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☆ India's central bank holds rate, looking for inflation 'elephant' to vanish
▼ + stars: | 2024-04-06 | by ( ) www.cnbc.com time to read: +4 min

India's central bank held its key interest rate for a seventh straight policy meeting on Friday as growth in the economy is expected to remain robust while inflation stays above the 4% target. The six-member monetary policy committee kept the main lending rate at 6.5%, in line with expectations. While low core inflation provides comfort, the uncertainty on food inflation remains a worry. "While low core inflation provides comfort, the uncertainty on food inflation remains a worry," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. "The increasing incidence of climate shocks remains a key upside risk to food prices," the rate setting panel said in its monetary policy statement.

Persons: Shaktikanta Das, Das, Upasna Bhardwaj, Devendra Kumar Pant Organizations: Bloomberg, Getty, Kotak Mahindra Bank, U.S, NSE, BSE, Research Locations: India

☆ India's banking system liquidity deficit jumps to over 4-year high
▼ + stars: | 2023-09-20 | by ( Dharamraj Dhutia | ) www.reuters.com time to read: +2 min

MUMBAI (Reuters) - India’s banking system liquidity deficit is at its widest in over four years ago, amid tax outflows and the lack of any major inflows, traders said on Wednesday. REUTERS/Hemanshi Kamani/File PhotoBanking system liquidity deficit jumped to 1.47 trillion rupees ($17.67 billion) as on September 18, the highest single day shortfall since April 23, 2019, while banks have borrowed a record 1.97 trillion rupees from the central bank’s Marginal Standing Facility window. Advance tax payments took place last week, while outflows towards Goods and Services tax will be completed by Wednesday, with bankers estimating aggregate outflows of up to 2.50 trillion rupees. Moreover, “another drain on rupee liquidity could be from RBI’s (Reserve Bank of India) FX intervention if depreciation pressures on the rupee persist,” said Gaura Sen Gupta, an economist with IDFC First Bank. The liquidity deficit will, however, narrow towards the end of this month and the beginning of October as government spending picks up and the I-CRR is completely wound down.

Persons: Hemanshi, ”, Gaura Sen Gupta, Upasna Bhardwaj Organizations: REUTERS, Goods, Services, Reserve Bank of India, IDFC, Bank, Kotak Mahindra Bank Locations: MUMBAI, India, RBI’s

☆ India inflation likely hit 18-month low in April - Reuters poll
▼ + stars: | 2023-05-10 | by ( Madhumita Gokhale | ) www.reuters.com time to read: +2 min

Predictions ranged from 4.40% to 5.80%, with respondents expecting inflation to remain below the RBI's 6.00% upper tolerance limit for the second consecutive month. "Food inflation was a mixed bag on the month, with cereals and vegetables easing, whilst pulses and milk rose. "With inflation off the boil besides core (inflation), the RBI is likely to remain on an extended pause." However, inflation was expected to remain well above the RBI's medium-term target of 4.0% in the coming quarters, according to a separate poll. The survey also showed wholesale price inflation (INWPI=ECI), which measures the change in producer prices, is likely to have fallen to -0.20% last month compared to a year ago.

The central bank said its policy stance remains focused on "withdrawal of accommodation", signalling it could consider further rate hikes if necessary. The monetary policy committee (MPC), comprising three members from the central bank and three external members, retained the key lending rate or the repo rate (INREPO=ECI) at 6.50%. Most analysts had expected one final 25 basis point hike in the RBI's current tightening cycle, which has seen it raise the repo rate by a total 250 bps since May last year. The central bank sees inflation at 5.2% in 2023-24, and GDP growth is seen at 6.5% in the financial year beginning April 1. Reuters GraphicsFinancial stability concerns appear to have prompted the pause in rate hikes, said Aditi Nayar, chief economist at rating agency ICRA.

☆ Instant View: Here’s what experts think of India's surprise rate decision
▼ + stars: | 2023-04-06 | by ( ) www.reuters.com time to read: +16 min

The monetary policy committee (MPC) retained the key lending rate or the repo rate (INREPO=ECI) at 6.50% in a unanimous decision. With the likely softening of CPI to the low- to mid-5% levels in the coming month, the current repo rate of 6.5% implies that India’s real policy rate will hover around 1% during 2023-24, while maintaining a policy rate differential of about 1.5% with the US. Room for additional rate hikes has been retained with MPC’s policy stance continuing to remain unchanged at ‘withdrawal of accommodation’. We believe the bar for future rate hikes has increased, especially since near-term prints of CPI will be sub 6%. Scope for further hikes is limited given our growth-inflation outlook and impact of the past rate hikes on the same.

☆ India's milk imports soar as disease hits local cattle stock
▼ + stars: | 2023-04-04 | by ( Rajendra Jadhav | ) www.reuters.com time to read: +6 min

"Any upside risk coming from higher milk prices is going to pose an additional challenge," said Upasna Bhardwaj, chief economist at India's Kotak Mahindra Bank. "Cattle prices have doubled as there are fewer cows in the market," said Sharma, who has been raising cattle since childhood. "We will witness further rises in milk prices during summer," Shah said. India's SMP imports are likely to hit an all-time high in the fiscal year that started April, surpassing record purchases in 2011-12, dairy industry officials said. The temporary removal of those duties would mean imports rise even further, the NDDB official said.

The central bank said that its policy stance remains focused on the withdrawal of accommodation, with four out of six members voting in favour of that position. Reuters GraphicsThe monetary policy committee (MPC), comprising three members from the central bank and three external members, raised the key lending rate or the repo rate (INREPO=ECI) to 6.50% in a split decision. We have to remain unwavering in our commitment to bring down CPI headline inflation," RBI Governor Shaktikanta Das said, while announcing the committee’s decision. In a poll conducted ahead of the federal budget on Feb. 1, more than three-quarters of economists, 40 of 52, had expected the RBI to raise the repo rate by 25 bps. Das said that the inflation-adjusted, real interest rate remains below the pre-pandemic levels and liquidity remains surplus, even though it is lower than during the pandemic.

