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 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.
The Indian equity market is likely to remain under pressure and rangebound over the next few months. This comes as global central banks, led by the US Federal Reserve look at a possibility of hiking rates aggressively to tame inflation. Back home, the Reserve Bank of India, too, remains data dependent in its endeavour to keep inflation in check and pursue an aggressive monetary policy stance.
'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.
With a sole mandate of inflation targeting, RBI wears many hats.
The trade gap was $11.66 billion in December 2015 while in September 2015 it stood at $10.16 billion
RBI declines to accede to plea, upheld by Padmanabhan panel, for priority sector tag; feels move would dilute claims of those needing it more.
Rate cuts are unlikely to be aggressive, in our view.
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.
Banks argued that loans of most lenders are funded primarily by retail deposits and not from the wholesale market as was the practice abroad
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.
'The rising cost of construction, the cost of doing business, high compliance, and inflation/interest rates going up have already reduced returns to single digits.'
The government has no plan to print currency notes to tide over the current economic crisis triggered by the outbreak of COVID-19 pandemic, Finance Minister Nirmala Sitharaman informed Parliament on Monday. To a question on whether there is any plan to print currency to tide over the crisis, the finance minister said, "No Sir". Many economists and experts have suggested to the government to print more currency notes to tide over the difficult economic situation with a view to support the economy ravaged by the spread of COVID-19, and protect jobs.
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.
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 services sector activity moderated further in January as new business rose at a noticeably slower rate amid the escalation of the pandemic, reintroduction of restrictions and inflationary pressures, a monthly survey said on Thursday. The seasonally adjusted India Services Business Activity Index fell to 51.5 in January, down from 55.5 in December, pointing to the slowest rate of expansion in the current six-month sequence of growth. For the sixth straight month, the services sector witnessed an expansion in output.
Costlier vegetables and eggs pushed up retail inflation to a nearly six-and-a-half year high of 7.61 per cent in October, keeping it significantly above the comfort zone of the Reserve Bank.
Potato, a daily consumable vegetable, witnessed maximum inflationary pressure at 60.58 per cent
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.
Reserve Bank of India Governor Shaktikanta Das tells Anup Roy, Raghu Mohan and Niraj Bhatt that it is time for banks to lower interest rates and start lending to cash-starved finance companies after due credit appraisal and proper risk assessment.
Managing Brexit, inflation and banking reforms, along with the political environment, will be tough.
It would be beneficial for the economy to hold on to high interest rates till inflation numbers are under control.
The headline seasonally adjusted Nikkei India Composite PMI Output Index, that maps both the manufacturing and services sectors, rose from 53.3 in June to 54.1 in July.
'There are deeper, underlying, forces at work and we need institutional arrangements to guard against them.'
Some say the MPC will raise the rate, while others are of the view that there is already de facto interest rate tightening through rising bond yields, which might prompt the central bank to go for a pause.
Barry Eichengreen, professor of economics and political science, University of California, Berkeley, analyzes the transparency of the Reserve Bank of India, the growth rate of the Indian economy and why he feels globalisation can never be rolled back.
Currency scarcity weighed on manufacturing performance where growth of new work flows slowed
The Reserve Bank of India is expected to announce a slew of measures to bring vibrancy into the debt market as part of its mid-term review of the annual monetary policy.
The size of the hole in today's banking crisis appears to be roughly 10 per cent of GDP.
The wider Nifty hit a low of 10,033.35 before finishing at 10,044.10, down 74.15 points or 0.73 per cent.
Rajan said the process of dialogue with the government did not reach a stage where he could have agreed to stay on
RBI could opt for a 'deep cut' after winning inflation war, say experts.
'If Urjit Patel had resigned after the five-state elections results people would have taken a different view. So this was the right time for him to resign.' 'He rightly resigned as he felt the differences with the government were not getting settled.'
The Financial Stability and Development Council meeting on Tuesday started with an air of tension in the room. An official present described the participants' body language as "tetchy". However, once presentations and discussions begun, the mood considerably eased.
The Reserve Bank of India has set up an experts committee to implement Basel II accord by 2006 to strengthen the financial health of banks by adopting globally accepted norms for capital adequacy.
he reason behind the cut in policy rate seems to be a slowing economy
Says impact of crisis in China won't be as big here as in some other countries
Delivering the key mote address at the Citi's Investor Summit, Jaitley hoped that as a professional organisation the Reserve Bank will take 'the best decision'.
There is also a lobby within the bureaucracy that wants to see Rajan's influence curtailed
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