Yielding to demands of Finance Minister Arun Jaitley and India Inc, RBI
Governor Raghuram Rajan "front loaded" the repo rate cut despite worries
of below normal monsoon and its impact on prices.
The Governor asked banks to follow suit and pass on the rate cuts --
0.75 percent since January -- to individual and corporate borrowers.
Most bankers felt that with Tuesday’s rate cut RBI has provided space for lowering lending and deposit rates.
Public sector Allahabad Bank became the first to reduce the lending rate by 0.3 percent.
RBI cut the repo rate (short-term lending rate) from 7.5 percent to
7.25, but left all other policy tools like cash reserve requirement
unchanged at 4 percent and Statutory Liquidity Ratio (SLR) at 21.5
percent.
Rajan lowered projections of the economic growth as measured by GVA
(gross value added) to 7.6 percent from 7.8 percent estimated in April
due to global factors and likely impact of below normal monsoon.
At the same time, inflation still remains a worry for the central bank
as it expects price rise to remain subdued till August before rising to 6
percent by January 2016.
It asked the government to put in place a contingency plan to manage the
impact of low food production on inflation, mainly because of expected
lower than normal rains.
The other concern for the RBI is rising crude oil prices. Since the last
policy in April, the crude oil prices have witnessed an increase of 9
percent.
Soon after the policy announcement, the BSE Sensex plunged by over 400 points. The markets, however, later recovered slightly.
Chief Economic Adviser, Arvind Subramanian said: "These cuts are
consistent with the trends in the economy including strongly declining
inflation, contained current account deficit and ongoing strong fiscal
discipline."
The government and RBI agree that these cuts signify that the economy
needs policy support as growth is recovering while the external
environment remains weak, he said on Tuesday.
"The government and the RBI will work together to ensure that the
macroeconomic (indicators) remain strong while investment and growth are
accelerated towards their potential," Subramanian added.
Announcing the second bi-monthly monetary policy this fiscal, Rajan said
that "with low domestic capacity utilisation, still mixed indicators of
recovery, and subdued investment and credit growth, there is a case for
a cut in the policy rate today".
Following the downward revision in the repo rate, the reverse repo rate
(short-term borrowing rate) has got adjusted to 6.25 percent and
Marginal Standing Facility rate as well as Bank rate to 8.25 percent.
Commenting on macroeconomic conditions, RBI said, the domestic economic
activity remains moderate with agriculture being the most disappointing
following the unseasonal rains and hailstorms in the most part of the
country in March.
Rajan said however that the risks to inflation identified in April could
cloud the picture with below par monsoons forecast for the second
successive year.
He also called for astute food management to mitigate possible inflationary effects in case of failure of monsoon.
Given this background, Rajan said, "A conservative strategy would be to
wait, especially for more certainty on both the monsoon out-turn as well
as the effects of government responses if it (monsoon) turns out to be
weak.
"(But) with still weak investment and the need to reduce supply
constraints over the medium-term to stay on the proposed
dis-inflationary path (to 4 percent in early 2018), a more appropriate
stance is to front-load a rate cut Tuesday and then wait for data that
clarify uncertainty," Rajan said while explaining the rationale behind
the rate cut.
Rajan said he expects banks to pass on the policy rate cut to individual and corporate borrowers.
"Banks should pass sequence of lending rate cuts," he said.
Soon after the policy announcement, SBI chief Arundhati Bhattacharya
said there is a downward bias on the interest rate and there would be
tendency to pass on the rate cut.
"With inflation coming down and RBI cutting rate by 0.75 percent, banks will look at cutting lending rate," she said.
Echoing similar views, BoB acting CEO and Managing Director Rajan Dhawan
said that "there is rate cut in store for us in the next 2-3 weeks".
Rajan said strong food policy and management will be important to help
keep inflation and inflationary expectations contained over the near
term.
Furthermore, he said, monetary easing can only create the enabling
conditions for a fuller government policy thrust that hinges around a
step up in public investment in several areas that can also crowd in
private investment.
This will be important to relieve supply constraints and aid disinflation over the medium term, he added.
"Banks have started passing through some of past rate cuts into their
lending rates, headline inflation has evolved along the projected path,
the impact of unseasonal rains has been moderate so far, administered
price increases remain muted, and the timing of normalisation of US
monetary policy seems to have been pushed back," Rajan said.
The global data however points to not so rosy a picture. The global
recovery is still slow and getting increasingly differentiated across
regions.
What is more worrisome is the US numbers where the world’s largest
economy surprisingly shrank 0.7 percent in the first quarter, even as
its currency has been on record high, he said.
(DD-2.6
Befitting celebration of Int. Yoga Day
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 Updated on : 29-05-2015 11:01 AM
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Prime Minister Narendra Modi, on Thursday chaired a high-level meeting
to review the preparations for International Yoga Day on 21st June. He
said the planning of activities and events on Yoga Day should aim to
make Yoga a mass movement, all over the world.
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Emphasizing
that Yoga's central theme is "synergy," the Prime Minister called for a
coordinated effort, not only from various Government Ministries and
Departments, but also with people's active participation, to enable a
befitting celebration for the first International Yoga Day. He called
for the involvement of eminent yoga practitioners, spiritual leaders and
other distinguished individuals from various walks of life, so as to
make the event a success.
