RBI raises repo and reverse repo rates by 25 and 50 bps
Finally, the RBI Governor mustered some courage to hike the much needed Repo and Reverse Repo rates by 25bps and 50 bps during its monetary policy review meeting today. With this, the repo rate will stand at 5.75% and reverse repo rate will go up to 4.5%. Meanwhile, CRR has been kept unchanged at the current level of 6.0%. Story Updating..
RBI embarked on gradual exit from an overtly accommodative monetary stance, while ensuring that the nascent recovery is not
derailed. Thereafter, as recovery gathered momentum and so did inflation, RBI’s stance was one of balancing the objectives of Read more
RBI Monetary Policy Expectations
With Inflation showing no signs of abatement and corporate profits on the upswing, it is high time that RBI act as an independent regulator in the interest of Indian consumer and not South Block.
In the forthcoming announcement of monetary and credit policy on July 27, markets expect 25bps hike in both repo and reverse repo rates and no change in CRR. This expectation is based on the view that as the economy inches towards normalcy, policy rates also need to firm up to their long-term ‘steady-state’ level. Any more aggressive tightening is unwarranted at this juncture in analysts Read more
India July rainfall ~12% below normal so far
According to the latest update on the progress of South West monsoon 2010, all India rainfall during the monsoon season so far (between 1 June and 21 July) and during July (from 1-21 July) were ~14% and ~12% deficient, respectively, compared to their long period average (LPA).
During the monsoon season so far (June 1- July 21), actual rainfall in South peninsula has been 9% above LPA. In fact, South peninsula is the only region where the actual rainfall so far has exceeded the LPA. The actual rainfall in North West India and Central India was 12% and 19% below the LPA, respectively. Progress of rainfall Read more
India Reforms 2.0 – GST Closer to Rollout
The FM has proposed to start with a differential tax structure for goods and services in the first year and gradually converge to a uniform rate structure applicable for all goods and services in the third year. He has proposed Central GST (CGST) and requested states to consider State GST (SGST) rates equivalent to the former. Likely effective rates are summarised in the table below:
Rate Structure – There will be two tier rate structure for goods and separate rate for services in initial years. It is Read more
Deficit Watch – fiscal improvement + red flag on the current account
India’s current account balance has been subject historically to pronounced seasonality – improving sharply in the second half of each fiscal year (October- March). For FY09/10, however, we were surprised that the seasonal impact did not apply – instead, the current-account deficit actually widened for October 2009-March 2010 (to 3.4% of GDP, from 2.2% of GDP for April-September 2009). There were two main factors responsible; the trade balance was broadly unchanged between the two halves of the fiscal year Read more
New Indian Rupee Symbol
The new Indian Rupee Symbol is as show below. The creator of this Symbol gets Rs 250,000 but the symbol itself is now the property og the Government of India.
Significance of the new Indian Rupee symbol – It looks like an “R” as well as “Ra” in Devanagiri script which powers the official Indian Language – Hindi.
All Software Makers across the World have been asked to accommodate the New Symbol. The RBI and Government of India has released this Symbol for use by FreePress and others.
Energy Sector De-regulation – India Vs China
Deregulating petrol (gasoline) prices on 25 June is an important, bold and encouraging step for India’s fuel price reforms. We expect India to deregulate diesel prices in 2HFY11, which is critical to the sustainable growth of State-owned oil companies’ profitability. Both the Chinese and Indian governments have increased gas prices substantially in May. While the hike is mainly to offset the loss from imports of expensive gas by PetroChina, Indian gas companies, such as OIL and ONGC, can get true economic benefits from the gas hike. Read more
Current fall in IIP a shocker
IIP growth, at 11.5% Y-o-Y, has been lower than the most conservative Street estimate; we had estimated 13-14%. The median street estimate was ~16.2%.
The big cyclical uptick is largely over for IIP, and in the coming months the number will fall further from the current level. IIP growth rate for June should be in high single-digits. The current number supports our view of absence of any generalised demand overheating in Read more
10% inflation + 16.5% IP = 25bp RBI hike
Here is BOFA Merrill’s account of the current situation in India. IN a report it said,
expect the RBI to hike policy LAF rates by 25bp in its July 27 policy. We believe May industrial growth, after all, will likely post a high 16.5% on July 12. We also expect June inflation to persist at 10% levels on July 14. Besides these figures, it is critical that the sowing month of July gets the normal rains that the Met forecasts. The markets will also keep an eye on the June Read more
RBI Hikes Repo + Reverse Repo – Too Late
Several Moves in the market fixing the base rate and effecting the Repo and Reverse Repo rate come too late in our view as the RBI seems to be under Pressure from South Block and is not acting in the interest of the Nation for which it has been created. Inflationary pressure has been in Double Digits and we simply don’t understand why RBI is refusing to suck the excess liquidity driving prices like crazy.
The RBI under criticism from all corners took a baby Read more