Author: Abhishek Jha

Government defends gas price cap; says city gas distributors need to share their ‘super-high profits’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian government on Thursday evening approved revisions to the 2014 gas pricing guidelines in a move to provide relief to consumers suffering from the recent surge in global gas prices. The Information and Broadcast Minister, Anurag Thakur said that last year gas producers got $1.79/mmBtu as prices had crashed but now, ONGC, OIL etc. have now been assured a minimum $4/mmbtu rate.

The government is trying to justify the capping of gas prices at $6.5/mmBtu while the Administered Price Mechanism or APM price currently works out 2 dollars higher at $8.57 and lower than current rates as well.

Also Read | Your piped gas and CNG will cost less now, here is what has changed

“The APM price is still dynamic, if the crude oil price falls as it had done in March before the OPEC production cuts, then gas producers are ensured a floor price,” said a North Block official to CNBC-TV18.

Gas producers will be able to charge 20 percent above the administered price for new wells. The cabinet press brief says, “Gas produced from new wells or well interventions in the nomination fields of ONGC & OIL, would be allowed a premium of 20 percent over the APM price.”

The government further clarified that the freedom to charge a premium of 20 percent over the administered price would be for 5 years and DG Hydrocarbon would work out details within 3 months.

“This gas would also be subject to the Government’s policy related to the commercial utilisation of natural gas. This gas shall be allocated separately from the APM gas by MoP&NG. The allocation shall be done for a period of 5 years with suitable take or pay obligation, as notified by MoPNG or as contractually agreed to. The modalities for recognition of new wells or well intervention shall be finalised by Directorate General of Hydrocarbon and approved by MoP&NG within a period of three months,” the government notification stated.

Also, the Petroleum Planning & Analysis Cell (PPAC) determined administered price will apply to those gas blocks where prices have been decided with government approval, but without the floor or ceiling price caps. The government notification stated, “ Subject to the provisions of respective Production Sharing Contracts (PSCs), this APM price, so declared by PPAC, would also apply where PSCs of NELP Blocks or Pre NELP blocks provide for Government’s approval of prices. Floor and ceiling shall not apply to such APM price for gas produced from fields under these regimes.”

The government has also indicated the $6.5 price cap has been the landed cost of imported LNG, making it a viable price cap. Moreover, the linking of administered gas prices to crude oil is due to the fact that LPG and diesel prices are largely determined by crude oil prices. Both product prices have skyrocketed, leading to heavy losses for oil marketing companies or OMCs as they haven’t been able to pass on the price increases.

Instead, the government is trying to encourage greater use of PNG and CNG as alternative fuels. Even at current prices, PNG is far cheaper than LPG, the official added. By capping gas prices, the government is also ensuring PNG’s consumer base expands and it does not have to subsidise oil marketing companies for LPG losses.

Additionally, the government will also be monitoring CNG and PNG prices on a regular basis, without any delay. “PPAC has been mandated to prepare and maintain a portal for monitoring CNG/PNG consumer prices on a dynamic basis. PPAC will develop a suitable mechanism for receiving regularly updated data from the CGD entities. The portal would be made dynamic to reflect the changing prices without delay,” the notification said.

The government has also stated how and when the administered gas prices will be announced. “The APM prices would be declared on a monthly basis by PPAC on the last day of the current month. For determining this APM price for the relevant month, the average of the daily prices data of India Crude Basket price shall be taken for the period 26th day of the previous month to the 25th day of the current month,” the notification stated.

For example, APM prices for May 2023 would be declared on 30th April 2023 based on the average of daily prices for the Indian Basket of crude for the period March 26 2023 to April 25 2023.

The government is clear that the major objective of the new price formula is to protect consumers while ensuring gas producers also find it remunerative. On the other hand city gas distributors will need to take a knock on their super-high profits and sacrifice some in consumer interest.

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RBI keeps repo rate unchanged contrary to market and economist expectations

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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RBI Governor Shaktikanta Das has announced that the Indian central bank will not hike its lending rate (repo rate) contrary to what market watchers and economists were expecting. A CNBC-TV18 poll had seen 90 percent of economists predict a 25 bps rate hike. Thus, the lending rate stands at 6.5 percent as announced on Feb 8 in the previous policy.

Governor Das reasoned that the global economy has seen an uptick in recent times, as well as inflation, has started to moderate.

