The central bank’s monetary policy committee (MPC), however, kept the repo rate unchanged at 4%.(File photo for representation)
The central bank’s monetary policy committee (MPC), however, kept the repo rate unchanged at 4%.(File photo for representation)

Recovering growth, rising inflation puts rates on hold

The Reserve Bank of India on Friday pledged to retain an accommodative policy stance well into the next financial year to support a nascent economic recovery.
By Gopika Gopakumar | Livemint, Mumbai
UPDATED ON DEC 05, 2020 04:53 AM IST

The Reserve Bank of India on Friday pledged to retain an accommodative policy stance well into the next financial year to support a nascent economic recovery.

The central bank’s monetary policy committee (MPC), however, kept the repo rate unchanged at 4%.

The committee raised its growth and inflation expectations, in a clear indication that it won’t change its benchmark interest rate soon.

“The MPC decided to continue with the accommodative stance as long as necessary—at least during the current financial year and into the next financial year—to revive growth on a durable basis and mitigate the impact of Covid-19 on the economy, while ensuring that inflation remains within the target going forward,” RBI governor Shaktikanta Das said in the monetary policy statement.

The panel, which cut rates by 115 basis points since the Covid-19 outbreak in March, has kept rates on hold since May.

“We think the RBI may choose to maintain this position until it sees the drivers of growth become broad-based. We also think inflation is a secondary concern in the RBI’s view, given weak aggregate demand conditions,” said Rahul Bajoria, chief economist of Barclays Bank in India.

Acknowledging the faster-than-anticipated rebound in economic activity in Q2, the RBI said it now expects the economy to shrink by 7.5% in the year to March 31. It had earlier projected a 9.5% contraction.

The monetary policy panel, however, noted that growth is spread unevenly and continues to be dependent on monetary and fiscal support.

Private investment continues to remain anaemic, and capacity utilisation is yet to pick up fully.

The outlook is therefore contingent on the extent of Covid-19 containment, the MPC said.

“We must turn our attention to nurturing the recovery beyond the meeting of pent-up demand, and focus on setting it on a firm trajectory of sustained, high-quality growth,” said Das.

The committee also noted that inflation is expected to remain elevated in the short term, despite some easing in the price of fruits and vegetables.

Inflationary pressures are emanating from supply-chain disruptions and higher indirect taxes.

So, the RBI has raised its inflation forecast to 6.8% in the third quarter, 5.8% in the fourth and 4.6-5.2% in the first half of the next financial year. The central bank’s earlier inflationary estimate stood at 5.4-4.5% in the second half of the current fiscal year and 4.3% for the first quarter of the next fiscal year. Given the inflationary pressures in the Indian economy, analysts are ruling out any more rate cuts in the current fiscal year.

“In our view, the adverse outlook for inflation, the concern that price pressures are spreading, and the strong commentary around monitoring threats to price stability to anchor macroeconomic and financial stability indicate that the room for further rate cuts is negligible,” said Aditi Nayar, principal economist, Icra Ltd.

“However, an extended pause will mean that rates will remain low for a long period of time,” Nayar added. Any significant development will happen only in the next fiscal year, said Shubhada Rao, founder of QuantEco Research.

“If growth picks up or inflation sticks on, the monetary policy committee may want to recalibrate its strategy. But to gather a complete picture, RBI would perhaps wait for the Union Budget and also the government’s view on the inflation-targeting framework by the end of March,” she said.

SHARE THIS ARTICLE ON
app
Close
The company's fourth-quarter profit fell 56.7% to $1.74 billion. The company reported that it had recorded litigation expenses of $2.9 billion in the fourth quarter.(REUTERS)
The company's fourth-quarter profit fell 56.7% to $1.74 billion. The company reported that it had recorded litigation expenses of $2.9 billion in the fourth quarter.(REUTERS)

Johnson & Johnson promises 2021 profit jump, vaccine data 'soon'

