by admin | May 25, 2021 | Banking, Corporate, Corporate finance, Corporate Governance, Economy, News, Politics
New Delhi : An ex-Governor of the Reserve Bank of India (RBI) had pointed to the risks in the practice of political parties promising loan waivers during poll campaigns to the Election Commission, Parliament was informed on Friday.
In a written reply submitted to the Lok Sabha during Question Hour, Finance Minister Arun Jaitley said that as a consequence of such poll promises, loan beneficiaries stopped making payments due even if they were in a financial position to do so.
While addressing a conference organised by NABARD and SIDBI, the former Governor in question had also said that loan waivers and subsidies “distort the credit discipline,” he added.
The Minister made the statement, however, without revealing the name of the former Governor concerned.
He said the Governor had written to the Chief Election Commissioner noting “the risk of promising loan waivers by political parties at election time, as beneficiaries stop making payment even if they are financially in a position to make them and that this affects the banking sector as well as the state finances.”
Last year, the current RBI Governor Urjit Patel had spoken of the damaging effects of farm loan waivers on the budgets of state governments.
—IANS
by admin | May 25, 2021 | Corporate, Corporate Governance, Economy, Markets, News, Politics
New Delhi : The government will undertake additional market borrowing of Rs 50,000 crore in the remaining period of the current fiscal to meet expenditure, according to its issuance calendar released on Wednesday.
Giving details of the government securities (G-Sec) to be issued during the upcoming fourth quarter, a Finance Ministry statement said the government had net market borrowings of Rs 3.81 lakh crore in the current fiscal till December 26.
Following a review of the government’s borrowing programme undertaken along with the Reserve Bank of India (RBI), the government had decided to “raise additional market borrowings of Rs 50,000 crore only in fiscal 2017-18 through dated government securities,” it said.
“The government will, thus, between now and March 2018, not be raising any net additional borrowing (T-Bills will be run down by Rs 61,203 crore and additional G-Sec borrowing will be Rs 50,000 crore),” it said.
“The revised G-Sec borrowing would be Rs 15,000 crore each in the last five weekly auctions of fiscal 2018 ending on 9th February, 2018. The revised T-Bill borrowing will be Rs 14,000 crore each in first 13 weeks of 2018 ending on 28th March,” it added.
The Union Budget for the current fiscal had pegged the government’s gross and net market borrowings at Rs 5,80,000 crore and Rs 4,23,226 crore, respectively, with Rs 3,48,226 crore being raised from dated government securities and Rs 2,002 crore from T-bills.
The government’s gross and net market borrowings in the current fiscal till December 26 stood at Rs 5,21,000 crore and Rs 3,81,281 crore, respectively, the statement added.
—IANS
by admin | May 25, 2021 | Banking, Economy, Markets, News
Mumbai : In its penultimate monetary policy review of the fiscal, the Reserve Bank of India (RBI) on Wednesday maintained status quo on key lending rates citing concerns over the rising trajectory of inflation. It retained the economic growth projection for the current fiscal.
The central bank said its repurchase rate, or the short-term lending rate for commercial banks, had been maintained at 6 per cent.
Consequently, the reverse repo rate remained at 5.75 per cent.
The RBI said “two of the key factors determining the cost of living conditions and inflation expectations – food and fuel inflation – edged up in November.
“Accordingly, the MPC (Monetary Policy Committee) decided to keep the policy repo rate on hold,” the fifth bi-monthly monetary policy statement said.
“The decision of the MPC is consistent with a neutral stance of monetary policy in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent… while supporting growth,” it added.
Official data last month showed that India’s annual rate of inflation based on wholesale prices (wholesale price index) rose to 3.59 per cent in October due to an exponential rise in food prices.
In addition, the consumer price index (CPI), or retail, inflation for October rose to 3.58 per cent from 3.28 per cent in September.
The decision was taken by the six-member MPC headed by RBI Governor Urjit R. Patel. Five members of the panel voted in favour of maintaining the key lending rate.
At its two previous policy reviews, the central bank had kept its repo, or repurchase rate, unchanged at 6 per cent.
On the growth outlook, the RBI retained a real GVA (gross value added) growth, which includes taxes, for 2017-18 at 6.7 per cent, “with risks evenly balanced”.
On the positive side, the RBI said there there had been some pick up in credit growth in recent months.
“Recapitalisation of public sector banks may help improve credit flows further,” the policy statement said.
“In the MPC’s assessment, capital raised from the primary capital market has increased significantly after several years of sluggish activity. As the capital raised is deployed to set up new projects, it will add to demand in the short run and boost the growth potential of the economy over the medium-term,” it said.
At the media briefing following the announcement, RBI Governor Urjit Patel said he did not foresee any credit shortage that as demand grows and the economy picks up.
“Our latest data on bank credit shows we’re on the uptick on credit growth. There is more credit flowing in than at the time of our last policy review in October,” he said.
The Monetary Policy Committee also decided to continue with its neutral stance.
Elaborating on this, Patel said the macro data since October did not warrant a change in the RBI neutral outlook.
“Data flow will determine what we do on policy. All possibilities are open as we look at the inflation as well as growth data in the coming months.”
However, the RBI’s decision belied investors’ expectations.
The two key indices — S&P BSE Sensex and NSE Nifty50 — traded deep in the red just minutes after the RBI came out with its fifth monetary policy review.
The BSE Sensex dropped by almost 200 points while the wider NSE Nifty50 fell by over 70 points.
Nearing the close of trade on Wednesday, the wider Nifty50 of the National Stock Exchange (NSE) fell by 71.15 points or 0.70 per cent to trade at 10,047.10 points.
—IANS
by admin | May 25, 2021 | Opinions
By Amit Kapoor,
The much-awaited second quarter gross domestic product (GDP) figures were released last week. It must have come as a relief to the Modi government that economic growth is finally on the upswing. After five successive quarters of decline, growth inched up to 6.3 percent in the July-September quarter after hitting rock bottom at 5.7 percent in the previous quarter. There was a mild sentiment of euphoria over this turnaround, but it is instructive to point out that even the worst quarter after the 2008 recession took India to a low of 6.9 percent. Clearly, we’ve left the last decade far behind.
Some might say that the comparison is unfair since the global economy was conducive to such levels of growth at the time. However, the impact of domestic factors in the growth decline over the previous five quarters cannot be refuted as OECD estimates put global growth to be the fastest since 2011. Also, demonetisation and GST were not the only two culprits of the slowdown in growth since it had begun much earlier. Private investment sentiments had already been muted due to a rising stock of bad loans.
Nevertheless, the adverse impact of all these factors seem to be nearing their end. A rise in GDP growth rate points to the fact that the impact of demonetisation and GST is finally wearing off and the government has over the last few months taken some crucial steps to deal with the problem of bad loans. But are we out of the woods yet?
The data released last week does not paint a promising picture. First, the growth rebound was brought about largely on account of the manufacturing sector. It grew by seven percent as compared to a paltry 1.2 percent during the April-June quarter. However, curiously, this figure is much higher than the 2.2 percent year-on-year growth in the same quarter based on the index of industrial production (IIP) data. The gap can only be explained by differences in methodology.
The IIP measures the change in production volumes as compared to the previous year while the GDP calculation measures the value addition taking place in the economy. Therefore, if production volumes remain the same over the year, IIP data will show no growth, but in the same scenario, if the price of inputs fall, GDP will grow positively. This is exactly how the recent growth in manufacturing has come about. Production volumes have not expanded as commensurately as production value. This is not a positive sign for a developing economy like India, where demand for jobs is ever expanding. Growth will not matter much if real production does not take place.
Second, a factor of growing concern for the economy is the problem of the fiscal deficit. The day GDP figures came out, stock markets reacted negatively due to the slippage on the fiscal front. Private investments have not seen any substantial revival since the last quarter and, in fact, gross fixed capital formation as a percentage of GDP has actually declined. The only thing keeping the economy running was increased government spending, but even that has been stretched beyond its limits. Barely more than half a year has passed, and the government has already spent 96 percent of its annual target. Since the government has made clear its intentions of sticking to the fiscal target, future growth prospects do not look promising and will solely depend on a revival of private sentiments.
Finally, a big worry for the Indian economy is its underperforming export sector. The growth in exports took place at merely 1.2 percent in the last quarter, which is hard to explain at a time when the global economies are at one of their strongest phases of growth in a long time. It is absolutely crucial to address this issue because, as repeatedly pointed out by veteran economic journalist Swaminathan S. Anklesaria Aiyar, no country in history has managed to grow at seven percent on a sustained basis without an export growth of at least 15 percent. India’s subdued export performance is puzzling and it needs to figure out what is inhibiting its growth. The recently-implemented GST framework could have put a spoke in the wheel. Addressing these policy bottlenecks can bring exports to an upward growth path.
All these factors, combined with the fact that private investment continues to remain weak, point to bleak prospects for the Indian economy. This will remain true for the next few quarters. Hopefully, when the complete impact of the recent string of reforms with GST, Real Estate Act and Bankruptcy Code start to kick in, a revival in private sentiments will take place and drive manufacturing and exports in the process. Until then the only ray of hope resides with the favourable external sector as a lucrative source of demand.
(Amit Kapoor is chair, Institute for Competitiveness, India. He can be contacted at amit.kapoor@competitiveness.in . Chirag Yadav, senior researcher, Institute for Competitiveness, India, has contributed to the article.)
—IANS
by admin | May 25, 2021 | Economy, Markets, News
Mumbai : Breaking a four-day losing streak, key Indian equity indices on Monday closed in the green with marginal gains as investors traded with caution ahead of the Reserve Bank of India’s (RBI) two-day policy review meet starting Tuesday.
According to market observers, a surge in stocks of IT major Infosys kept market sentiments buoyed. However, profit booking in banking and auto stocks capped gains.
On a closing basis, the wider Nifty50 of the National Stock Exchange (NSE) inched up 5.95 points or 0.06 per cent to 10,127.75 points.
The barometer 30-scrip Sensitive Index (Sensex) of the BSE closed at 32,869.72 points — up 36.78 points or 0.11 per cent — from Friday’s close.
The BSE market breadth was bearish — 1,604 declines and 1,088 advances.
“Indian markets ended flat in trade. Focus now shifts to RBI’s monetary policy meeting after the upbeat GDP (gross domestic product) numbers for the September quarter failed to cheer investors. The central bank’s two-day policy meet is scheduled to begin on Tuesday,” Dhruv Desai, Director and Chief Operating Officer of Tradebulls, told IANS.
According to Deepak Jasani, Head, Retail Research, HDFC Securities, markets ended with marginal gains on Monday after four consecutive sessions of losses.
“Broad market indices like the BSE mid-cap and small-cap indices ended with bigger losses, thereby underperforming the main indices,” Jasani told IANS.
“Technically, while the Nifty has bounced back marginally, the index remains in a short term downtrend,” Jasani added.
In the broader markets, the S&P BSE mid-cap index closed lower by 0.09 per cent and the small-cap index by 0.52 per cent.
On the currency front, the rupee strengthened by 9-10 paise to close at 64.37-38 against the US dollar from its last week’s close at 64.47.
Provisional data with the exchanges showed that foreign institutional investors sold scrips worth Rs 333.59 crore, while domestic institutional investors bought stocks worth Rs 776.18 crore.
Sector-wise, the S&P BSE IT index gained by 145.14 points, metal index by 68.85 points and Teck (technology, media and entertainment) index by 64.81 points.
On the other hand, the S&P BSE banking index declined by 85.91 points, auto index by 53.20 points and energy index by 22.29 points.
Major Sensex gainers on Monday were: Infosys, up 2.80 per cent at Rs 985.30; Hindustan Unilever, up 1.37 per cent at Rs 1,269.50; HDFC, up 1.25 per cent at Rs 1,680; Tata Motors, up 1.06 per cent at Rs 403.40; and Tata Steel, up 1.03 per cent at Rs 687.70.
Major Sensex losers were: Coal India, down 2.09 per cent at Rs 266.55; Maruti Suzuki, down 1.10 per cent at Rs 8,512.90; Asian Paints, down 1.02 per cent at Rs 1,124.50; Sun Pharma, down 0.95 per cent at Rs 520.95; and Reliance Industries, down 0.92 per cent at Rs 901.50.
—IANS
