business

RBI Monetary Policy Expectations

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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

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India Reforms 2.0 – GST Closer to Rollout

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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

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Current fall in IIP a shocker

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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

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10% inflation + 16.5% IP = 25bp RBI hike

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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

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RBI Hikes Repo + Reverse Repo – Too Late

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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

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