“The headline inflation is expected to moderate in 2023-2024. MPC will not hesitate to take further action in future meets,” mentioned Das.

The Monetary Policy Committee also voted by a 5:6 majority to remain focussed on the withdrawal of accommodation to ensure inflation aligns with the target while focussing on growth.

The standing deposit facility (SDF) rate is unchanged at 6.25 percent. Moreover, the marginal standing facility (MSF) and bank rates have also been left unchanged.

The market has reacted positively to this news and as seen in the graph below recovered from its lows. At the time of publishing the Nifty50 has turned positive and is 30 points in the green.

“The RBI will adopt a nuanced approach to liquidity management. Will ensure completion of government borrowing programme in a non-disruptive manner,” said the Governor.

For the current financial year, which started just a few days back, the RBI Governor projected a growth rate (GDP) of 6.5 percent.

For the same period, the inflation projection has been kept at 5.2 percent.

Catch LIVE updates on RBI’s MPC Meet, reactions and more here

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Govt sees second highest GST collection in March 2023

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Indian government has seen a collection of Rs 1,60,122 crore as gross GST (goods and services tax) revenue for the month of March 2023. This is the second-highest collection ever, next only to the collection in April 2022.

The monthly GST revenue collections have stayed more than Rs 1.4 lakh crore for the past 12 months (full FY23) in a row. This is also only the second time that Rs 1.6 lakh crore has been crossed since the inception of GST.

When compared on a year-on-year basis, the GST revenue growth has been clocked at 13 percent for the fiscal that ended yesterday (March 31, 2023).

Also Read | The Indian government just let go Rs 7 lakh in GST to save a child’s life

The total gross collection for 2022-23 currently stands at Rs 18.10 lakh crore. The average gross monthly collection for the full year is Rs 1.51 lakh crore.

It is noteworthy that the gross revenues in 2022-23 were 22 percent higher than that last year.

Also Read | The long road to GST 2.0 is bumpy and must be tread carefully

In a bid to increase its tax base and catch tax avoiders, the GST department in March also announced that it will soon begin analysing ITRs filed by businesses and professionals and also MCA filings to ascertain if the entities are adequately discharging their GST liability and widening the taxpayer base.

The data analysis will focus on those entities which are not exempt and are required to register under the GST and file returns, either monthly or quarterly. After identifying the entities which are not complying with the GST law, the GST department will communicate to them at their registered place of business asking them the reasons for non-compliance.

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Bottomline | SEBI ticks the right boxes, but…

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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SEBI has struck the right notes with its recent pronouncements on disclosures and shareholder empowerment. It has called for swifter reporting of developments—board meeting outcome to be disclosed within 30 minutes of it ending and internal developments to be reported within 12 hours.

It has also asked the top 100 corporates to prepare to respond by accepting or denying all queries on market rumours with effect from October 1 this year. The span of this rule will be expanded to cover the top 250 companies by market capitalisation from April 1, 2024.

Also Read | SEBI tells mutual funds they cannot double-charge fund investors in the name of total expense ratio

SEBI has also attempted to try and prevent subjectivity in determining the materiality of an event to be reported by prescribing quantitative criteria. This even as it looks to give more powers to shareholders by making permanent board seats and perpetual rights to certain shareholders a thing of the past, with their continuation requiring shareholder approval. This even as it has capped the time limit for a listed company to appoint a Director, CXO or Compliance Officer at 3 months, following such a position falling vacant.

These are well-intended moves, looking to set some clear wrongs right. But how their compliance will evolve remains the big question. We look at some scenarios to suggest why this could be a tricky pitch for companies to bat on, and why the aimed objectives may be only partially met.

Also Read | Clearing company for corporate bond repos may start functioning in 3-6 months: Sebi chief

Guarded Responses To Queries

SEBI’s stance that rumours and news reports must be confirmed or denied can put corporates in a quandary in certain circumstances, but can also serve to provide vital, timely information to investors in others.

In the instance of M&A discussions, given that there are more-often-than-not binding Non-Disclosure Agreements in place between the engaging parties, it may not be possible for companies to violate these contractual obligations to disclose deals that may still be in the making. It is quite likely, therefore, that companies may respond, but with guarded, non-specific messages till there is a certainty of a deal—read: the deal has been inked and sealed. And, it would also be wrong of SEBI to expect a company to violate a non-disclosure pact. Hence, there may be little obtained in terms of information in the case of M&A transactions.

