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Tag: inflation issue

  • RBI Monetary Policy Committee (MPC) Meeting Live Updates: 08 December 2023

    RBI Monetary Policy Committee (MPC) Meeting Live Updates: 08 December 2023

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    The Reserve Bank of India is likely to maintain the status quo on the short-term interest rate in its monetary policy review, with inflation staying in comfort zone and economic growth moving at an accelerated pace, opined experts. The RBI has left the repo rate unchanged in its past four bi-monthly monetary policies. The central bank had last increased the repo rate in February to 6.5 per cent, thus ending the interest rate hiking spree which began in May 2022 in the aftermath of Russia-Ukraine war and subsequent disruptions in the global supply chain resulting in high inflation in the country. 

    On expectations from the RBI’s monetary policy, Madan Sabnavis, Chief Economist, Bank of Baroda, said the central bank is most likely to maintain the status quo on rates as well as stance this time.

    “The high growth witnessed in Q2 in GDP will provide assurance that the economy is on track. The low core inflation numbers in the last few months will provide comfort that there is no need to increase rates even while headline inflation is likely to be volatile in the upward direction,” he said.

    “Some direction on liquidity will be useful to the market as the system is in deficit for quite some time,” he said and added there can be some upward revision in the GDP growth numbers though will not be very significant.

    Aurodeep Nandi, India economist at Nomura, also expects the MPC to unanimously vote to pause at its December policy meeting. (PTI)

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  • India Inc urges RBI to moderate pace of interest rates hikes

    India Inc urges RBI to moderate pace of interest rates hikes

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    The Confederation of Indian Industry (CII) has urged the Reserve Bank of India (RBI) to moderate monetary tightening from the earlier 50 basis points, especially given the headwinds to domestic growth emanating from the global uncertainties.

    This has been conveyed by CII to the central bank as part of its expectations for the upcoming monetary policy.

    The domestic demand has been recovering as mirrored by the performance of host of high-frequency indicators, however, the prevailing global policy crisis is likely to impinge on India’s growth prospects too, said the CII in its submissions to RBI.

    While CII is in cognisance of the fact that RBI’s interest rate hikes of 190 basis points so far this fiscal have been warranted to tame inflationary pressures, the corporate sector has now started to feel its adverse impact, the industry body said.

    CII’s analysis of results for nearly 2,000 companies in the second quarter (July-Sept 2022) shows that both the top-line and bottom line has moderated on sequential and annual basis. Thus, moderation in pace of monetary tightening is the need of the hour.

    However, given the sticky core inflation at around the 6 percent mark, the RBI could consider hiking the key interest rates by an additional 25 to 35 basis points to tame inflation, CII has suggested.

    Notwithstanding the recent moderation in October 2022, the headline print continues to remain outside RBI’s target range for ten consecutive months. 

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    Further, with a yawning gap existing between credit and deposit growth, an additional rate hike will incentivise savers, thus providing an impetus to deposit growth and help narrow the Credit-Deposit wedge.  

    Further, with rising global risk aversion adversely impacting the foreign capital inflows, CII stated that it poses challenges for the financing of the country’s current account deficit. 

    “In fact, we need to keep a watch on capital flows across all the three buckets namely – foreign direct investment (FDI), NRI flows and foreign portfolio flows (FPI). High focus only on FPI numbers may not always provide a complete picture,” the CII said.

    “The incipient signs of domestic recovery need to be preserved to help accelerate movement towards a normalised growth scenario. As in the past, the RBI should use all the weapons in its arsenal to ensure that while through its actions inflationary expectations are well anchored, it should in no way muzzle the growth impulses”.

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    KR Srivats

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