After unseasonal rains, supply disruptions and pandemic-induced woes pushed retail inflation well over the Reserve Bank's comfort zone in 2020, the scenario is likely to stay that way at least in the short term as economic recovery slowly gains foothold. For most part of this year, pricier food items pushed the retail inflation, based on Consumer Price Index (CPI), higher in the range of 6.58-7.61 per cent, except for March when the reading was 5.91 per cent. Experts believe retail inflation is likely to average around 6.3 per cent this fiscal and mostly will remain sticky going forward owing to pick-up in demand across sectors.
"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.
RBI said inflation in the second half of the current fiscal is projected at 2.7-3.2%. It retained its GDP forecast for the current fiscal at 7.4%
Chaos in Parliament threw a spanner in the government's efforts to revive the economy and kick-start reforms.
Economists and investors want RBI to retain independence in setting rates
As a result, the forecast of eight per cent retail inflation by January next year looks achievable.
While they have restructured loans, there is still question mark over the success of such a work-out
An action on the rate front is unlikely to figure in Rajan's plan for the moment.
'We get to know secrets such as some of India's top-rated firms do not always make payments when due and many State-owned, listed, enterprises that borrow in bond markets default regularly.' 'Without naming the bank, he says that ever-greening of poor loans by a part of India's shadow banking lay at the doorstep of India's banking, notably 'one private bank'.' Viral Acharya's Quest for Restoring Financial Stability in India won't be music to many ears, observes Tamal Bandyopadhyay.
The Reserve Bank of India unexpectedly raised its policy interest rate on Tuesday by 25 basis points (bps) but said that if consumer price inflation eases as projected, it does not foresee further near-term tightening.
To cut interest rates, the central bank head has to open up a debate on inflation target revision.
'Election years tend to see high government expenditure on unproductive schemes, though that money sloshing around can boost private consumption.' 'Again, it can mean higher inflation,' explains Devangshu Datta.
Suggesting steps to boost the Indian economy, the IMF chief further said the government should focus on fiscal consolidation.
The message to bankers from Raghuram Rajan was clear.
As inflation rate is near the upper limit of the comfort zone, experts rule out rate cuts anytime soon
Home Minister Rajnath Singh said that the decision could cost the government roughly Rs 15,000 crore.
The RBI has this year cut interest rates by 110 basis points in four instalments but banks have passed only a part of it to borrowers. Before the last reduction earlier this month of 35 basis points, the bank on an average had passed only 29 basis points out of 75 basis points cut affected during 2019.
The change from wholesale to retail inflation as an anchor means that the weightage of diesel in inflation has decreased
RBI conducts interviews for first lateral hire for CGM post; deputy governors to head four distinct verticals.
'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.
For the first time, the value of card and mobile payments of Rs 10.57 trillion was more than ATM withdrawals of Rs 9.12 trillion in Q4 of fiscal 2019-20. In the months of lockdown, the gap may have widened further, but cash could be back in vogue when the situation normalises.
The financial crisis has challenged the intellectual assumptions on which previous regulatory approaches were largely built, and in particular the theory of rational and self-correcting markets.
Government hits back, tells rating agency to introspect on processes.
A smartly executed reform-recap will be the best booster for the economy, says Ajay Chhibber.
The 30-share Sensex jumped 729 points to end at 28,076 and the 50-share Nifty soared 217 points to end at 8,494.
The speed at which he led the central bank in different areas -- ranging from internal reorganisation to inflation fighting, stabilising the currency, taking on rogue corporations, cleaning up bank balance sheets, and opening the sector -- makes one believe that Rajan knew he had only three years to do his job. A fascinating excerpt from Tamal Bandyopadhyay's MUST-READ Roller Coaster: An Affair with Banking.
Invest in liquid funds if you have a horizon of three months, ultra-short-term for six months, and low-duration funds for one year.
While Raghuram Rajan's departure under these circumstances is a pity, it would be wrong to conclude that the RBI or the economy cannot do without him.
Reserve Bank of India (RBI) Governor Raghuram Rajan's decision to cut rates last week surprised even top officials.
Raghuram Rajan joked he wasn't expecting to win any votes or Facebook 'likes' in the position.
Growth in the third quarter (October-December) is expected to be the weakest in years, with spending hit due to unavailability of enough replacement currency.
Finance Minister Arun Jaitley said RBI and the government are in continuous dialogue and that relationship will continue.
Taking advantage of the RBI's different accounting year, the Centre had started demanding an interim dividend till the time the latter's final balance sheet is prepared (usually in August). To address this anomaly, an expert committee led by former RBI governor Bimal Jalan had recommended aligning the RBI's financial year with that of the government.
His finest years came when he served as deputy governor under C Rangarajan.
The finance ministry has put out a revised draft in public domain.
The view among the regulator and the government is that the currency is overvalued
Rajan tells RBI colleagues he will be returning to academics
For banks to cut loan rates, the cost of deposits needs to come down, and there is no sign of that happening.
'The assumed linear correlation between forced lower yields, higher bank borrowing from the RBI, higher lending, and higher growth involves leaps of faith, each a step on the quicksand of false beliefs,' warns Debashis Basu.
Banks want lower provisioning burden on recast debt, interest on cash reserve ratio deposits.
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