However, there are several other instances where swift clarity can be most helpful. Like, for instance in the case of big blocks of shares being sold. Swifter responses by corporates on, for instance, the promoters being involved in the transaction can help clear the air.

Also Read | A Rs 30,000 crore safety net for India’s corporate debt market

Similarly, in instances of regulatory actions like I-T searches or regulatory inspections and actions, an obligation to confirm or deny can go a significant way in providing transparency. Incidents like fire accidents or manpower agitation etc are others where timely dissemination of information can be useful.

There could also be legal developments in India or overseas with significant implications that a timely reply from a company can help offer the right perspective on. Thus, the pros outweigh the cons, and some opacity in particular situations as warranted may continue, but that’s a business necessity.

The Grey In “Material”

It is always good to bring objectivity, read “quantification”, to determining what should be considered material to shareholders’ interests. The rub lies in the assessment of the impact. For news that has a clear and direct bearing on financial aspects or shareholder value of a business, like sales and profits, or equity dilution, such a definition is perfect.

The problem arises when the outcome of a certain development needs to be projected as above or below the indicated threshold. Will companies choose to disclose even less material information, so as not to run afoul of the law or will some choose to underplay adverse events claiming the outcomes will be muted? This remains a tricky aspect.

If, for instance, a company enters into an alliance with another to co-develop a certain product or offer a certain service, its expectation of what the arrangement can deliver will drive the decision to disclose or not disclose. But what will finally be delivered, only time will tell.

Well Begun, But Half Done

Clearly, SEBI is on the right path to address the key ills that ail the capital markets, but there will likely be hurdles along the way and what’s most important is for it to stay on the path. What it shoots for may not be easily achieved, but making significant headway is also an achievement.

As an investor, I’m cheered by more disclosures.

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Electricity bills to rise 5-10% for Maharashtra residences starting April 1

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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If you stay in Maharashtra get ready to pay 5-10 percent more for electricity from today (April 1). In a decision taken on Friday late at night, the Maharashtra Electricity Regulatory Commission (MERC) agreed to a proposal by distribution companies and announced the out-of-turn hike.

It is noteworthy, that the last electricity price hike in the state was done three years back and as per the Electricity Act, tariff hikes happen once every five years. However, there is a provision for a mid-term hike as well.

The average hike that MERC has approved comes to  2.9 percent for 2023-24 and 5.6 percent for 2024-25.

A closer look shows that for the residential category there has been a six percent hike announced for 2023-24 and 2024-25.

For industry (HT category), the hike is a percent for 2023-24 and four percent hike for 2024-25.

For the agriculture sector, the hike is a steep one. For the next two years, a nine percent hike has been announced.

But this is just the average hike. The hikes differ from distributor to distributor.

The next question is how does this translate to per kilowatt charges?

Why the hike?

The four distribution companies of Maharashtra, MSEDCL, BEST, Tata Power and Adani Electricity had sought this tariff hike citing coal price increase in their petitions as the main reason for the demand. The companies also mentioned the losses they had to bear during COVID and the shortfall in the availability of renewable power as the reason for the overall cost of power purchases shooting up. The discoms reasoned that in order to adjust the revenue gap after the increased power purchase cost a mid-term tariff hike was needed.

As per the procedure, once the distribution companies filed their petition, MERC conducted multiple meetings with all the stakeholders and then issued an order allowing an electricity tariff hike in Maharashtra. The new rates will be applicable from 01st April 2023.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Fed hike bets deeply divided as US primary dealers not in sync

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Federal Reserve is expected to evaluate options to fight the red-hot inflation in the United States when it meets at its monetary policy meeting on March 22. Until recently the US central bank was widely predicted to raise fed fund rates by 25 basis points at least from the current 4.50-4.75 percent this month, but economists are now divided on that view and some are even expecting the Fed to hit the brakes and stay on the sidelines.

The Fed started rising interest rates in March 2022 – just a year back in this cycle after the US recovered from the pandemic-led economic slowdown and Chairman Jerome Powell last month said that FOMC may have to keep raising rates for longer than previously expected as inflation remains stubborn.

While the pace of hikes has slowed over the months, there is a rising disagreement amongst economists about the Fed’s next move.

