Benchmark interest rate hiked by 50 basis points to 3-year high at 5.90 per cent. Economic growth projection for FY23 cut to 7% from 7.2% estimated in August. GDP expected to grow at 6.3% in September quarter, 4.6% each in December and March quarters.
Hikes benchmark lending rate by 35 basis points to 6.25 per cent Cuts growth projection for this fiscal to 6.8 per cent from 7 per cent estimated in September Inflation to come down below 6 per cent in March quarter, to average 6.7 per cent this fiscal
The rupee has remained largely stable against the US greenback in the current calendar year (CY 2024), depreciating by just 0.59 per cent so far. However, it has considerably weakened against the euro and pound. The local currency has depreciated by 1.6 per cent against the euro and 5.6 per cent against the pound, as both currencies strengthened against the dollar during this period.
'The RBI's MPC will maintain the current policy rates (6.50%) at the policy meeting, given ongoing inflationary pressures.'
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RBI's forex swap window for oil marketing companies addresses an urgent issue but what happens when the dollars have to be returned?
The rupee plunged 58 paise to close at an all-time low of 81.67 (provisional) against the US dollar on Monday as the strengthening of the American currency overseas and risk-averse sentiment among investors weighed on the local unit. Moreover, escalation of geopolitical risks due to conflict in Ukraine, a negative trend in domestic equities and significant foreign fund outflows sapped investor appetite, forex traders said. At the interbank foreign exchange market, the local currency opened at 81.47, then fell further to close at an all-time low of 81.67 against the American currency, registering a decline of 58 paise over its previous close.
Referring to visible indicators of green shoots, the finance minister said the forex reserve is at an all time high and the stock market is upbeat.
The rupee remains overvalued against the currencies of India's trading partners, even as it hit record lows against the dollar in August and September. According to the Reserve Bank of India's (RBI) real effective exchange rate (REER) index, the rupee stood at 5.5 per cent above its fair value in August, down from 7.7 per cent in July. This slight easing followed fears of a US recession and the unwinding of yen carry trades, which exerted pressure on the Indian currency.
It is high time to manoeuvre the rupee more effectively and predictably, even as it has to be recognised that such tweaking of the rupee needs to be accompanied by reforms to the real sector and factor markets.
India on Friday made a strong pitch for a sovereign rating upgrade with Moody's and also questioned the parameters based on which the US-based agency accords ratings, sources said on Friday. Ahead of its annual review of the sovereign rating, Moody's Investors Service representatives met Indian government officials during which the officials highlighted the reforms and strong fundamentals of the Indian economy. A higher rating for India would mean the nation is less riskier, translating into lower interest rates on borrowings.
BofA-ML revised its end-2015 rupee-dollar forecast to 60 from 64 earlier.
Market participants do not expect any immediate impact on the rupee from the Reserve Bank of India's (RBI's) a "comprehensive" master direction aimed at strengthening the framework for hedging foreign exchange risks. RBI Governor Shaktikanta Das, in his monetary policy statement, revealed that the central bank is poised to issue a master direction to consolidate guidelines for all types of forex transactions. But this development, according to market players, is more of a directional guidance than a mandatory directive.
Pakistan, the closest ally of China, has decided to skip the Democracy Summit that begins in Washington on Tuesday, opting instead to engage with the US bilaterally to strengthen democratic values, the foreign office in Islamabad said.
Brokerage firm Bank of America Merrill Lynch (BofA-ML) on Monday said the ongoing US government shutdown is positive for the country, as it gives additional time to recoup the forex reserves.
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The BofAML report said that five year money can be raised by issuing the 7 to 9 per cent coupon bonds to stabilise markets, just as it was done in 1998 and 2001.
Growth remains weak, inflation is within 2-6% range, rate cut would help recoup forex reserves
ICICI Bank chief Chanda Kochhar on Wednesday said the country has many positives like high forex reserves, and low current account and fiscal gaps, which can help it weather the ongoing volatilities.
Indian central bank may soon edge out its counterpart in the Netherlands from the top-10 list, as latter's holding has largely remained unchanged.