@BJ-29.05
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India becomes fastest growing economy in the world
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 Updated on : 02-06-2015 08:43 AM
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India's
GDP has grown by 7.5 percent in the fiscal fourth quarter and the
country has become the fastest growing economy in the world.
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India's gross domestic product has grown by 7.5 per cent in the fiscal fourth quarter.
The latest GDP number puts India's economic growth ahead of China, which grew by 7 per cent in the March quarter.
This marks a new chapter in Indian Economy where in , it is now expected
to be the fastest growing economy in the 2015-16 fiscal as well.
The GDP data for fiscal 2014-15 is based on the new series and takes into account the gross value added into the economy.
PM Narendra Modi has promoted a campaign to ‘Make in India' and
encourage labour-intensive manufacturing which is now bearing results.
GDP data for previous quarters were revised.
First quarter GDP growth was revised upwards to 6.7 per cent and second was revised upwards to 8.4 per cent.
However, third quarter GDP was revised downwards from 7.5 per cent to 6.6 per cent.
Finance minister Arun jaitley has termed the achievement as an indicator of the economy moving in the right direction.
(ST-30/05)
G7 summit begins; leaders arrive in Bavaria, Germany
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 Updated on : 08-06-2015 12:14 AM
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The G7 Summit has kicked off amidst protests in Germany. Chancellor Angela Merkel welcomed her guests at the venue.
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This was followed by the first working session of the seven heads of
state and government along with the Presidents of the European
Commission and the European Council.
US President Barack Obama, Japanese Prime Minister Shinzo Abe, UK PM
David Cameron, French President Francois Hollande, Canada's PM Stephen
Harper and the Italian PM are at the meeting.
In his opening
remarks, after a bilateral with German Chancellor Angela Merkel, US
President Barack Obama urged fellow leaders of the G7 to stand up to
Russian aggression in Ukraine an issue that is high on the agenda of the
Summit.
The leaders are also expected to discuss the Greek debt crisis, the
threat posed worldwide by jihadist terrorism, how to tackle global
warming and corruption in the context of the FIFA scandal.
Russia has been excluded from what was previously known as the G8, since the annexation of Crimea last year.
This Summit also includes an outreach meeting with African Nations on
the common challenges they face and the priority issues for the G7.
Earlier, thousands of demonstrators protesting against the policies of
the world's major industrialised countries clashed with police in the
Bavarian town.
The demonstrators are demanding the richest nations to take concrete
measures to combat climate change, to promote fair trade and food
security, to reduce poverty worldwide and to rescue migrants from Africa
and the Middle East taking a perilous journey across the Mediterranean
to reach Europe.
(AKS-08/06)
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Barcelona makes history with second European treble
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 Updated on : 07-06-2015 01:45 PM
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Luis
Suarez and Neymar scored second-half goals to give Barcelona a 3-1
Champions League final victory over Juventus as the Spaniards became the
first team to twice win the European treble.
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Luis Enrique capped his first season as Barcelona's head coach by
matching Pep Guardiola's feat from the 2008/09 season when the Catalans
captured the European, Spanish league and cup titles.
An early goal by Barca's Ivan Rakitic late last night was cancelled out
by Juventus' ex-Real Madrid striker Alvaro Morata, who equalised on 55
minutes.
But Suarez put the game beyond the Italian champions with a 68th minute
strike off a rebound at Berlin's Olympic Stadium on Saturday.
Neymar added the third with the last kick of the game in the 97th minute.
Juventus suffered the indignation of becoming the first team to lose six
European Cup finals, 30 years after winning the trophy for the first
time amidst the tragedy of the Heysel Stadium disaster.
This was the fifth time Barcelona have been crowned European champions
and it is their fourth Champions League title in the last decade after
their 2006, 2009 and 2011 triumphs.
On the streets of Barcelona, where you could have heard a pin drop
during the final, thousands of ecstatic fans dressed in their team
colours of blue and red celebrated with cheers, chants and fire
crackers.
"It's a dream, I still can't believe it!" said Eduard Ocana, a
23-year-old student, in the Catalan capital, as cries of "champions,
champions!" echoed around the famous party street of Las Ramblas.
For Suarez it was a triumphant end to a first season with the Spanish
champions after his ignominious biting ban at the World Cup.
"It's incredible, it's something unique. To win these trophies you have to suffer," he said.
"The best thing about this side is the spirit and the fact we've been united since the start of the season."
(DD-7.6)
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Wawrinka dashes Djokovic dream to win French Open
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 Updated on : 08-06-2015 08:20 AM
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Stan Wawrinka spectacularly shattered Novak Djokovic's dream of a career
Grand Slam on Sunday when he became the oldest winner of the French
Open in 25 years.
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The 30-year-old Swiss claimed a famous 4-6, 6-4, 6-3, 6-4 victory to
secure his second career major after the 2014 Australian Open.
It ended world number one Djokovic's bid to become only the eighth man
to secure a career Slam as he slumped to his third defeat in a Roland
Garros final in four years.
Wawrinka became the oldest champion in Paris since Andres Gomez in 1990
after just his fourth win in 21 meetings against the Serb.
Sunday's shock defeat, meanwhile, was only Djokovic's third in 44 outings in 2015 and ended his 28-match win streak.
RBY@08/06
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