Uncertainty about the Fed’s next move comes at a time when the ECB has hiked rates by 50 basis points last week despite a rout in global markets triggered by worries about the future of Switzerland’s Credit Suisse bank.

Goldman Sachs: Outs March Hike Call

Goldman Sachs, one of the biggest investment banks in the world and a US primary dealer – who buys and sells Government securities directly from the Government, now expects the Fed to stay put at its policy meeting on March 22.

“In light of the stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its next meeting on March 22,” Goldman Sachs economist Jan Hatzius said in a research note.

Goldman now expects the Fed to deliver only a 25 basis point rate hike in May, June & July and the terminal rate at 5.25-5.5 percent, while they see considerable uncertainty about the path.

The change in views came as the US banking system faces severe threats with several banks nearing a collapse. It started with Silicon Valley Bank’s shares crashing after it sold $21 billion worth of bond assets at a loss of $1.8 billion on March 8. Silicon Valley Bank is the first FDIC-insured bank to fail in more than two years, the last was Almena State Bank in October 2020.

This scenario takes us back to Sep 15, 2008, the collapse of the investment banking giant Lehman Brothers, which also found itself on the verge of bankruptcy triggering the worst of the Global Financial Crisis.

First Citizens BancShares Inc is now evaluating an offer for Silicon Valley Bank, Bloomberg News reported on Saturday, citing people familiar with the matter.

Many now think that the Fed may pause as interest rate hikes impact the banking system the most. That is despite inflation running historically high. The money market is still pricing in a 25 bps hike at the March meeting.

Citi: Still With 50 Basis Points Hike

However, Citi, another US primary dealer has a different take.

Robert Sockin, Global Economist at Citi said banking stability will be a marginal factor in the Fed’s thinking, Fed may raise rates by 50 basis points this month and won’t be surprised if the Fed has to hike interest rates up to 6 percent.

That is largely in line with the CME Fed Tool which shows the probability of a 50 basis point hike is higher than a 25 basis point increase.

“Think, SVB was idiosyncratic; broader banking sector in the US is healthy and large banks have high capital ratios,” Sockin Added.

Citi re-affirmed its 50 basis point Fed rate hike call.

Nomura now expects a 25 bps rate cut and a halt to Fed’s balance sheet reduction on March 22.

But Former RBI Governor Raghuram Rajan in an exclusive interview with CNBC-TV18 said that a pause in the next Fed meeting looks like a low probability and a 25 bps hike still looks like a strong possibility, 50 bps is off the table.

“Well, I think in the US, at least for the moment there seems to be a sense that the Fed has pulled out all stocks. Depositors have been guaranteed right up to the largest depositors who typically are uninsured and second, banks have access to liquidity by using the entire value of their bond portfolio. Remember, there are two reasons for concern in the US. One is a lot of small and medium banks are sitting on unrealized losses on their bond portfolios,” Rajan said.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Despite US Fed pressure and inflow challenges, here’s why the Indian rupee is a bright spot

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The near-term outlook for the Indian rupee has brightened despite expectations that the Federal Reserve (US central bank) will probably hike interest rates by 50 basis points in March and will not hit the pause button anytime soon.

It is noteworthy here that the rupee was one of the worst-performing currencies last year in Asia but has reversed fortunes come 2023 and is ranked the third-best currency so far behind the Indonesian rupiah and the Philippine peso.

Also Read | Rupee vs US dollar: INR back below 82 vs USD

Near-term Rupee Outlook

Forex watchers and economists believe that while there are chances for the rupee to see a slight moderation from the current level, the weakness could be limited.

“There is no change in outlook for rupee due to Fed hawkishness. In fact, India has been doing really well on all fronts,” said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors.

“The problem for India is inflows, which have stopped. As inflows came in March we saw the rupee moving up to 81.63. It’s going to be a two-way market till talks of inflation and interest rate hikes continue. My take is 81-83 with RBI protecting at both ends.”

Others believe that the rupee path will be dictated by domestic and global scenarios which are currently shaky and uncertain. The volatility is likely to remain high as flows will be continuously swaying on and off from Emerging Markets (EMs) to Developed Markets (DMs).

Also Read | Highlights and key reactions on Fed Chair Jerome Powell’s speech

‘Biggest risks to the rupee are inflows which have dwindled down to near zero as FPIs continue to sell. Due to Fed rate hikes, they are getting better rates into currencies with least risk like USD,” Bhansali, from Finrex Treasury Advisors added.

