Monetary Policy 23 Dec 2016 by Tojo Jose

NITI Ayog meeting called to discuss economic recovery measures post demonetisation

NITI Ayog meeting called to discuss economic recovery measures post demonetisation

Prime Minister Modi has called a meeting of NITI Ayog officials along with that of Ministry of Finance to design economic rebuilding after demonetisation. The meeting is scheduled to be held on Tuesday and is expected to bring the thoughts of all the available resource persons associated with the government. Government is reinforcing quickly as the note ban impact is not going to be settled by December 30- the promised deadline by the Prime Minister. Indications are that continuing cash crunch may develop distrust about demonetisation among people. Similarly, the momentum and popular mood may shift away from attack on black money to cash crunch created hardships. The meeting will

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Monetary Policy 15 Dec 2016 by Tojo Jose

Inflation enters demonetisation phase

Inflation enters demonetisation phase

The Wholesale Price Inflation data indicated a declining trend for November. as per the Ministry of Commerce data, the WPI inflation came down to 3.15 % from 3.4% in the previous month. This is the five-month low and the index is registering a third month consecutive decline. The present decline in inflation was largely led by falling food prices. A general slowdown of inflation is expected in the context of demonetisation. Low consumption, wages and decline in general economic activities are supposed to bring interesting effects on the price front. Commodity markets are already reporting low turnover with the decline in consumption. Market participants at the same time warns so

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Monetary Policy 15 Dec 2016 by Tojo Jose

US Fed makes second rate increase, hints more in the coming year

US Fed makes second rate increase, hints more in the coming year

A return cycle of capital from emerging markets is on the card as the US Fed has raised its policy rate for the second time after the reversal of monetary stimulus. More than that, the US central bank has indicated more rate cuts in the coming year, than it previously indicated. The Fed raised its policy rate called the Fed rate to between 0.5% to 0.75% on Wednesday. The central bank was expected to raise the rate as US inflation rate and employment rate went on to the expected figure. Inflation has got momentum over the last two months and the Fed was informing the market about the rate hike consistently. Markets and currencies have already accommodated the rate hike though the

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Monetary Policy 07 Dec 2016 by Tojo Jose

RBI may not opt for large scale MSS use to manage liquidity

RBI may not opt for large scale MSS use to manage liquidity

Rather than rate cut, the liquidity management becomes a stressful issue for the RBI right now. When nearly 10 lakh crore rupees is returning to the balance sheet of the banking system, the first responsibility of the RBI is to ensure that banks will facilitate the re-monetization. They should not lend out of the temporary deposit. Deposited money is not actual deposit rather a temporary monetary stock and will be quickly withdrawn by the people in the form of new currencies. To discourage banks from lending, the RBI has imposed 100 per cent CRR on deposits from September 16 onwards. But the CRR is painful for banks as they have to give a short-term interest for deposits while no

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Monetary Policy 07 Dec 2016 by Tojo Jose

Demonetization was a joint effort of the government and RBI – claims Urjit Patel

Demonetization was a joint effort of the government and RBI – claims Urjit Patel

So far, the demonetization was interpreted as a technical misstep secretively designed by the bureaucracy inside the Ministry of Finance.  But for the first time, the central bank Governor has uttered some words about the role of RBI in the process. Speaking after the monetary policy declaration by the RBI, Mr Urjit Patel who kept an uncharacteristic silence about the event so far, pointed out that the decision was well planned and was taken without haste. “The consequences that have emanated from that were taken on board. That is why the planning, the process and implementation was what it was, keeping in mind high secrecy has to be maintained. The central bank and th

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Monetary Policy 07 Dec 2016 by Tojo Jose

RBI is comfortable with liquidity operations; withdraws 100 percent CRR norm

RBI is comfortable with liquidity operations; withdraws 100 percent CRR norm

The RBI is becoming increasingly comfortable with the liquidity management situation in the context of the aftershocks of demonetisaiton. It has withdrawn the 100% CRR requirement for demonetisaiton deposits from December 10 onwards. The central bank has not changed policy rate of repo in its latest monetary policy revision. Earlier the central bank asked banks to keep the full deposits obtained after demonetization with the central bank.  A 100 per cent CRR norm was introduced as a step. Now after the last review of the Monetary Policy on Wednesday, the central bank withdrawn it and instead is going to relay on the usual Liquidity Adjustment Facility operations and the ren

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Monetary Policy 01 Dec 2016 by Tojo Jose

Government to launch ecommerce portal for its procurements

Government to launch ecommerce portal for its procurements

Government is going to create an Amazon like web portal for procuring its goods and services from vendors. If created, such an entity will undertake the entire procedures for procurement needed for the government in a centralized manner. Besides the digital non-paper format, the portal will bring completer transparency as information is easily accessible to the public. Revealing this move, Ms, Rita Teaotia, Department of Commerce, Ministry of Commerce & Industry told that it will save at least 10% of government money during procurement. At present, the public sector is around 25% of India’s GDP and procurement by the government is about 20% of the whole trade. The port

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Monetary Policy 30 Nov 2016 by Tojo Jose

The currency using informal sector bleeds on pay day

The currency using informal sector bleeds on pay day

People’s resolve for bearing the pain of cashless days after demonetization will be tested during the first week of December. As the first monthly closing day passes on November 30, reports indicate that the informal sector and part-time labourers are about to bear the burnt. Shortage of cash takes away their purchasing power and the employers are making innovative ways like half salaries, half month closures etc. Unorganised sector laborares are least digitally prepared and educated and this may stop them from cushioning from the current stale mate. Reports from several cities indicate that employers offer only a part of their salary. Large number of shops and retail establ

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Monetary Policy 27 Nov 2016 by Tojo Jose

RBI asks banks to keep all demonetization deposits as CRR

RBI asks banks to keep all demonetization deposits as CRR

The RBI has asked banks to consider deposit accumulated during the demonetization period as incremental Cash Reserve Ratio. This means that banks can’t lend out of the sudden flood of deposits. The RBI instructed that deposit from September 16 to November 11 as transitory deposit. Interestingly, RBI’s calculation of temporary deposit goes back to September 16 which means that demonetization related deposits started from that date onwards. There was accusation that deposits started going up high even two-three months back the demonetization date of November 8. The RBI press release indicated that a 100% CRR should be kept for the deposits accrued during this period. &l

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Monetary Policy 27 Nov 2016 by Tojo Jose

RBI Governor breaks silence but keep mum over parenthood of demonetization

RBI Governor breaks silence but keep mum over parenthood of demonetization

Governor of the RBI, Urjit Patel is alive. Nearly 20 days after the denomination day, Patel has came into the light declaring that the Central Bank will make necessary actions to ease the ‘genuine pain of citizens.’ Throughout the last twenty days, there was a general confusion at Patel’s silence after demonetization and later it turned into anguish as he never bothered to face the public. The Governor has not mentioned anything about independent India’s biggest monetary event that came as a shock. He was conspicuously absent from the scene despite being the newly crowned Governor of the central bank. On the previous day, Union Minister Ravi Shankar Prasad

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