rediffGURU Ramalingam Kalirajan answers your personal finance queries.
Inflation, remained in negative territory for the 7th month in May
The Institute of Economic Growth, an economic think thank, has said that inflation rate may increase in the coming month but would remain within the RBI's target range of 4 to 4.5 per cent for this fiscal. In its latest monthly monitor, IEG said that despite this expected increase in inflation, there could still be a downward pressure on the interest rates in the next few months.
Train passenger fares may soon be linked to inflation rate, sources say, adding that the new model may be based on the Wholesale Price Index.
Shaktikanta Das is a master of the finest balancing act who listens to all but takes his own decisions, discovers Tamal Bandyopadhyay.
High inflation print is the price that the Reserve Bank of India (RBI) will have to pay to nurse a fragile growth back, say economists. Wholesale Price Index-based inflation rose to a record high of 12.94 per cent in May, aided by low base effect, but also because of higher fuel and commodity prices. Retail inflation, too, surprised by rising to 6.30 per cent, while the core inflation, which is the non-food and non-fuel component, rose to an 83-month high of 6.55 per cent. These numbers are much above RBI's upper limit of 6 per cent inflation target, but there is very little that the RBI can do at this moment.
The International Monetary Fund (IMF) on Tuesday lowered India's economic growth projection for the current fiscal to 5.9 per cent from 6.1 per cent earlier. Yet India will continue to be the fastest-growing economy in the world. In its annual World Economic Outlook, IMF also lowered the forecast for 2024-25 fiscal (April 2024 to March 2025) to 6.3 per cent from the 6.8 per cent it had predicted in January this year. The growth rate of 5.9 per cent in the 2023-24 fiscal compares to an estimated 6.8 per cent in the previous year.
'The market should maintain optimism on the back of range-bound oil prices, a robust fiscal balance sheet, a better-than-expected monsoon, and moderating inflation.'
Home Minister Rajnath Singh said that the decision could cost the government roughly Rs 15,000 crore.
'Normally, the system is geared towards counting notes -- it is equipped to do x amount of work and one day you are asking them to do 20 x.' 'The processes involved are very complex.'
The members of the Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC) voiced different views on the interest rate and stance, with two of them indicating they may not vote for further rate increases even if Governor Shaktikanta Das and Deputy Governor Michael Patra maintain bringing down inflation as their primary objective, the minutes of the December review of the monetary policy showed. The other two members remained neutral. The MPC increased the policy repo rate by 35 basis points (bps) - which was lower than the previous three hikes of 50 bps. The repo rate has been hiked by 225 bps to 6.25 per cent since May this year.
In the coming days, unless Modi tones down the communal spiel, it will be clear that anxiety continues to drive his mind and clouds his judgment, observes Modi biographer Nilanjan Mukhopadhyay.
India's trade account could come under pressure and there could be an inflation push if crude oil prices remain above the $90 per barrel (Brent) for a prolonged period since India imports over 85 per cent of its oil and roughly 50 per cent of its gas. A rebound in economic activity is bound to lead to higher fuel demand. While India is the third-largest importer of crude, it is a net exporter of refined products, which helps to compensate to some degree.
rediffGURU Dev Ashish answers your personal finance and mutual fund queries.
While achieving an eight per cent retail inflation rate by January 2015 is well within reach, Reserve Bank of India Governor Raghuram Rajan notes there is a second target, of six per cent by 2016.
RBI takes steps to control inflation but the masses are not convinced.
rediffGURU Dev Ashish answers your personal finance and mutual fund queries.
The Reserve Bank of India (RBI) is precariously balancing two opposing objectives - maintaining easy financial condition in the domestic market, while ensuring external stability - and economists have started taking note. They say India is going through the classic trilemma of the 'Impossible Trinity'. The RBI cannot have an independent monetary policy (setting domestic interest rates) in an environment of an open capital account and flexible exchange rates. What is even more complicated for the central bank now is that financial market stability overlays all the other three objectives.