“Second biggest risk is prices of oil moving up higher. The third risk is an escalation of conflict in Ukraine as Russia continues its offensive and the fourth risk is a fall in exports due to recession lingering in different parts of the world.”

India’s foreign currency reserves stood at a five-month high in January.

“After net dollar purchases in Nov-Dec ‘22 and likely in Jan ‘23, the RBI is expected to have switched to dollar sales since Feb to defend one-sided weakness in the rupee and keep intraday volatility in check,” said Radhika Rao, Senior Economist at DBS Bank.

“Rebuilding foreign reserves is likely to face two steps forward one step back move, justifying the central bank’s proactive stance on rebuilding its buffer. This might keep the USD/INR from decisively breaking above 83.0, notwithstanding a bid dollar tone.”

Also Read | Indian govt bond market sees yield curve invert briefly on Fed’s hawkish comments on rate hike

The Year That Was…

India’s forex reserves fell in 2022 as the RBI intervened to protect the rupee, which weakened past 83 against the dollar in October. Reserves in Asia’s third-largest economy started rising again later last year as major currencies strengthened against the dollar.

Last year, the rupee slid nearly 10 percent against the dollar and breached the 83 mark in October, a record low but since then it has strengthened despite a volatile macro environment, threats from the ongoing Russia-Ukraine war and global investors swaying towards the safe haven– US dollar.

Most emerging market currencies along with the rupee came under pressure after Fed Chair Jerome Powell reaffirmed that the Fed is determined to bring inflation down to its 2 percent target and an aggressive rate hike cycle will possibly continue to slow the stubbornly high inflation in the US.

Macro-Policy Action

Back home, the RBI will most probably follow the US central bank’s footsteps and keep tightening in order to tame the red-hot inflation.

That is despite economic data indicating growth to be below expectations in the last quarter as a gloomy global outlook and rising borrowing costs hurt manufacturing and consumption.

Meanwhile, the Reserve Bank of India has reportedly been selling dollars, both onshore and offshore, to prevent the rupee from weakening below the 83 handle, according to several market participants, and will continue its vigil.

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Breakfast of heavyweights at G20 — Shaktikanta Das, Jerome Powell and other central bank governors get in a huddle

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The central bank governors of G20 nations held an informal meeting over breakfast on Saturday morning, the final day of the Finance Ministers and Central Bank Governors meeting here in Bengaluru.

Among the attendees was the Reserve Bank of India Governor, Shaktikanta Das, who is jointly chairing the First G20 Finance Ministers and Central Bank Governors (FMCBG) meeting under the G20 Indian Presidency along with Finance Minister Nirmala Sitharaman.

The breakfast table saw the likes of Jerome Powell, US Federal Reserve Chair, Brazil’s Roberto Campos Neto, Bank of Canada’s Governor Tiff Macklem, Ignazio Visco from Bank of Italy and Andrew John Bailey, Governor of Bank of England.

IMF chief exclusive | Global recession may not be on the cards; India a bright spot, says Kristalina Georgieva

The central bankers and finance ministers of G20 nations are expected to hold discussions over several sessions on the final day of the meeting, including the global economy, health and international taxation.

The G20 meeting this week covered issues such as strengthening multilateral development banks to address shared global challenges of the 21st century, financing for resilient, inclusive and sustainable ‘cities of tomorrow’, and leveraging Digital Public Infrastructure (DPI) for advancing financial inclusion and productivity gains. The sessions will also cover issues related to the global economy, global health, and international taxation.

Also Read | FM Sitharaman spotlights UPI, CoWin at G20 power meet on digital public infrastructure

It is noteworthy that lending rates across the world have risen sharply in the past year as central banks try and battle the high inflation readings. In fact, the US Federal Reserve is expected to raise rates in its next policy if not the one after that. Market watchers and economists in India are also more or less aligned with an expectation of another rate hike at least by the RBI.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

IMF chief exclusive | Global recession may not be on the cards; India a bright spot, says Kristalina Georgieva

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The International Monetary Fund (IMF) chief Kristalina Georgieva has said that the world is likely to avoid a recession in 2023. In an exclusive interview with CNBC-TV18 on the sidelines of the G20 meeting in Bengaluru, the managing director of IMF said that the resilience of labour markets and a mild winter in Europe have helped countries in avoiding a recession.

