Here's why RBI went for an unconventional rate cut

Agencies
August 22, 2019

New Delhi, Aug 22: The Reserve Bank of India had raised quite a few eyebrows when it announced an unconventional 35 basis points rate cut during its bi-monthly policy meet earlier this month.

RBI Governor Shaktikanta Das, according to the minutes of the meeting released on Wednesday, said that "the economy needs a larger push" and a reduction in the policy repo rate by conventional 25 bps will be inadequate.

Voting for a 35 basis points (bps) rate cut, Das said that "a policy rate adjustment of 25 bps or multiples thereof may not always be consistent with the evolving macroeconomic situation. Hence, at times it is apposite to calibrate the size of the conventional rate adjustment".

Noting that there was clear evidence of domestic demand slowing down further, he said that investment activity has been losing traction and the weakening of the global economy in the face of intensifying trade and geo-political tensions has severely impacted India's exports, which may further impact investment activity.

The Reserve Bank of India's (RBI) MPC voted by a 4:2 margin to cut its repo, or short-term lending rate for commercial banks, by an unprecedented 35 bps to 5.4 per cent.

Indicating future course of action, Michael Debabrata Patra, who was among the four who voted for a 35 bps cut, said that "from here on, the space for monetary policy action has to be calibrated to the evolving situation, especially as the nature and depth of the slowdown is still unravelling and elbow room may be needed if it deepens".

"A more broad-sided response involving all levers of policy acquires the highest priority now. The overarching goal is to reinvigorate domestic demand and the time to do it is now," Patra added.

Ravindra H. Dholakia had expressed that he would like to cut the policy rate by 40 bps, "but I do not mind going with majority opinion of cutting the rate by 35 bps this time, and maintaining the accommodative stance".

Voting for a 25 bps, external MPC member Chetan Ghate had said that by agreeing to a 35 bps cut, the RBI could be burning through monetary policy space.

Opposing the four MPC members who voted for a 35 bps cut, he said that there has been inadequate monetary transmission given the quantum of past rate cuts.

"..the WALR (weighted average lending rate) on fresh rupee loans in the banking system has come down by only 29 bps despite the MPC cutting rates by 75 bps in the February-June window. By a large cut (35 bps), I feel we will be burning through monetary policy space without much to show for it," Ghate said, according to the minutes.

"While the real economy needs some support, we should wait for more transmission to happen," he added.

External member Pami Dua, who also recommended a 25 basis point cut, said that it was also important to recognize that, while monetary policy can impact cyclical factors, it has its "limitations with respect to significantly impacting structural factors".

According to Dua, investment-focused fiscal policy and active continuation of structural reforms were imperative at this juncture to complement the already substantial easing in central bank rates that have been delivered since February 2019.

The rate cut earlier this month was the fourth in succession adding up to a total of 110 bps.

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News Network
March 20,2020

New Delhi, Mar 20: The four men convicted of the gang rape and murder of a Delhi woman on December 16, 2012 were hanged in the darkness of pre-dawn on Friday, ending a horrific chapter in India's long history of sexual assault that had seared the nation's soul. Mukesh Singh (32), Pawan Gupta (25), Vinay Sharma (26) and Akshay Kumar Singh (31) were executed at 5.30 am for the savage assault in an empty moving bus on the 23-year-old physiotherapy intern who came to be known the world over as Nirbhaya, the fearless one.

This is the first time that four men have been hanged together in Tihar Jail, South Asia's largest prison complex that houses more than 16,000 inmates. The executions were carried out after the men exhausted every possible legal avenue to escape the gallows. Their desperate attempts only postponed the inevitable by less than two months after the first date of execution was set for January 22.

They were hanged at 5.30 am, Director General of Prison Sandeep Goel said.

After raping and brutalising the woman, the men, one of whom was a juvenile at the time, dumped her on the road and left for dead on the cold winter night. Her friend who was with her was also severely beaten and thrown out along with her. She was so severely violated that her insides were spilling out when she was taken to hospital. She died in a Singapore hospital after battling for her life for a fortnight.

