MPC meet | More on caution, less on activism

Asia's Tech News Daily

#MPC meet, #opinion, #RBI policy review, #Shaktikanta Das

Representative image

In line with our expectations, today’s monetary policy decision was primarily influenced by the uncertainty created by the emergence of the COVID-19 variant omicron and lingering imbalances in the economic recovery.

While all the six members of the MPC unanimously voted to keep the policy rate unchanged, five members voted to continue with the accommodative stance to support growth revival on a durable basis.

In his statement, the RBI governor has explained the rationale behind today’s policy in terms of lagging private investment, uncertainty created by omicron and weak private consumption that is still below its pre-pandemic levels. While the economic recovery that was interrupted by the second wave of COVID-19 is regaining traction, it is not yet strong enough to be self-sustaining and durable, asserted the RBI governor.

Amid the omicron scare, even the Bank for International Settlements (BIS) — the central bank to the world’s central banks — has cautioned that policymakers and financial markets cannot lower their guard on COVID-19 and will have to calibrate their policies carefully.

According to the BIS, omicron could exacerbate supply-chain bottlenecks in the short run and adversely impact economic activity, particularly in the first quarter of 2022.

Combining both the positive and negative influences on growth and assuming no resurgence in COVID-19 infections in India, the MPC has retained projection for India’s real GDP growth at 9.5 percent in 2021-22 (FY22) consisting of 6.6 percent in Q3, FY22 (earlier projection – 6.8 percent) and 6.0 percent in Q4, FY22 (earlier 6.1 percent).

Incidentally, Fitch Ratings has slashed India’s growth forecast today (Dec 8th) for FY22 from 8.7 percent earlier to 8.4 percent given that less than one-third of the population is fully vaccinated and the new omicron variant poses a new risk to the recovery.

The MPC has retained its headline CPI inflation projection for FY22 at 5.3 percent with 5.1 percent in Q3, FY22 (earlier 4.5 percent) and 5.7 percent in Q4, FY22 (earlier 5.8 percent).

Interestingly, Fitch Ratings expects India’s headline inflation to average 4.9 percent in 2022 from 5.0 percent in 2021, amid moderate food inflation. The MPC also expects food inflation to moderate in the coming months with the winter arrivals for vegetables & fruits.

In its today’s press note even Fitch Ratings has said that “a large negative output gap and inflation close to the midpoint target should allow the RBI to lag many other emerging markets peers in the interest-rate-normalisation process. However, the RBI will continue to roll out liquidity withdrawal auctions to reduce excess liquidity in the banking system”.

The RBI has precisely done this in today’s policy by making appropriate use of the available policy space. While staying pat on the rates and stance, it has increased quantum of VRRR (variable rate reverse repo) of 14-day tenor to Rs 6.5 lakh crore by December 17 from the current Rs 6 lakh crore and to Rs 7.5 lakh crore by December 31st. It has also announced that from January 2022 onwards, liquidity absorption will be undertaken mainly through the auction route.

The RBI’s well calibrated approach to liquidity normalisation has already helped short-term (money market) rates move higher by 15-20 bps since the last monetary policy review in October. Now the proposed liquidity management through the auction route from January, 2022 onwards may push these rates even further – closer to the repo rate, if the RBI opts for shorter tenor auctions.

A few important regulatory and developmental measures are also announced in today’s policy. First, to provide higher operational flexibility, banks are given permission to infuse capital in their overseas branches & subsidiaries if they are meeting the regulatory capital requirements.

Second, for external commercial borrowings and trade credits (currently benchmarked to LIBOR), new guidelines are being issued to facilitate their transition away from the LIBOR to Alternative Reference Rates (ARRs).

Third, discussion papers are getting prepared on the review of prudential norms for banks’ investment portfolios and on charges in payment systems.

Fourth, in order to further deepen digital payments and make them more inclusive a number of steps are being taken such as launching of UPI-based payment products for feature phone users, simplifying the process flow for small value transactions and raising the transaction limit for payments through UPI, etc.

In his concluding remarks, the RBI governor has warned that despite the ongoing economic recovery, Indian economy cannot remain immune to global spillovers or to possible surges of infections from new COVID-19 mutations. A cautious approach to monetary policy may be prudent during times of uncertainty like today.

The writer is Group Chief Economist, L&T Financial Services.

Views are personal and do not represent the stand of this publication.

Internet Explorer Channel Network
Asia's Tech News Daily
News Related

OTHER NEWS

‘Controversial Activision CEO to receive $375 million after Microsoft deal' Financial

Activision, known for games like Call of Duty, has been in the news a lot over issues surrounding sexism and employee misconduct, which Kotick would have known about. The Wall ... Read more »

Sebi launches mobile app on investor education

In the Frankin Templeton case, Supreme Court upheld that unitholders’ consent was necessary. Amid the growing trend of stock trading through mobiles, capital markets regulator Sebi on Wednesday launched its ... Read more »

Hips don't lie, but charts can

Anup Maheshwari, Swanand Kelkar, and Dhruv Maniyar As buy-side professionals, we spend a lot of time looking at charts. Every results season, any diligent investor ends up browsing through presentations ... Read more »

Albert Heijn and Jumbo conquer market share from Superunie

Albert Heijn remains by far the largest supermarket chain in the country and has 35.9% of the market, according to figures from NielsenIQ. That was 35% a year earlier. According ... Read more »

Memes make their way in India's NFT space, soon you can buy viral images and videos

After film stars like Amitabh Bachchan and sports celebrities like Yuvraj Singh launched their digital collectibles, making their way into the trending non-fungible token (NFT) market are memes that will be available to ... Read more »

Odisha starts trial run of 'OmiSure' kits for detection of Omicron variant

Representational image The Odisha government has received 30,000 ‘OmiSure’ RT-PCR test kits for early detection of the Omicron variant of COVID-19, a senior health department official said. Odisha’s Director of ... Read more »

Hero Electric, Mahindra ink pact to collaborate in EV space

Image: Shutterstock In a significant development, Hero Electric and Mahindra Group on Wednesday announced a strategic pact in the electric vehicle space. As part of the partnership, Mahindra Group will ... Read more »

Lexus India commences bookings for NX 350h SUV

With a starting price of Rs 56.65 lakh (ex-showroom, Delhi) the ES300h does manage to undercut the price of its competition by a considerable margin. Add to that spruced-up interiors, ... Read more »

Alok Industries Standalone December 2021 Net Sales at Rs 2,089.01 crore, up 77.84% Y-o-Y

Reported Standalone quarterly numbers for Alok Industries are: Net Sales at Rs 2,089.01 crore in December 2021 up 77.84% from Rs. 1,174.65 crore in December 2020. Quarterly Net Profit at ... Read more »

China's small-cap stocks flash bearish signs as pricey valuations keep investors at bay without stronger policy easing

Investors are falling out of love with China’s start-up companies listed in Shenzhen as the market made its worst start to a year since 2016. Aggressive valuations against established industry ... Read more »

Alok Industries Consolidated December 2021 Net Sales at Rs 2,129.60 crore, up 75.54% Y-o-Y

Reported Consolidated quarterly numbers for Alok Industries are: Net Sales at Rs 2,129.60 crore in December 2021 up 75.54% from Rs. 1,213.20 crore in December 2020. Quarterly Net Loss at ... Read more »

Australian court sets January 20 to issue reasons for dismissal of Novak Djokovic case

File image of Novak Djokovic The Federal Court of Australia will publish reasons for its dismissal of tennis star Novak Djokovic’s challenge to the cancellation of his visa on Thursday ... Read more »

Jio Q3 PAT seen up 11.7% YoY to Rs. 3,675 cr: ICICI Direct

Tamil, Telugu and Kannada will also be added to the JioMeet app soon. ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Telecom sector. ... Read more »

Indus Towers Q3 PAT seen up 12.8% YoY to Rs. 1,533 cr: ICICI Direct

ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Telecom sector. The brokerage house expects Indus Towers to report net profit at Rs. 1,533 ... Read more »

Goa Election 2022 | New entrant Amit Palekar AAP's CM face

The Aam Aadmi Party (AAP) on Wednesday announced lawyer-turned-politician Amit Palekar as its chief ministerial face for the next month’s assembly elections in Goa. The 46-year-old lawyer had recently joined ... Read more »

Attention for chip machine maker ASML on Beursplein 5 after results

Photo: ANP At the Amsterdam stock exchange, attention will be focused on ASML on Wednesday. The chip machine maker has had a record year thanks to continued strong demand for ... Read more »

Page Industries Q3 PAT seen up 8% YoY to Rs. 166.3 cr: ICICI Direct

page industries_54513635 ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Retail sector. The brokerage house expects Page Industries to report net profit at ... Read more »

TTK Prestige Q3 PAT seen up 10.1% YoY to Rs. 95.2 cr: ICICI Direct

ttk_prestige_slide_300_250_89666698 ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Retail sector. The brokerage house expects TTK Prestige to report net profit at Rs. ... Read more »

Trent Q3 PAT seen up 77.7% YoY to Rs. 141.5 cr: ICICI Direct

trent_68373304 ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Retail sector. The brokerage house expects Trent to report net profit at Rs. 141.5 ... Read more »

Pfizer chief Albert Bourla wins $1 million Genesis Prize for development of COVID-19 vaccine

Albert Bourla, chairman and chief executive of global pharmaceutical giant Pfizer Inc., was awarded on Wednesday the prestigious Genesis Prize for his efforts in leading the development of a COVID-19 ... Read more »

Bata India Q3 PAT seen up 159% YoY to Rs. 66.8 cr: ICICI Direct

Bata India | Representative India ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Retail sector. The brokerage house expects Bata India to report ... Read more »