“Looks like we will avoid a recession. Europe has quickly managed to overcome its dependence on Russian oil and gas. China has opened up and that has created more impetus for growth. India is a bright spot with 15 percent growth coming from India,” said Georgieva.

The IMF chief praised India and the Finance Ministry for creating an enabling atmosphere to build consensus and a spirit of collaboration. She added that India must continue with structural reforms,  continue on the path of inclusiveness and create more opportunities for women.

Also Read | FM Sitharaman spotlights UPI, CoWin at G20 power meet on digital public infrastructure

One of the contentious issues at the G20 is debt restructuring to help countries like Sri Lanka and Zambia which are under unsustainable levels of debt.

Commenting on the deliberations, Georgieva said that there was a clear commitment from G20 countries to bridge differences for the benefit of countries which are dependent on debt. She highlighted that a political consensus will be crucial for overcoming differences in global financial architecture.

Also Read | UNDP welcomes priorities set by India at G20, appeals for debt recast for the poorest countries

Outlook for 2023

Speaking on her economic outlook for 2023, the IMF chief said that the world economy has been resilient but 2023 will be challenging.

“The war in Ukraine is a great source of uncertainty. It is very uncertain how the war will evolve and this can make energy markets anxious. We hope for peace and calm and a stop to the war,” she said.

Georgieva also pointed out that natural disasters including earthquakes in Turkey and Syria have shown how governments need to be prepared for the unthinkable.

“We saw natural disasters in all continents in 2022, including earthquakes in Turkey and Syria. We must have a mindset towards building resilience, resilient people who are healthy and educated with strong social protection. We must also build resilience for everyone to prosper and have a resilient climate,” she said.

IMF chief on crypto

The IMF MD said that while digital currency was now part of the global economy, there was a need to differentiate between Central Bank Digital Currencies from cryptocurrency and stablecoins which are privately issued. Further, she said that BIS, FSB, World Bank and IMF have all committed to laying the foundations for regulations for cryptocurrencies and stablecoins.

“We must remember crypto assets are not money and cannot be legal tender. If regulations fail, we should not take banning off the table”, said Georgieva.

The IMF Chief said that governments should not rule out banning crypto assets if regulations don’t work and added that global financial institutions have been slow in making regulations on private cryptocurrencies.

For our full G20 coverage, click the tab below

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

RBI maintains policy stance but revises FY24 growth target to 6.4%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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RBI Governor Shaktikanta Das announced on February 8 that the Indian central bank would keep its policy stance maintained at “withdrawal of accommodation” because inflation still remains to be in a sticky zone.

However, with the inflation cloud starting to lift, the RBI revised its growth forecast in the February policy meeting, the last for this fiscal year. The RBI has revised its real GDP target for FY24 to 6.4 percent with the first quarter expected to see a growth of 7.8 percent.

The Break-Up

The governor noted that the current global macro risks are evenly balanced on growth and said he was hopeful of a robust third quarter at 6.2 percent.

“On balance, the MPC is of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, breakcore inflation persistence and thereby strengthen medium-term growth prospects,” reads the policy document.

Reacting to the policy, Kaushik Das, Chief Economist at Deutsche Bank expressed surprise in an interview with CNBC-TV18.

“I am surprised with not just the growth forecast, which you alluded to 6.4 percent, which is higher than the consensus forecast of 6 percent but if you see inflation forecast of FY24, that’s been given at 5.3 percent, where the consensus forecast is about 5 percent,” he said.

The Committee lowered the inflation projection for FY23 to 6.5 percent, governor Shaktikanta Das announced. In the last MPC meeting inflation projection for the financial year 2022-23 was at 6.7 percent.

When it comes to RBI’s stance, Amandeep Chopra of UTI MF said that the central bank seems to be in no mood to indicate a change.

“It does leave a window open for maybe another potential rate hike going forward. And secondly, I guess, they still remain pretty much focused on a much lower inflation target than what I think markets will take comfort from which is around 5 percent,” he told CNBC-TV18.

Further, the MPC decided to (4/6 members) increase the policy repo rate by 25 bps in line with the US Federal rate hike a couple of days ago.

For all the action from RBI Monetary Policy LIVE, click here

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow