Analysts are expecting inflation to fall further in October and November on base effect. Inflation measured by consumer prices has been trending down for over four months, and came in at 6.7 per cent in September.
The downward surprise in Q2 stemmed from a stronger-than-anticipated drag from gross fixed capital formation and marginal weakness in private final consumption expenditure. In Q3, projection errors emanated mainly from a steep unanticipated contraction in gross fixed capital formation, which was the deepest in the new series of GDP.
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 recently cut repo by 0.25 percentage point, taking the rate to 7.25 per cent in three reductions since January.
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.
Finance minister Arun Jaitley has delivered a Arun Jaitley delivered a bold, far sighted budget
RBI wants periodic revision of the pensions for its retired employees.
A host of factors including the reform measures taken by the government and decline in global oil and commodity prices have led to lower inflation, the Finance Ministry said on Wednesday.
If the concerns over risking political capital are overcome, the long-term gains for the Indian economy will be immense, asserts A K Bhattacharya.
'People know if inflation is not within the tolerance band, then action will be taken so they do not expect inflation to rise above that.'
The domestic market has posted its third straight weekly gain, supported by positive global cues, strong foreign fund inflows and good numbers from some companies.
Some say the MPC will raise the rate, while others are of the view that there is already de facto interest rate tightening through rising bond yields, which might prompt the central bank to go for a pause.
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.
The apex bank's observation on Tuesday comes at a time when global markets remain uncertain about the overall impact of the tsunami and the subsequently unravelling nuclear crisis in Japan.
The statement, issued after the 2-day meeting of the 6-member Monetary Policy Committee of the Reserve Bank of India, also said that recapitalisation of public sector banks along with resolution of stressed assets under the Insolvency and Bankruptcy Code (IBC) will create demand for fresh investments.
However, predictions that economic conditions will normalise after the elections underpinned optimism regarding the outlook and supported a stronger upturn in employment.
During the month, inflation in vegetables shot up to 35.99 per cent, as against 26.10 per cent in October. Likewise, the prices of cereals and eggs grew at a faster pace of 3.71 per cent.
'The Reserve Bank's independence has remained a work in progress, an enduring challenge that the nation has been grappling with on an ongoing basis,' says RBI Deputy Governor Dr Viral Acharya.
Potato, a daily consumable vegetable, witnessed maximum inflationary pressure at 60.58 per cent
HDFC Bank was the top loser in the Sensex pack, falling 2.99 per cent, followed by Adani Ports at 2.87 per cent.
In his book, former governor Subbarao says Chidambaram, Pranab were piqued by his tight rate policy.
If you are planning for a long-term goal like your child's education in a foreign university, invest about 20% of your portfolio in foreign assets that can provide a hedge against the rupee's depreciation.
'There are deeper, underlying, forces at work and we need institutional arrangements to guard against them.'
Governments that do not respect central banks' independence will sooner or later incur the wrath of the financial markets, ignite economic fires, and come to rue the day they undermined an important regulatory institution; their wiser counterparts who invest in central bank independence will enjoy lower costs of borrowing, the love of international investors, and longer life spans, said Acharya, who will return to the New York University's Stern Business School in August.
He said the short term macroeconomic priorities of the RBI continue to focus on bringing down inflation towards the government-set target of 4 per cent
Most central banks across the world have around 5-7 years of tenure for the governor and deputy governors.
In the Sensex pack, M&M was the biggest loser, tumbling by 6.66 per cent, followed by TCS dropping 4.14 per cent.
However, it may still not change its stance on the policy rate as inflationary pressures are coming from high commodity prices.
Barry Eichengreen, professor of economics and political science, University of California, Berkeley, analyzes the transparency of the Reserve Bank of India, the growth rate of the Indian economy and why he feels globalisation can never be rolled back.
Rajan said the process of dialogue with the government did not reach a stage where he could have agreed to stay on
'India is not so distant from years of high and entrenched inflationary expectations that it should start trying to play games with the economy the way the West's central bankers think they are entitled to,' argues Mihir S Sharma.
The Reserve Bank is working on a phased implementation strategy for its own digital currency and is in the process of launching it in wholesale and retail segments in the near future, RBI Deputy Governor T Rabi Sankar said on Thursday. He said the idea of Central Bank Digital Currency (CBDC) is ripe, and many central banks in the world are working towards it. Sankar further said CBDC is needed to protect consumers from the "frightening level of volatility" seen in some of the virtual currencies which have no sovereign backing.
Will seek to bring inflation to the mid-point: Rajan
The government has no plan to print currency notes to tide over the current economic crisis triggered by the outbreak of COVID-19 pandemic, Finance Minister Nirmala Sitharaman informed Parliament on Monday. To a question on whether there is any plan to print currency to tide over the crisis, the finance minister said, "No Sir". Many economists and experts have suggested to the government to print more currency notes to tide over the difficult economic situation with a view to support the economy ravaged by the spread of COVID-19, and protect jobs.
Terming the RBI action on Wednesday as a "pleasant surprise", analysts today cautioned that possibility of a rate hike in the future cannot be ruled out. Urijit Patel committee's report on monetary policy would clear the air on RBI's future stand, they added.
The US Federal Reserve has said economic activity is improving while deciding to continue with the near-zero interest rate regime to bolster the economy.
Inflation targeting has worked well and the government must stay with it, and the framework is going to work well in the period ahead also, former RBI Governor D Subbarao said on Thursday. He also said low inflation contributes to sustainable growth. Addressing the 'Times Network India Economic Conclave' virtually, Subbarao said the government's proposal to privatise some public sector units is not akin to selling family silver but it is a route for putting India on a sustainable growth path.
During March, the rate of inflation slowed to the weakest in four months and was below the long-run survey average
The government plans to bring down its stake to 26 per cent in these two banks, which are yet to be identified. This may not come in the way of getting investors for these banks, provided the government is willing to step back rather than run them the way it had been doing for over five decades since these banks were nationalised, points out Tamal Bandyopadhyay.
Shifting its stance of monetary policy towards targeting retail inflation as it is an "inequitable tax", RBI today said it may exceed 8 per cent by March end and efforts will continue to bring it down.
