The RBI is not statutorily independent from the government but has long enjoyed wide latitude
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.
RBI governor is seen succeeding International Monetary Fund (IMF) chief executive officer, Christine Lagarde, next year.
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.
A lot depends upon the composition of the monetary policy committee.
Market participants must appreciate that staying cautious is a virtue for central bankers and should not expect a sudden reversal in the formal monetary policy stance.
In the current fiscal so far, retail inflation stabilised around 5 per cent, while wholesale price-based inflation averaged around 2.9 per cent during April-December.
However, RBI would continue to nudge banks to cut lending rates
Tomorrow's review could also turn out be the last policy anchored by Rajan if the proposed Monetary Policy Committee (MPC) is put in place before the next review due on August 9.
India's services sector growth eased to a three-month low in June but service providers continued to signal positive demand trends, which resulted in a stronger increase in new business volumes and further job creation, a monthly survey said on Wednesday. The seasonally adjusted S&P Global India Services PMI Business Activity Index fell from 61.2 in May to 58.5 in June. Despite falling from May, the latest figure was consistent with a sharp pace of growth.
As COVID-19 infections spike in the country resulting in restrictions in various states and impacting the fragile recovery, many economists are expecting RBI to delay the policy normalisation move, which is expected in the February review. The country has reported a single-day rise of 58,097 new Covid-19 cases as of Wednesday morning--the highest in around 199 days -- of which 2,135 are Omicron cases and later in the day, the first confirmed Omicron-related death has also been reported. Maharashtra recorded the maximum number of 653 Omicron cases followed by Delhi at 464, Kerala 185, Rajasthan 174, Gujarat 154 and Tamil Nadu 121 cases, taking the total tally of cases to 3,50,18,358.
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
Amid prolonged uncertainty, continued policy support will be crucial for sustained economic recovery from the coronavirus pandemic, Reserve Bank Governor Shaktikanta Das said at the recent meeting of the Monetary Policy Committee. "In this period of prolonged uncertainty, it would be wise to remain agile and respond in a gradual, calibrated and well telegraphed manner to the emerging challenges," opined Das, according to the minutes of the MPC meeting released by the Reserve Bank on Thursday. Observing that economic recovery from the pandemic remains incomplete and uneven, he said, "continued support from various policies remains crucial for a sustained recovery." The governor said the renewed surge in international crude oil prices, however, requires close monitoring.
Probably 35 bps. There could be even an encore in February 2023 to take the policy rate to 6.5% before the financial year ends, predicts Tamal Bandyopadhyay.
Inflation in the 'fuel and power' basket in December slumped to 8.38 per cent, nearly half of 16.28 per cent.
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.
India's manufacturing sector activities witnessed the strongest rate of growth in three months in July amid improved demand conditions and easing of some local COVID-19 restrictions, a monthly survey said on Monday. The seasonally adjusted IHS Markit India Manufacturing Purchasing Managers' Index (PMI) rose from 48.1 in June to 55.3 in July, pointing to the strongest rate of growth in three months. In PMI parlance, a print above 50 means expansion while a score below 50 denotes contraction.
Goyal said India has been recognised as brightest spot in the world in last five years.
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.
'Banks are being encouraged to lend instead of parking their resources with the RBI and earn risk-free interest income,' points out Tamal Bandyopadhyay.
RBI targets to keep inflation at 4 per cent, (+/- 2 per cent), and its rise beyond this comfort zone will put pressure on the central bank to hike rates.
Market breadth depicted gains with 1,476 advances over 1,403 declines on the BSE. 140 stocks remained unchanged.
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.
Both the indices closed at five-month highs, led by financial services, IT and metal stocks, amid persistent foreign fund inflows.
Banks have raised concerns over the new international trade settlement in rupee, fearing that facilitation of such a mechanism could result in them facing the ire of economic sanctions by the West, people aware of the matter said. Large banks with overseas operations have sought clarity and assurance from the Reserve Bank of India (RBI) that they will not be targeted with sanctions for facilitating rupee trade with a sanction-hit country such as Russia. The present payment mechanism is a shift from earlier such arrangements, like the one with sanction-hit Iran, which involved banks facilitating settlement of international trade that did not have business in the sanctioned nation.
Balance is needed in selecting members for the proposed monetary policy committee, says Abheek Barua.
Exactly a fortnight ahead of the Reserve Bank of India's (RBI's) next monetary policy review, a key market indicator of interest rates - the overnight indexed swap (OIS) - suggests that the central bank may tighten policy by 35 basis points and then refrain from further rate hikes. RBI Deputy Governor Michael Patra recently described the OIS as the primary instrument for hedging interest rate risk in India. The six-member Monetary Policy Committee (MPC) of the RBI will meet on December 5-7.
The government on Friday appointed Suman K Bery as the vice chairman of Niti Aayog, following the sudden resignation of Rajiv Kumar.
If true then it would be a major disruption in the industry
Fitch said the full implications of Patel's resignation will only become clearer once there is some indication of the RBI's policy approach under his replacement, Shaktikanta Das
Retail inflation fell to a five-month low of 4.35 per cent in September from 7.27 per cent in the year-ago period as prices of vegetables and other items declined, according to government data released on Tuesday. The moderation in Consumer Price Index-based inflation is in line with the assessment of Reserve Bank Governor Shaktikanta Das who recently projected substantial softening of retail inflation. The CPI inflation was at 5.3 per cent in August and at 7.27 per cent in September 2020.
In its scheme of things, tackling inflation now comes ahead of ensuring growth in the world's sixth largest economy, points out Tamal Bandyopadhyay.
ICICI Bank was the top gainer in the Sensex pack, rising around 4 per cent, followed by UltraTech Cement, Sun Pharma, Bharti Airtel, HUL, SBI, L&T, Axis Bank and IndusInd Bank. On the other hand, Reliance Industries, Bajaj Finserv, HCL Tech and HDFC were among the laggards.
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.
DBS called Rajan's decision not to seek an extension as a 'negative surprise'.
RBI Governor Shaktikanta Das has assured Finance Minister Nirmala Sitharaman that the Rs 12.05-trillion gross borrowing programme for FY22 will go through smoothly.
The banking sector is set to move at a fast pace from hereon.
The Reserve Bank of India (RBI) will maintain the policy repo rate at 6.5 per cent during its upcoming June 8 announcement, considering the easing of retail inflation in April and the potential for further decline, indicating the effectiveness of previous policy rate actions, anticipate experts. Headed by Reserve Bank Governor Shaktikanta Das, a meeting of the six-member Monetary Policy Committee (MPC) is scheduled for June 6-8. The decision of the 43rd meeting of the MPC would be announced on Thursday, June 8.
The repo rate, at which the central bank lends to the system, will come down to 5.75 per cent after the cut.
Arvind Subramanian was appointed CEA in October 2014 and got a year's extension in September 2017
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