
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.
However, the RBI is still not in a mood to issue an OMO calendar, which was the expectation in some sections of the market.
There is a near consensus that at least a 25 basis points cut, if not 50, can be expected in the June policy.
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.
Rajan said that even though inflation has breached the 6 per cent mark as against the RBI target of getting it down to 5 per cent by March 2017, the price rise scenario will ebb in future
Tuesday's policy announcement had a regulatory and development component.
The man widely expected to be India's next central bank chief favours clipping the autocratic power of the role and giving more say to a monetary policy committee.
Heading to the third year, will Urjit Patel be busy firefighting a currency crisis? Almost no governor of the RBI managed to evade it and Patel perhaps knows it.
The imported inflation component is also expected to ebb on lower oil prices and softer US dollar, it said.
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