Avenue Supermarts Q3 PAT seen up 34.6% YoY to Rs. 601.6 cr: ICICI Direct

ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Retail sector. The brokerage house expects Avenue Supermarts to report net profit at Rs. 601.6 ... Read more »

Titan Company Q3 PAT seen up 402.2% YoY to Rs. 868.7 cr: ICICI Direct

ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Retail sector. The brokerage house expects Titan Company to report net profit at Rs. 868.7 ... Read more »

Oracle opens data centre to provide cloud services across Africa

Oracle Financial Services Software | The company announced an interim dividend of 9,700 percent in 2014. On December 16, the stock was trading at Rs 3,135.85 and its 52-week high ... Read more »

Inflation soars to 5.4% - highest rate in almost 30 years as cost of living squeeze intensifies

Inflation climbed to 5.4% last month, its highest rate since March 1992, as Britain’s cost of living squeeze intensified, official figures show. The consumer price index (CPI) measure of inflation, ... Read more »

How warehousing and logistics hubs are impacting neighbouring residential real estate markets

Representative image (Image: Shutterstock) Residential real estate markets located close to established warehousing and logistics hubs have something to cheer. Demand-driven warehousing and logistics networks have had a direct impact ... Read more »

Karnataka CM Basavaraj Bommai recovers from COVID, says decision on relaxing curbs likely on January 21

Karnataka Chief Minister Basavaraj Bommai on Wednesday said his government will re-examine the COVID-19 curbs that are in place, and will take a decision regarding relaxation, including the weekend curfew ... Read more »

Coal India Q3 PAT seen up 37% YoY to Rs. 4,239 cr: ICICI Direct

coal_india_logo_13292906 ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Metals & Mining sector. The brokerage house expects Coal India to report net profit ... Read more »

DGCA extends the suspension of international commercial passenger airlines to and from the country till February 28

Representational image. The Director-General of Civil Aviation (DGCA) on January 19 has extended the ban on scheduled international commercial flights to and from the country till February 28. “This restriction ... Read more »

Moneycontrol PRO & Espresso present Nifty Banker 2.0 on Wednesday, 19th January, at 8 pm, with Rohit Srivastava on “Are we in a Bull Market Or Bubble?”

Nifty Banker | PC-MoneyControl Nifty Banker 2.0 is India’s First Retail Index Traders Online Conferences to be organised in India. Some of the best index traders in India will share ... Read more »

Market trade lower for second consecutive day: 6 factors that are dragging the indices

India’s benchmark Sensex and Nifty indices  declined for second straight session falling over 1.4% each tracking losses in global equities amid expectations of rate hike by federal reserve and surge ... Read more »

Albert Heijn and Jumbo gain market share at the expense of Superunie

Photo: ANP Supermarket chains Albert Heijn and Jumbo have gained market share in the past year. This was mainly at the expense of Superunie, which includes PLUS, Coop and Dirk ... Read more »

Asian shares fall after retreat on Wall Street

The Associated PressPeople walk by an electronic stock board of a securities firm in Tokyo, Wednesday, Jan. 19, 2022. Asian shares were lower Wednesday after a retreat on Wall Street. ... Read more »

Explosion in Turkey shuts down key Iraq oil pipeline

ANKARA, Turkey — An explosion has shut down a pipeline in southeastern Turkey that carries oil from Iraq to world markets, officials and news reports said. The blast late Tuesday ... Read more »

Record year for chip machine manufacturer ASML due to chip shortages

Photo: ANP Chip machine manufacturer ASML has had a record year, because the worldwide chip shortages mean that the demand for the machines of the Dutch company is very high. ... Read more »

Automobili Lamborghini luxury car sales in India jump by 86% in 2021

Italian super luxury carmaker Automobili Lamborghini on Wednesday reported its best ever sales performance of 69 units in India in 2021, a growth of 86 per cent over the previous ... Read more »

Airlines worldwide rush to change flights over US 5G dispute

The Associated PressFILE – An Emirates jetliner comes in for landing at the Dubai International Airport in Dubai, United Arab Emirates, Dec. 11, 2019. Airlines across the world, including the ... Read more »

Oberoi Realty Q3 PAT seen up 3.9% YoY to Rs. 297.8 cr: ICICI Direct

Representative image ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Real Estate & Infrastructure sector. The brokerage house expects Oberoi Realty to report ... Read more »

Lupin inks pact with Shenzhen Foncoo to introduce products in China

Drug firm Lupin on Wednesday said it has inked a pact with Shenzhen Foncoo Pharmaceutical Co to sell products in China. This is the company’s first partnership arrangement in China ... Read more »

Kajaria Ceramics Q3 PAT may dip 11.3% YoY to Rs. 105.5 cr: ICICI Direct

ICICI Direct has come out with its third quarter (October-December’ 21) earnings estimates for the Real Estate & Infrastructure sector. The brokerage house expects Kajaria Ceramics to report net profit ... Read more »
On free-english-test.com you will find lots of free English exam practice materials to help you improve your English skills: grammar, listening, reading, writing, ielts, toeic