The Governor said the MPC had voted to maintain its accommodative stance, implying more rate cuts in the future if the need arises.
He will be the eighth Deputy Governor to be made Governor at RBI
Shaktikanta Das is a master of the finest balancing act who listens to all but takes his own decisions, discovers Tamal Bandyopadhyay.
Industry players said they were indeed seeing a serious fall in capacity usage, though some sectors were seeming to prevent further fall in the overall capacity utilisation.
A rise in petrol and diesel consumption can help the government cut cesses on the fuels by Rs 4.5 a litre without impacting revenue collections of FY21, and help cool off the pressure on inflation, domestic rating agency ICRA said on Friday. Petrol consumption is estimated to increase 14 per cent in 2021-22 and diesel by 10 per cent on the lower base, rise in mobility and economic recovery, ICRA said. The rating agency added that it will result in an additional Rs 40,000 crore in revenue for the government through higher collections of the cess.
The 50-stock NSE barometer Nifty finished 14.75 points, or 0.14 per cent, down at 10,382.70 after shuttling between 10,340.65 and 10,393.15.
There is a near consensus that at least a 25 basis points cut, if not 50, can be expected in the June policy.
Central bank sees action as discriminatory, unfair
'There are deliberations on whether there can be lowering of income taxes and other sops to keep more money in the hands of taxpayers, enabling them to spend more and boost demand.'
Consumer prices rose an annual 5.11 per cent (2012 base) in January.
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.
Headed by Urjit Patel, MPC for the fourth straight time kept the repo rate unchanged, at which it lends to the banks, at 6.25 per cent. The reverse repo, at which RBI borrows, will be 6 per cent.
The resignation is sure to create more political firestorms for the government as it comes on the eve of the winter session of Parliament where the Opposition has already made it clear to the treasury benches that infringing on the RBI autonomy would be a big talking point for them.
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.
RBI said at the current juncture, the all-out effort is to maintain and sustain, with the hope that when life is secure, resources, energy and time can be marshalled to rebuild and revive.
The poll of over 30 economists, taken in the past week, showed Asia's third largest economy will expand 7.8 percent in the fiscal year ending March 2017.
Analysts are divided on their retail price inflation forecast, with some saying the first quarter numbers will overshoot the RBI target by as much as 60 bps while others are softer in their estimate. Consumer price inflation retreated from its 15-month peak of 7.4 per cent in July to 6.8 per cent in August, much lower than the market expectations, despite vegetable prices remaining elevated at 26.1 per cent. Food inflation eased to 9.9 per cent from 11.5 per cent, led by some cooling of inflation in vegetables, cereals, pulses and milk.
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.
The industrial output for the third month in a row remained in the negative territory, contracting 1.5% in January
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.
'There are deeper, underlying, forces at work and we need institutional arrangements to guard against them.'
One incident should not be used to generalise the health of all cooperative banks, says RBI governor Shaktikanta Das.
Banks normally park almost 27 per cent of their funds in government securitie.
'We are very watchful about inflation and growth. But the main challenge is economic revival and growth.'
'If the RBI now only prints Rs 100 in small denomination notes and the remaining amount is printed in Rs 500 and Rs 2,000 denominations, then by March-end the central bank can completely normalise the cash crunch situation.'
RBI could opt for a 'deep cut' after winning inflation war, say experts.
If this turns into reality, India's gross domestic product (GDP) growth will be the lowest since 2012-13, which could severely hit job creation and income growth in the near term.
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.
Rate cuts are unlikely to be aggressive, in our view.
Rajan said the process of dialogue with the government did not reach a stage where he could have agreed to stay on
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.
IMF attributes the slower growth rate to supply-side bottlenecks.
Rajan had overturned the majority opinion of the members and chose to hold the rates at the last monetary policy review in October.
With inflation remaining at elevated levels, central banks around the world, including the Reserve Bank of India (RBI), will kill excess demand in economy over the next six to eight months, sources in the know said. They also indicated that there could be a rate hike in June, when the inflation forecast for the current financial year would be raised. The RBI, the sources said, might announce more steps such as raising the limit on held-to-maturity (HTM) bonds to support government borrowings but might not come out with any further quantitative easing GSAP (Government Securities Acquisition Programme) measures.
The bigger worry is that its effects could linger well into the next financial year.
'Rate cut should reiterate RBI's commitment in providing confidence to consumers and small business.'
We need a change in mindset, says the RBI Governor.
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.
A staunch defender of demonetisation, it would be interesting to see how he handles the government's increasing demand for more cash from the RBI, and letting some weak banks get out of prompt corrective action.
A 13-member group, headed by RBI Executive Director R Gandhi, has made various recommendations on G-Sec market, retail participation and interest rate derivatives market.
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