☆ India Budget 2023: Here's what the experts say
▼ + stars: | 2023-02-01 | by ( ) www.reuters.com time to read: +13 min

"This budget, therefore, has rewritten the rules for financilisation of savings in India, which will induce expenditures rather incentivise savings. LAKSHMI IYER, CEO-INVESTMENT ADVISORY, KOTAK INVESTMENT ADVISORS LTD"India budget 2023 has offered a multi-dimensional view. The 3 Cs which stand out are - Capex increase - consumption boost - capital gains tax status quo. Additionally, the budget has provided significant direct tax benefits to individuals which will help increase disposable income and support spending. The budget keeps in mind the needs of future India while focusing on Artificial Intelligence and machine learning.

☆ RBI to hike repo rate by 25 bps in Feb, ending tightening cycle: Reuters poll
▼ + stars: | 2023-01-30 | by ( Devayani Sathyan | ) www.reuters.com time to read: +2 min

Like many other major central banks, the RBI is expected to then pause, waiting for inflation to fall before considering a shift toward a stimulative stance as Asia's third-largest economy slows. More than three-quarters of economists, 40 of 52, expected the RBI to raise its key repo rate (INREPO=ECI) by 25 basis points to 6.50%, according to a Jan. 13-27 Reuters poll. "They (the RBI) need to pause at some point to see what exactly is the impact of the previous monetary tightening overall on growth and inflation. That is why I believe it is not premature for them to pause after 6.50%," said Upasna Bhardwaj, chief economist at Kotak Mahindra Bank. A deteriorating global economic outlook also suggests downgrades to India's outlook are likely in coming months.

☆ Indian rupee's rally powered by changing offshore view - traders
▼ + stars: | 2023-01-11 | by ( Nimesh Vora | ) www.reuters.com time to read: +2 min

MUMBAI, Jan 11 (Reuters) - An unexpected rally in the Indian rupee to above 82 to the U.S. dollar was powered mostly by offshore market participants and helped the non-deliverable forward (NDF) and onshore rates to almost converge, traders said on Wednesday. The rupee's jump took market participants by surprise, considering that the USD/INR had been holding a narrow range over the past several sessions. The major reason for the USD/INR moving out of this range was dollar sales by offshore investors in NDF, said a trader at a large private sector bank. The NDF and onshore spreads have shrunk with the improvement in the rupee's outlook. "The above two factors is getting reflected in the NDF and onshore spreads."

BENGALURU, Jan 6 (Reuters) - A budget that accelerates fiscal consolidation would give more support to the Indian rupee in the near term, according to a Reuters poll of FX analysts who forecast the currency would erase a fifth of last year's losses over the next 12 months. A majority of FX analysts, 11 of 17, said a Feb. 1 budget that focuses on fiscal consolidation would help the Indian rupee the most in the near term. None of the respondents expected the rupee to be stronger than 75 per dollar, where it started 2022, at any point this year. Abhishek Upadhyay, senior economist at ICICI Securities Primary Dealership, said the "fiscal deficit is still too high and needs to be reduced" for the rupee to find some support. "High fiscal deficit will hurt the savings-investment balance, curb improvement in current account deficit, and complicate the RBI's efforts to temper inflation pressures."

☆ No spending spree likely in last full Indian budget before 2024 election: Reuters poll
▼ + stars: | 2022-12-22 | by ( Vivek Mishra | ) www.reuters.com time to read: +4 min

BENGALURU, Dec 22 (Reuters) - The Indian government will focus on fiscal consolidation in its Feb. 1 budget, the last full one before a 2024 general election, according to a Reuters poll of economists who said slowing economic growth would limit it from spending more. That will likely limit the government's ability to provide relief to households and businesses facing an uneven recovery from the pandemic. Economic growth likely slowed sharply to an annual 4.6% in the December quarter from 6.3% reported in the preceding quarter. Sitharaman's expected fiscal prudence coincides with state assembly elections in Karnataka, Chhattisgarh, Madhya Pradesh and Rajasthan in 2023, which would likely discourage the government from making deep cuts to social welfare. Among those who expect it to be a more populist budget, some said the government would announce new subsidies, an increase in healthcare and rural spending to boost jobs.

The monetary policy committee (MPC), comprising three members from the RBI and three external members, raised the key lending rate or the repo rate (INREPO=ECI) to 6.25% in a majority decision. "The MPC was of the view that further calibrated monetary policy action was warranted to keep inflation expectations anchored, break core inflation persistence and contain second round effects,” Das said as he announced the monetary policy committee's decision. We see a possibility of another 25 bps rate hike before a prolonged pause," Upasna Bhardwaj, chief economist at Kotak Mahindra Bank said. A 6.8% growth (rate) is robust," Das said. The Indian rupee dipped against the dollar after the policy decision and comments on inflation, while government bond yields rose.

☆ India cenbank hikes key policy rate by 35 basis points
▼ + stars: | 2022-12-07 | by ( ) www.reuters.com time to read: +7 min

However, the pace of rate hikes is reducing from 50 bps to 35 bps, in line with expected global hikes." The market needs to keep a close watch on global rate hikes and sticky core inflation." "We expect RBI to go for another 25 bps hike in its next policy, with the terminal rate at 6.5%. ANUJ PURI, CHAIRMAN, ANAROCK GROUP, MUMBAI"The 35 bps rate hike by the RBI - the fifth consecutive rate hike this year - comes as no surprise. We see a possibility of another 25 bps rate hike before a prolonged pause."

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