Nifty99000 100%

Sensex99000 100%

Article rating: 3.4
Article rating: 3.0
Article rating: 2.0
Article rating: 4.0
Article rating: 4.5
Article rating: 4.3
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
RSS

News

Inflation, fiscal uncertainty induced RBI to hold rates

Author: IANS/Saturday, October 21, 2017/Categories: Banking & Financial Services

Inflation, fiscal uncertainty induced RBI to hold rates

Mumbai, Oct 18 - RBI Governor Urjit Patel had recommended keeping the central bank's key interest rate unchanged at 6% citing risks to inflation and uncertainties on the external and fiscal fronts, the minutes of October's monetary policy committee (MPC) meeting released on October 18 showed.

"We have to be vigilant on account of uncertainties on the external and fiscal fronts; this calls for a cautious approach," he said.

Belying industry expectations, RBI maintained its hawkish stance at its fourth bi-monthly monetary policy review of the fiscal here earlier this month, refusing to cut rates in view of the rising inflationary pressure and concerns over "fiscal slippage". 

On the other hand, the central bank lowered the country's growth projection for 2017-18, pegging the Gross Value Added (GVA) to 6.7%, from earlier estimate of 7.3%.

Declaring that inflation is expected to rise from its current level of around 3.3 per cent "and range between 4.2-4.6% in the second half of this year", Patel said the MPC remains committed to keeping headline inflation close to 4% "on a durable basis".

Five members of the six-member MPC voted in favour of maintaining the key lending rate.

The MPC had expressed concern about the upside risks to inflation and that implementation of farm loan waivers by states may result in fiscal slippages resulting in upward pressure on prices.

"Although the domestic food price outlook remains largely stable, generalised momentum is building in prices of items excluding food, especially emanating from crude oil. The possibility of fiscal slippages may add to this momentum in the future," it said. 

Besides Patel, RBI Executive Director Michael Patra, RBI Deputy Governor Viral V. Acharyaand outside members Chetan Ghate (Professor, Indian Statistical Institute) and Pami Dua (Director, Delhi School of Economics) were in favour of holding the repo rate at which the apex bank lends short term to commercial banks.

One of the government nominated external members, Ravindra H. Dholakia, a Professor at IIM-Ahmedabad, voted for a repo rate reduction of at least 25 basis points.

"In my view, the policy rate should have been cut by 50 basis point long back in June 2017. A cut of 25 basis point in August was too small and too late. We can still make the additional cut of 25 basis point now if we want to be extremely cautious," Dholakia said at the MPC meeting.

"Otherwise, my opinion is that we have a space for a cut of about 40 basis point at present with due consideration to any possible upward risk to future inflation," he added. 

Acharya said that the Reserve Bank remains committed to improving the monetary policy's transmission by the banks.

"I believe there is still some scope left for transmission of past monetary policy accommodation to existing loan portfolio that is tied to the base rate," Acharya said.

Patel noted that recent reforms like the Goods and Service s Tax (GST) may have had some impact on growth in the short run.

"To improve immediate growth prospects, teething troubles relating to GST need to be addressed expeditiously. Concerted efforts also need to be made to encourage investment activity by removing various constraints," he said.

Print Rate this article:
No rating

Number of views (212)/Comments (0)

Kavita Giridhar Mallya

IANS

Other posts by IANS
Contact author

Leave a comment

Name:
Email:
Comment:
Add comment

Name:
Email:
Subject:
Message:
x

Videos

Ask the Finapolis.

I'm not a robot
 
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
 
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest
 
 

Categories

Disclaimer

The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free