If indeed we want the board to manage the RBI, probably the government should take a close look at the US Federal Reserve system which has a two-part structure - a central authority in Washington, DC, and a decentralised network of 12 Federal Reserve Banks located throughout the country, says Tamal Bandyopadhyay.
India's services sector activity witnessed a sharp upturn in August on the back of stronger gains in new business, ongoing improvements in demand conditions and job creation, a monthly survey said on Monday. The seasonally adjusted S&P Global India Services PMI Business Activity Index rose from July's four-month low of 55.5 to 57.2 in August, amid a quicker upturn in business activity and the sharpest rise in employment for over 14 years. For the thirteenth straight month, the services sector witnessed an expansion in output.
In a double delight, retail inflation eased to a one-year low of 5.72 per cent - staying below the upper tolerance limit for two months in a row, while factory output rose sharply to 7.2 per cent on the back of healthy growth in manufacturing. The retail inflation numbers based on Consumer Price Index (CPI) will provide some room for the Reserve Bank to further moderate the quantum of hike in key interest rate or even press a pause button. The RBI has been on a rate hiking spree since May 2022 in its bid to tame inflation, having raised the repo rate by a cumulative 225 basis points (bps).
The wholesale price-based inflation accelerated to a record high of 12.94 per cent in May, on rising prices of crude oil and manufactured goods. Low base effect also contributed to the spike in WPI inflation in May 2021. In May 2020, WPI inflation was at (-) 3.37 per cent. This is the fifth straight month of uptick seen in the wholesale price index (WPI)-based inflation. In April, 2021, WPI inflation hit double digit at 10.49 per cent. "The annual rate of inflation, based on monthly WPI, was 12.94 per cent for the month of May, 2021 (over May, 2020) as compared to (-) 3.37 per cent in May 2020.
Consumer goods firms and auto companies are witnessing an upturn in rural demand, which had been lagging for most of FY24. Expectations of a bumper rabi crop harvest have helped turn the tide. The Reserve Bank of India's (RBI's) Monetary Policy Committee kept the repo rate unchanged last week, noting that as rural demand catches up, consumption is expected to support economic growth in 2024-25.
'They can transition from short to long-duration funds when the yield curve normalises.'
Wednesday's was the first MPC meeting that had a dissent note.
'We are very watchful about inflation and growth. But the main challenge is economic revival and growth.'
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.
'There will be no serious effect on Indian economy because one person, one man, however powerful, however influential, however great, cannot have an impact on an economy as big and complex as India.'
RBI conducts interviews for first lateral hire for CGM post; deputy governors to head four distinct verticals.
RBI will take a cue from the Fed policy statement.
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 his book, former governor Subbarao says Chidambaram, Pranab were piqued by his tight rate policy.
Watal panel had suggested an independent payments regulator be set up.
Analysts are expecting inflation to fall further in October and November on base effect. Inflation measured by consumer prices has been trending down for over four months, and came in at 6.7 per cent in September.
Historically, the RBI has tried to keep the crooks at bay by issuing a circular a day. What it needs is more onsite supervision. Merely checking high-frequency data with the help of technology is insufficient, notes Tamal Bandyopadhyay.
He said the short term macroeconomic priorities of the RBI continue to focus on bringing down inflation towards the government-set target of 4 per cent
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Bankers remained ambivalent on the impact of Tuesday's policy announcement by Reserve Bank on the cost of funds and refrained from giving a guidance on the direction in which lending rates are headed.
India has been relatively insulated from the severe headwinds in the West. However, with a third of the global economy expected to slip into recession in calendar year 2023, the impact will strongly be felt on India's exports and trade economy, leading economists said in a panel discussion at the Business Standard BFSI Insight Summit in Mumbai on Wednesday. The panel comprised former Reserve Bank of India executive director and former Monetary Policy Committee member Mridul Saggar, State Bank of India Chief Economic Advisor Soumya Kanti Ghosh, Citibank India Chief Economist Samiran Chakraborty, ICRA Chief Economist Aditi Nayar, and IndusInd Bank Chief Economist Gaurav Kapoor. The topic of the panel discussion was No recession in sight: Is India decoupled from developed economies?
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.
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.
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.
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.
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.
"I am an academic and I have always made it clear that my ultimate home is in the realm of ideas," Rajan said in a letter to staff.
India's consumer price index (CPI)-based inflation could ease in the coming months thanks to the arrival of kharif crops, lower international commodity prices, and a pass through of lower input costs to consumers, the finance ministry said in its Monthly Economic Review (MER) for October, which was released on Thursday. The MER, however, warned that the global macroeconomic situation remained precarious and a recession in many advanced economies would impact India's exports. "Easing international commodity prices and new Kharif arrival are set to dampen inflationary pressures in the coming months.
Has the Modi government been more at odds with institutions than other governments? There is no doubt that there have been more run-ins. While the RBI and CBI cases have drawn attention, there have been others, less publicised, Subhomoy Bhattacharjee points out.
The report said that "we believe, institutions are more important than individuals" and ultimately what is important is the credibility and the independence of any institution and nothing else.
Rajan said it was important that the government and the RBI be vigilant to the growth scenario.
Thanks to the recapitalisation by the government and measures taken by the central bank, collapse of any large housing finance company won't pose as big a risk as it had six months ago.
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As many as nine respondents said RBI would hold the repo rate at 8% till March-end, 2015
Inflation targeting has worked well and the government must stay with it, and the framework is going to work well in the period ahead also, former RBI Governor D Subbarao said on Thursday. He also said low inflation contributes to sustainable growth. Addressing the 'Times Network India Economic Conclave' virtually, Subbarao said the government's proposal to privatise some public sector units is not akin to selling family silver but it is a route for putting India on a sustainable growth path.
Instead of only focusing on the tenure for which the best interest rate is available, investors should also focus on their own investment horizon.
Rising crude oil prices, traction in China equities and inflation concerns back home are casting a shadow on the Indian equity markets in the short term, believe analysts at Jefferies. They said this could see the markets remaining range-bound in the near term before the next leg up.
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.
Banks have issues with their balance sheet profiles, say PSB executives.
The RBI may grant licences for setting up small finance and payment banks by April 2015.
'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.'
Economists have said if a stimulus is needed it should be different from what was provided in 2008-09, when the economy faced the ripple effects of a global meltdown following the Lehman Brothers collapse.
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