Monetary Policy 08 Dec 2012 by Tojo Jose

Why the RBI’s monetary policy is not delivering?

Why the RBI’s monetary policy is not delivering?

The last monetary policy revision by the RBI governor on October 30 has witnessed the central bank continuing with its high interest rate policy in the cover of inflation combating despite fall in GDP growth rate to new unbearable lows. Finance Minister P Chidambaram has outraged that the government is making a ‘walk alone’ on the growth front because of the unfriendly monetary policy stance by the RBI. The macroeconomic environment at present is dominated by the undesirable combinations of slowing growth, high inflation and persistence of high interest rate.            The RBI is going to make a mid-quarter monetary po

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Monetary Policy 24 Nov 2012 by Tojo Jose

LIC saves government from agony on one more day

LIC saves government from agony on one more day

The LIC and a few public sector banks purchased the almost unsold shares of Hindustan Copper Limited in thursday’s FPO. This is the second time in eight months that the LIC is pouring money into governments’ disinvestment programme.                  In March this year, the last minute intervention by the LIC has rescued the ONGC offer for sale from a near collapse. The government collected nearly Rs 12500 crores from the ONGC disinvestment because of the help from LIC.                  How far government can st

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Monetary Policy 14 Nov 2012 by Alexin George

NIB: Grease to Increase Ease

NIB: Grease to Increase Ease

National Investment Board, a super board is expected to be created soon -- proffers Mr. Montek Singh Ahluwalia . “Most of the ministries now agree to the proposal”. The news comes in the wake of World Bank placing India in the 132nd position out of the 185 countries surveyed for the “ease of doing business”. India is considered as one among the worst destinations for investors. It is a reality that the rate of flying out of investments is growing in India. This happens when the regional neighbors of India are improving their ranks up in the index. The proposed NIB is expected to fill the atmosphere with the required amount of positivism, so that inflows wi

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Monetary Policy 14 Nov 2012 by Alexin George

When CAG claims Paramountcy

When CAG claims Paramountcy

Mr. Narayanaswamy, the Minister of State in PMO, has sparked off a constitutional debate. He set off the bunch of remarks, may be to gauge public opinion for the radical restructuring of the supreme audit institution of India, once recommended by the V.K. Shungulu committee. The comptroller and auditor general, created under the article 148 of the Indian constitution is so distinguished that it is even compared to the Supreme Court of India. The CAG is equivalent to a Supreme Court judge, his tenure is assured, functional independence is guaranteed, and could be removed only through impeachment by the Parliament of India. CAG is a single member body. The debate recently started sp

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Monetary Policy 30 Oct 2012 by Tojo Jose

RBI maintains high interest rate policy; but cuts CRR to inject liquidity

RBI maintains high interest rate policy; but cuts CRR to inject liquidity

There is no change in the hard interest rate policy of the RBI as the central bank has keptthe interest rate anchor repo at 8%. The step was more expected as the retail inflation for the last month was nearly 10%.But at the same time the quantitative instrument of CRR has been cut by 25% to easeliquidity into the system. The CRR cut will inject RS 17500 crores into the banking system.The CRR cut is just a seasonal intervention as the economy is coming to the midst ofthe busy season and more than that more money is kept at government balances because of the advance tax payment by the corporate sector.Banks were facing liquidity shortages as they were borrowing nearly one lakh crorer

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Monetary Policy 15 Mar 2012 by Tojo Jose

No relief! Money remains dear

No relief! Money remains dear

RBI keeps the high interest rate intact. The rather adamant monetary policy has evoked negative sentiments and the stock market has reacted with a strong red.                 The continuation of the tight monetary policy by maintaining higher interest rate may lead to further slowdown of industrial activity- especially in the manufacturing sector. Index of industrial production has recorded a dismal slowing growth during the last two quarters in the background of high interest rate. GDP growth rate declined from 6.9% in Q2 to 6.1% in Q3. Analysts attribute this fall in economic growth to RBI’s dear mo

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Monetary Policy 14 Mar 2012

RBI may go for interest rate cut under government pressure

RBI may go for interest rate cut under government pressure

Next monetary policy revision is on the door step. Like people waiting for monsoon after a heavy drought, the industry and business people are praying for the end of the current high interest rate regime. Prevailing economic environment is also conducive to enforce the desirable rate cut. On the liquidity front, the RBI has already supplied enough liquidity through last two CRR cut interventions. Hence there is high probability for introducing a repo cut tomorrow without touching the CRR.                 During the last two monetary policy revisions, the RBI was concentrating on financial stability by ensur

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Monetary Policy 10 Mar 2012

RBI cuts CRR to face year end liquidity shortages

RBI cuts CRR to face year end liquidity shortages

The RBI has made a surprisingly higher 75 basis points cut in CRR to inject nearly 48000 crores rupees into the economy. Already liquidity in the economy was very tight due to the busy financial year end situation. Usually, March being a busy last month of the financial year, witnesses liquidity tightness. Money is to be supplied quickly to facilitate transactions. This year, the RBI’s repo window was very active in providing liquidity even before the start of the month. Hence, the present move is worthy to supply enough money into the tight market.             Liquidity shortage was present over the last few weeks com

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Monetary Policy 02 Mar 2012

Liquidity is short in the economy and the RBI may intervene with a CRR cut

Liquidity is short in the economy and the RBI may intervene with a CRR cut

Liquidity scenario is worsening in the economy with call money rate increasing and banks’ daily liquidity purchase from the RBI nearing to of Rs 2 lakh crores mark.  Overnight call rate has almost reached 10% mark on Wednesday. The call rate is the interbank rate at which a bank borrows money from the interbank market for very short period.                 Usually, the call rate may be quite high during March because it is the closing month of the financial year. During the last few years, call rate mostly hanged around 15% towards the end of March. But this year, the call rate is raising fast ev

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Monetary Policy 01 Mar 2012

Government may ambush RBI's citadel to enforce a growth friendly interest rate.

Government may ambush RBI's citadel to enforce a growth friendly interest rate.

The recently published third quarterly report on GDP growth is a setback for the macroeconomic management in the country. On government’s behalf, a low economic growth means low tax revenue in the coming periods. So, there is more urgency this time on the part of the government to ensure macroeconomic recovery by cooling the interest rate. For this, there is high chance that the Finance Ministry may give strong message to the RBI to cut interest rate. Already the finance ministry is angry about the RBI’s hard monetary policy stance.               The RBI on its part during the last couple of weeks was discover

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