Reuters
UPDATED ON JAN 26, 2021 05:58 PM IST
The company had previously signaled that it expected to deliver data on the trial before the end of January, at a time when global hopes of defeating the virus are riding on securing adequate supplies of multiple vaccines.
Close
Braun’s proposal was immediately shot down by Eckhardt Rehberg, budget spokesman for Merkel’s CDU/CSU parliamentary caucus.(AP Photo)
Braun’s proposal was immediately shot down by Eckhardt Rehberg, budget spokesman for Merkel’s CDU/CSU parliamentary caucus.(AP Photo)

Angela Merkel's ally Floats tweak to debt limits to fund pandemic fight

Bloomberg
UPDATED ON JAN 26, 2021 05:21 PM IST
Chancellor Angela Merkel’s chief of staff proposed temporarily adjusting constitutional rules to allow expanded new borrowing by Germany’s federal government, prompting a swift rejection from his own party’s budget spokesman.
Close
Plans towards FTA are expected to be formalised during the visit of Prime Minister Boris Johnson to India in the coming months.(Reuters)
Plans towards FTA are expected to be formalised during the visit of Prime Minister Boris Johnson to India in the coming months.(Reuters)

Enhanced trade partnership first step towards UK-India FTA, says UK minister

PTI, London
PUBLISHED ON JAN 26, 2021 02:36 PM IST
UK-India bilateral trade increased by over 11 per cent to nearly 24 billion pounds and the UK was the largest European market for India’s goods exports in the 2019-20 financial year.
Close
The previous all-time high price of petrol was <span class='webrupee'>₹</span>84 a litre on October 4, 2018.(REUTERS)
The previous all-time high price of petrol was 84 a litre on October 4, 2018.(REUTERS)

Petrol crosses 86-mark in Delhi, diesel above 83 per litre in Mumbai

By hindustantimes.com | Written by Susmita Pakrasi, New Delhi
PUBLISHED ON JAN 26, 2021 12:22 PM IST
The price data showed that diesel rate rose to 76.23 a litre in Delhi and to 83.03 per litre in Mumbai.
Close
In early Tuesday trade, the market capitalisation of BSE-listed companies was at <span class='webrupee'>₹</span>1,91,25,467.48 crore.(REUTERS)
In early Tuesday trade, the market capitalisation of BSE-listed companies was at 1,91,25,467.48 crore.(REUTERS)

India markets closed on Tuesday for holiday

Reuters
PUBLISHED ON JAN 26, 2021 07:33 AM IST
The NSE Nifty 50 index ended 0.93% lower at 14,238.9 on Monday, while the S&P BSE Sensex fell 1.09% to 48,347.59.
Close
US Dollar banknotes are seen in this photo illustration(Reuters File Photo )
US Dollar banknotes are seen in this photo illustration(Reuters File Photo )

Dollar firm as jittery markets look to Fed for catalysts

Reuters, Singapore
PUBLISHED ON JAN 26, 2021 06:56 AM IST
Bets the US dollar keeps falling, to extend a downtrend which began last March, hit an almost decade high last week, positioning data shows.
Close
The LNG Croatia FSRU liquid natural gas (LNG) storage vessel and import facility at the LNG terminal, operated by LNG Croatia LLC, in Krk, Croatia, on Monday, Jan. 25, 2021. The market for vessels carrying liquefied natural gas boomed last year as the world�s biggest trading houses and oil majors booked up ships to take advantage of the�winter demand boom�in fuel demand. Photographer: Petar Santini/Bloomberg(Bloomberg)
The LNG Croatia FSRU liquid natural gas (LNG) storage vessel and import facility at the LNG terminal, operated by LNG Croatia LLC, in Krk, Croatia, on Monday, Jan. 25, 2021. The market for vessels carrying liquefied natural gas boomed last year as the world�s biggest trading houses and oil majors booked up ships to take advantage of the�winter demand boom�in fuel demand. Photographer: Petar Santini/Bloomberg(Bloomberg)

Oil holds gain near $53 as tightening supply offsets virus woes

Bloomberg
PUBLISHED ON JAN 26, 2021 06:35 AM IST
Oil has surged almost 50% since the end of October but the rally has started to falter amid concerns about a sustained recovery in global fuel demand.
Close
Dr K Subba Reddy (HT Photo)
Dr K Subba Reddy (HT Photo)