Six people, including the four convicts and the juvenile, were named as accused.

While Ram Singh allegedly committed suicide in the Tihar Jail days after the trial began in the case, the juvenile was released in 2015 after spending three years in a correctional home.

The road to the gallows was a long and circuitous one, going through the lower courts, the High Court, the Supreme Court and the president's office before going back to the Supreme Court that heard and rejected various curative petitions.

The death warrants were deferred by a court thrice on the grounds that the convicts had not exhausted all their legal remedies and that the mercy petition of one or the other was before the president.

On March 5, a trial court issued fresh death warrants for March 20 at 5.30 am as the final date for the execution.

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News Network
March 25,2020

Chennai, Mar 25: Tamil Nadu reported its first Covid-19 death at the Rajaji Government Hospital in Madurai this morning. The 54-year-old man from Madurai had no history of travel to any coronavirus-affected state or country.

However, he did have contact with two Thai nationals who had tested positive for Covid-19 and are undergoing treatment in isolation in Erode.

"Despite our best efforts, the #COVID-19 +ve Pt at MDU, #RajajiHospital, passed away few minutes back. He had medical history of prolonged illness with steroid-dependent COPD, uncontrolled Diabetes with Hypertension,” Tamil Nadu health minister C. Vijayabaskar tweeted.

The patient tested positive for the coronavirus on March 23. Yesterday the minister had disclosed that the patient had not responded well to treatment due to his medical condition. “He has a medical history of prolonged illness with steroid dependent COPD, uncontrolled diabetes with hypertension,” he said.

As of Wednesday morning, the total number of Covid-19 infected patients in Tamil Nadu was 18, including one patient who has recovered.

The latest patients include a 65-year-old man who returned from New Zealand and is currently in isolation at a private hospital, a 55-year-old woman from Saidapet who is currently in quarantine Kilpauk Medical College Hospital, and a 25-year-old who returned from London and is undergoing treatment at the Rajiv Gandhi Government General Hospital.

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News Network
February 28,2020

Feb 28: National oil marketer Indian Oil Corporation (IOC) on Friday said it is ready to supply low emission BS-VI fuels from April 1 and that there will be a marginal increase in retail prices.

The largest oil supplier has spent over Rs 17,000 crore to upgrade its refineries to produce the low-sulfur diesel and petrol, the company's chairman Sanjiv Singh told reporters here.

Without disclosing the quantum of price increase, Singh said, “there will definitely be a marginal increase in retail prices of the fuels from April 1 when the whole country will be run on new fuels, which will have a sulphur content of only 10 parts per million (ppm) as against the present 50 ppm.

“But let me assure you, we will not be burdening the consumers with a steep hike,” Singh said.

He said, state-run oil marketing companies (OMCs) have invested Rs 35,000 crore to upgrade their refineries, of which Rs 17,000 crore have been spent by IOC alone.

Earlier this week, the sell-off bound BPCL said it had invested around Rs 7,000 crore for the same. ONGC-run HPCL has not so far disclosed its readiness for BS-VI supplies or its capex on the same.

HPCL had said from February 26-27 it was ready with BS-VI fuels and that it would sell only the new fuels from March 1.

IOC switched to BS-VI fuel production a fortnight ago and all its depots and containers are ready now, Singh said.

However, he said some remote locations, where the intake is very low, will take some more time to switch. But the company is planning to drain out the entire BS-IV stock and replenish the new fuels at such locations, he added.

Further, it has been reported that the companies will have to increase prices by 70-120 paise a litre, but Singh said, to arrive such a weighted average is not possible given the complexities of each refinery.

He, however, asserted that the price hike will not be a burden on consumers.

We are not looking at this investment from a pure return on investment basis, but this is a national mandate and we have done it.

Having said that, all those countries that moved to low emission fuels are charging higher prices; and from April 1, our prices will also be benchmarked against Euro VI prices as against the present practice of the cost-plus model, Singh concluded.

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