Rajan said it was important that the government and the RBI be vigilant to the growth scenario.
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.
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.
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).
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.
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.
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.
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.
.jpg)
As many as nine respondents said RBI would hold the repo rate at 8% till March-end, 2015
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.
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.
'They can transition from short to long-duration funds when the yield curve normalises.'
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.
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.
The Reserve Bank on Tuesday said growth is expected to fall below 5 per cent in 2013-14 in absence of pick-up in manufacturing sector, but likely to recover to 5.5 per cent in the next financial year.
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.
With a sole mandate of inflation targeting, RBI wears many hats.
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.
RBI declines to accede to plea, upheld by Padmanabhan panel, for priority sector tag; feels move would dilute claims of those needing it more.
The trade gap was $11.66 billion in December 2015 while in September 2015 it stood at $10.16 billion
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?
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.
Rate cuts are unlikely to be aggressive, in our view.
'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.'
Banks argued that loans of most lenders are funded primarily by retail deposits and not from the wholesale market as was the practice abroad
'Credit expansion is probably the quickest way to get the economy going again.' 'Easy credit is like a shot of nitro in a race car: In timely, small, quick, doses it can give a tremendous boost but carried to extreme it can destroy the engine,' points out S Muralidharan, former managing director, BNP Paribas.
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.
If the new governor can think out of the box even as he signals that he can bat for the RBI cadre and respect its institutional memory, that will go a long way in getting out of the current impasse.
After consumer price index jumped the 6.3-per cent mark in May and wholesale inflation set a record of 12.94 per cent, house economists at Swiss brokerage UBS Securities have warned that the country is facing more upside risks on the inflation front that is set to averaging at 5 per cent for the year. Rising prices of edible oils and protein rich items pushed retail inflation to a six-month high of 6.3 per cent in May, breaching the comfort level of the Reserve Bank and thus rendering reduction in interest rates a difficult proposition in the near term. Led by petrol price, that has crossed the Rs 100-mark in many states, wholesale inflation too accelerated to a record 12.94 per cent in May. While crude oil has crossed $70 a barrel on account of rising prices of crude oil and manufactured goods due to spike in commodities, and the low base of last year due to the lockdown.
The Reserve Bank is working on a phased implementation strategy for its own digital currency and is in the process of launching it in wholesale and retail segments in the near future, RBI Deputy Governor T Rabi Sankar said on Thursday. He said the idea of Central Bank Digital Currency (CBDC) is ripe, and many central banks in the world are working towards it. Sankar further said CBDC is needed to protect consumers from the "frightening level of volatility" seen in some of the virtual currencies which have no sovereign backing.
Potato, a daily consumable vegetable, witnessed maximum inflationary pressure at 60.58 per cent
The reform priorities are clear: enhance savings, improve productivity. Just 25 basis points of moving interest rate up or down would not boost investment: Former RBI Governor Y V Reddy.
A fall in the rupee could boost exports. But the flip side of the equation is that a weaker rupee could stoke some inflation
A V Rajwade wonders if the Modi sarkar is pursuing price stability at the cost of potential social instability in both rural and urban India.
It would be beneficial for the economy to hold on to high interest rates till inflation numbers are under control.
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.
Costlier vegetables slowly pushed retail inflation, which had remained well within the Reserve Bank's comfortable level of 4 per cent during most part of 2019, peaked to more than three-year high of 5.54 per cent in November.
Finance Minister Nirmala Sitharaman has said the recent interest rate hike by the Reserve Bank was not surprising for her but the timing was, asserting that the rising cost of funds will not impact the government's planned infrastructure investments. For the first time since August 2018, RBI had on May 4 delivered a blunt 40 basis points increase in key repo rate to 4.40 per cent, and also hiked the cash reserve ratio by 50 basis points to 4.5 per cent after an unscheduled meeting of the rate setting panel, citing increased inflation pressures following the Ukraine war and the resultant spike in crude oil prices. Retail inflation printed at 6.9 per cent in March and the April reading is forecast to top 7.7 per cent.
Managing Brexit, inflation and banking reforms, along with the political environment, will be tough.
