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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Agencies
August 7,2020

New Delhi, Aug 7: India's COVID-19 cases tally crossed 20 lakh mark with the highest single-day spike of 62,538 cases on Friday, said Union Ministry of Health and Family Welfare.

The COVID-19 tally rises to 20,27,075 including 6,07,384 active cases, 13,78,106 cured/discharged/migrated and 41,585 deaths, according to the Ministry of Health.

Maharashtra with 1,46,268 active cases and 3,05,521 cured and discharged patients continues to be the worst affected. The state has also reported 16,476 deaths due to the infection.

Tamil Nadu has 54,184 active cases while 2,14,815 patients have been discharged after treatment in the state. 4,461 deaths have been reported due to COVID-19 in the state.

Andhra Pradesh with 80,426 active cases is the third on the list. There are 1,04,354 cured and discharged patients and 1,681 deaths reported from the state.

Delhi now has 10,072 active cases and 1,26,116 cured and discharged patients. 4,044 people have lost their lives due to the disease in the Union Territory so far. 

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News Network
May 13,2020

Riyadh, May 13: Saudi Arabia’s cabinet on Tuesday urged oil-producing nations not only to adhere to agreed cuts to production, but further reduce output to help restore balance in global oil markets, state news agency SPA reported.

In issuing the call to OPEC+, which includes members of the Organization of the Petroleum Exporting Countries plus Russia and other nations, ministers said the Kingdom is committed to supporting the stability of global oil markets.

After the meeting, acting Minister of Media Majed Al-Qasabi said that in addition to its commitment to the OPEC+ agreement, the Kingdom will voluntarily reduce output by an additional 1 million barrels a day in June. It will also try to implement additional cuts this month, with the consent of its customers, he added.

The cabinet said the Saudi initiatives aim to encourage other countries, whether they have signed up to the OPEC+ agreement or not, to adhere to its reduced rates and to cut output even further to help stabilize global oil markets.

During the cabinet meeting, which was conducted using video conferencing, King Salman also briefed ministers on his recent telephone conversation with US President Donald Trump. He said they affirmed the historical and strategic relationship between the two countries and their commitment to the continuation of joint efforts to enhance security and stability in the region.

Ministers were then updated on the latest developments in the corona virus crisis, including the steps being taken locally and internationally to control it and safeguard public health, the number of cases in the Kingdom and the care being provided to those who are infected. They also reviewed details of the active screening and testing programs in all parts of the country, which have helped to keep the number of deaths relatively low compared to global rates.

The cabinet praised the efforts being made by government officials to combat the pandemic, and stressed that citizens and expatriates must abide by the precautionary and preventive measures introduced to prevent the spread of the virus.

Ministers described the decision by Saudi Arabia to host the Pledging Event for the Humanitarian Crisis in Yemen 2020 on June 2 as an extension of the Kingdom’s humanitarian and development contribution, which reflects its pioneering role in supporting its neighbor.

The cabinet also welcomed the formation of the new government in Iraq and reiterated Saudi Arabia’s support for the nation and its readiness to work with the new administration to strengthen relations and enhance security and stability in the region.

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News Network
July 11,2020

Istanbul, Jul 11: Turkish President Recep Tayyip Erdogan announced Friday that the Hagia Sophia, one of the architectural wonders of the world, would be reopened for Muslim worship, sparking fury in the Christian community and neighbouring Greece.

His declaration came after a top Turkish court revoked the sixth-century Byzantine monument's status as a museum, clearing the way for it to be turned back into a mosque.

The UNESCO World Heritage site in historic Istanbul, a magnet for tourists worldwide, was first constructed as a cathedral in the Christian Byzantine Empire but was converted into a mosque after the Ottoman conquest of Constantinople in 1453.

The Council of State, Turkey's highest administrative court, unanimously cancelled a 1934 cabinet decision to turn it into a museum and said Hagia Sophia was registered as a mosque in its property deeds.

The landmark ruling could inflame tensions not just with the West and Turkey's historic foe Greece but also Russia, with which Erdogan has forged an increasingly close partnership in recent years.

'Millions of Christians not heard'

Greece swiftly branded the move by Muslim-majority Turkey an "open provocation to the civilised world".

"The nationalism displayed by Erdogan... takes his country back six centuries," Culture Minister Lina Mendoni said in a statement.

The Russian Orthodox Church was equally scathing.

"The concern of millions of Christians were not heard," Church spokesman Vladimir Legoida told Interfax news agency.

The decision "shows that all pleas regarding the need to handle the situation extremely delicately were ignored," he said.

UNESCO chief Audrey Azoulay said she "deeply regrets" the decision made without prior dialogue with the UN's cultural agency.

The move was also condemned by the US Commission on International Religious Freedom, which said it was an "unequivocal politicisation" of the monument.

Hagia Sophia, which stands opposite the impressive Sultanahmet Mosque -- often called the Blue Mosque, has been a museum since 1935 and open to believers of all faiths.

Transforming it from a mosque was a key reform under the new republic born out of the ashes of the Ottoman Empire.

Sharing a presidential decree which named Hagia Sophia as a "mosque", Erdogan announced its administration would be handed over to Turkey's religious affairs directorate known as Diyanet.

"May we be blessed," he commented. The decree was published on the official gazette.

Erdogan has in recent years placed great emphasis on the battles which resulted in the defeat of Byzantium by the Ottomans, with lavish celebrations held every year to mark the conquest.

Muslim clerics have occasionally recited prayers in the museum on key anniversaries or religious holidays.

"The decision is intended to score points with Erdogan's pious and nationalist constituents," said Anthony Skinner of the risk assessment firm Verisk Maplecroft.

"Hagia Sophia is arguably the most conspicuous symbol of Turkey's Ottoman past -- one which Erdogan is leveraging to strengthen his base while snubbing domestic and foreign rivals," he told AFP.

'Chains broken'

A few hundred Turks carrying Turkish flags gathered outside Hagia Sophia shouting "Chains broken, Hagia Sophia reopened".

Police heightened security measures around the building, according to AFP journalists.

"It's been a dream since we were kids," said Erdal Gencler, an Istanbul resident.

"(Hagia Sophia) finds its true purpose again. We are very excited, proud, and hopeful that there will be beautiful services here," he added.

Fatma, a woman with tearful eyes, said: "Of course I am crying. (Hagia Sophia) belongs to us."

Ahead of the court decision, Justice Minister Abdulhamit Gul shared a picture of Hagia Sophia on his official Twitter account, with a message: "Have a good Friday."

Finance Minister Berat Albayrak, Erdogan's son-in-law, tweeted that Hagia Sophia would be reopened to Muslim worship "sooner or later", referring to a quote from Turkish poet Necip Fazil Kisakurek.

The Council of State had on July 2 debated the case brought by a Turkish group -- the Association for the Protection of Historic Monuments and the Environment, which demanded Hagia Sophia be reopened for Muslim prayers.

Since 2005, there have been several attempts to change the building's status. In 2018, the Constitutional Court rejected one application.

Despite occasional protests outside the site by Islamic groups, Turkish authorities had until now kept the building as a museum.

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