Budget 2021: Telangana doctor says investments in healthcare must be boosted

By Srinivasa Rao Apparasu, Hindustan Times, Hyderabad
PUBLISHED ON JAN 26, 2021 02:49 AM IST
  • Medical staff in hospitals wore bulky personal protective equipment (PPE) for hours, leaving them dehydrated, exhausted and drenched in sweat.
Close
Construction workers travelling on a winter morning amid heavy fog, in Noida. (Sunil Ghosh / Hindustan Times)
Construction workers travelling on a winter morning amid heavy fog, in Noida. (Sunil Ghosh / Hindustan Times)

Have the labour markets recovered post-lockdown?

By Rosa Abraham , Amit Basole, New Delhi
UPDATED ON JAN 26, 2021 04:48 AM IST
  • Several high-frequency indicators such as the Nomura India Business Resumption Index (NIBRI), Purchasing Managers’ Indices (PMI) show a strong sequential recovery in the economy.
Close
Rule 10 of Legal Metrology (Packaged Commodities) Rules, 2011, provides that e-commerce entities have to display details of the manufacturer.(Reuters)
Rule 10 of Legal Metrology (Packaged Commodities) Rules, 2011, provides that e-commerce entities have to display details of the manufacturer.(Reuters)

CAIT alleges Amazon, Flipkart, Zomato and Swiggy of flouting rules

PTI, New Delhi
PUBLISHED ON JAN 25, 2021 06:19 PM IST
CAIT Secretary General alleged that similar obligations were imposed on e-commerce food business operators.
Close
Amazon has asked the High Court in New Delhi to enforce the decision of a Singapore arbitrator.(Reuters)
Amazon has asked the High Court in New Delhi to enforce the decision of a Singapore arbitrator.(Reuters)

Amazon tries to block Future's asset sale to Reliance after regulatory approval

Reuters, New Delhi
PUBLISHED ON JAN 25, 2021 05:52 PM IST
The Amazon filing also argued that Future should not rely on any regulatory approval it has received, in light of the arbitrator's injunction.
Close
FILE PHOTO: The Apple Inc logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S., October 16, 2019. REUTERS/Mike Segar/File Photo(REUTERS)
FILE PHOTO: The Apple Inc logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S., October 16, 2019. REUTERS/Mike Segar/File Photo(REUTERS)

Apple faces Italian suit over iPhones that wear out too quickly

Bloomberg
PUBLISHED ON JAN 25, 2021 04:40 PM IST
The lawsuit mirrors US cases over claims that the company misled consumers about iPhone battery power and software updates that slowed the performance of the devices.
Close
A customer hands Indian currency notes to an attendant at a fuel station in Mumbai, India.(Reuters)
A customer hands Indian currency notes to an attendant at a fuel station in Mumbai, India.(Reuters)

Rupee rises for 5th straight session, settles 3 paise higher at 72.94

PTI
PUBLISHED ON JAN 25, 2021 04:08 PM IST
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, advanced 0.10 per cent to 90.32.
Close
Finance Minister Nirmala Sitharaman will unveil the Budget 2021-22 on February 1.(PTI)
Finance Minister Nirmala Sitharaman will unveil the Budget 2021-22 on February 1.(PTI)

Government may tweak customs duties on host of goods in Budget 2021

PTI, New Delhi
PUBLISHED ON JAN 25, 2021 03:58 PM IST
Sources said that while import duties could be tweaked on over 20 products, the customs duties could be removed on select raw materials.
Close
Sensex settled the session at 48,347, down 531 points(PTI)
Sensex settled the session at 48,347, down 531 points(PTI)

Sensex tanks over 500 points, Nifty ends below 14,250

PTI, Mumbai
UPDATED ON JAN 25, 2021 08:28 PM IST
Over the last three sessions, the BSE Sensex has lost 1,444.53 points or 2.90 per cent and the NSE Nifty has shed 405.80 points or 2.77 per cent.
Close
SHARE
Story Saved
OPEN APP