The RBI has targeted consumer price inflation at 6 per cent by January and 4 per cent by March 2018.
The Assocham suggested to the Reserve Bank of India on Monday to take measures to contain inflation and maintain interest rates at the existing level so that the 8 per cent plus GDP growth target is not compromised.
'Some risks to this market rally include inflation, erratic weather conditions, rising crude prices, slowing global growth and the resultant impact on domestic exports, escalation in geopolitical tensions.'
Fitch on Tuesday affirmed India's sovereign rating at 'BBB-' with a stable outlook, on robust growth and resilient external finances, but said weak public finances remain a challenge. India's rating has been unchanged at 'BBB-', which is the lowest investment grade, since August 2006. "Fitch Ratings has affirmed India's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BBB-' with a Stable Outlook," it said in a statement, adding strong growth potential is a key supporting factor for the sovereign rating.
Inflation for the first time in 5 years dropped below 3 per cent to 2.97 per cent for the week ended October 27, against 3.02 per cent in the previous week mainly due to fall in prices of food articles and some manufactured items. During the week under review, prices of fruits and vegetables, cereals and pulses declined, while wheat, poultry chicken, fish-marine, milk and eggs went expensive.
'Too many things happen in India... that is the root of the problem, not Raghuram Rajan'
In the new decade, the scene will change because the banks till recently had been challenged by the fintechs, but the techfins have now entered the arena, observes Tamal Bandyopadhyay.
The Reserve Bank of India (RBI) on Wednesday raised the benchmark lending rate by 35 basis points to 6.25 per cent in a bid to tame inflation, which has remained above its tolerance level for the past 11 months. With the latest hike, the repo rate or the short-term lending rate at which banks borrow from the central bank now has crossed 6 per cent. This is the fifth consecutive rate hike after a 40 basis points increase in May and 50 basis points hike each in June, August and September.
Bihar Chief Minister Nitish Kumar on Tuesday announced his intent to raise quotas for Other Backward Classes, Scheduled Castes and Scheduled Tribes in the state, saying a legislation to the effect is likely to be brought in the ongoing assembly session.
Noting that the assembly election results being very disappointing is an understatement, the Congress Parliamentary Party chairperson urged party MPs to channel their disappointment into positivity for next year's general elections.
The Central bank primarily factors Consumer Price Index while deciding on policy rate.
Finance Minister Nirmala Sitharaman on Wednesday said the country's economic growth remains a priority for the government, as inflation has come down to a manageable level. Job creation and equitable distribution of wealth remain the other focus areas, she said at India Ideas Summit. "Some of course are red-lettered (priorities), some may not be. Red-lettered ones would of course be jobs, equitable wealth distribution and making sure India is moving on the path of growth.
The cost of food has constantly been on the rise.
The 'black paper', titled '10 saal anyay kaal' also alleged that issues such as rising prices, unemployment, subversion of institutions and farmers' 'distress' had plagued the country.
Rise in vegetable prices can reverse the benefits of low oil prices.
Aiming to push India into the list of the top 10 agri export nations, the policy has been backed by the Prime Minister's Office
'I see in the BJP an attempt to get growth and redistribution of resources.' 'For growth you need growth of the economy.'
Slowing inflation prompted the RBI to cut the policy repurchase rate last month by 25 basis points to 6.50 percent, the lowest since 2011.
The stock has gained over 10 per cent in the last month but it could still have an upside, with valuations between Rs 5,200 and Rs 5,700 from several analysts and strong 'buy' consensus.
After bumbling for years since 2014, the Modi government seems to believe that massive government expenditure will lead us to prosperity supported by 'seat-of-the-pants' decision-making, observes Debashis Basu.
Besides high portfolio yield, investors may enjoy capital gains in debt funds in 2023 as bonds rally in anticipation of rate cuts.