The Reserve Bank is likely to continue buying dollars from market to add to its reserves in the coming months, which has crossed $300 billion, says a report.
India on Monday asserted that its friendly ties with the Maldives will continue as Prime Minister Narendra Modi and President Mohamed Muizzu unveiled a blueprint for comprehensive economic and maritime cooperation, signalling a reset of the relationship that had hit a rough patch last year due to anti-New Delhi rhetoric.
India's foreign exchange reserves rose by $2.8 billion to $343.2 billion
It plans to use it as collateral, along with forex reserves, to print currency.
Reserve Bank Governor Shaktikanta Das on Wednesday said in the wake of appreciating US dollar, the movement of rupee has remained least disruptive as compared to its peers, and the size of foreign exchange reserve is comfortable. On a financial year basis (from April to October 2022), the rupee has appreciated by 3.2 per cent in real terms, even as several major currencies have depreciated, he said while announcing the latest set of bi-monthly monetary policy. "The story of the rupee has been one of India's resilience and stability," the Governor said while pointing out that the appreciation of the US dollar this year, which precipitated large-scale depreciation of all major global currencies including the Indian rupee, has drawn wide attention.
The steep decline in commodity prices has reversed.
Sir Osborne Smith was the first governor of the Reserve Bank, serving from April 1, 1935, to June 30, 1937.
The Reserve Bank of India's (RBI's) outstanding net forward purchases of US dollars fell by more than 50 per cent from the last quarter of FY22 to $30.86 billion in the June quarter (Q1). The net forwards position was at $65.79 billion at the end of the last fiscal year. The purchases fell by $18.33 billion in June as the central bank intervened in both the forwards and the spot market in order to protect the rupee from excessive depreciation in the face of a widening trade deficit.
Amid reports of corporates making losses on hedging forex products other than dollar, the Reserve Bank may soon come out with guidelines on forex derivatives, which is widely expected to discourage banks from trading in foreign currencies other than in rupee-dollar. "We are working on the guidelines of forex derivatives," an RBI spokesperson told PTI.
As the nosediving rupee shatters foreign-education dreams and eats away the country's much-vaunted forex reserves -- to mention just two fallouts -- Uttam Ghosh takes up pen and paper to outline what the common Indian is feeling.
Business is down to such an extent that last year these firms could not even meet RBI's capital norm of Rs 50 million for partnerships and Rs 100 million for public and private firms in this line of business.
Following are the highlights of the Economic Survey 2022-23 tabled in Parliament on Tuesday
Sri Lankan government on Monday admitted that it has run out of cash to buy fuel as pumps in most filling stations across the country have run dry, exacerbating the deepening foreign-exchange crisis that has crippled the island nation's economy.
The swap windows were closed on November 30.
Bangladesh is in turmoil, which is not good news for India, which shares a porous 4000 km border with it. There is a danger of fundamentalism growing there, and India has to move in to reset its ties with the new dispensation before China and Pakistan make capital out of it, alerts Ramesh Menon.
In his address at the meeting of the foreign ministers of the Shanghai Cooperation Organisation in Benaulim, Goa, Jaishankar said the channel of finances for terror activities must be blocked without any distinction even as Bhutto Zardari raised the issue of "violation of international law" which was seen as an apparent reference to Kashmir.
The RBI is still a small player in international gold buying among central banks. But in terms of total gold bought in 2019, it is the sixth largest buyer with 25.2 tonnes purchases in the first 10 months of 2019.
India's rupee is likely to remain under pressure due to high prices of crude oil and other commodities, and may stabilise at around 79-80 against the US dollar in the near term, say experts amid limited headroom available with the Reserve Bank to check the weakening of the domestic currency. The currency has slumped over 5 per cent this year after Russia's invasion of Ukraine sent international crude oil prices soaring to a decade high. On Monday, rupee ended at a fresh all-time low of 78.34 (provisional) against the US dollar.
RBI's swap windows have boosted foreign inflows over the past two months.
The rupee fell 1.87 percent against the dollar this week, its biggest fall since late April.
Foreign currency assets, which are a major component of the overall reserves, rose by $646.4 million to $386.762 billion.
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