SME Times is powered by   
Search News
Just in:   • US prohibits transactions with Venezuela's digital currency  • Sebi exempts government from making public offers in six PSBs  • Facebook suffers drop of stocks amid alleged data leak crisis  • Air India to launch New Delhi-Tel Aviv flights from Thursday  • UltraTech offers to buy Binani Cement for Rs 7,266 cr 
Last updated: 13 Jun, 2017  

RBI.Thmb.jpg RBI-government rift

   Top Stories
» Kovind inaugurates festival of innovation and entrepreneurship
» Silk sector witnessing steady growth: Minister
» Draft agriculture export policy up in public domain
» WTO ministerial meeting begins Monday
» NITI Aayog releases SATH-Education roadmaps
Bikky Khosla | 13 Jun, 2017
The RBI last week came out with another monetary policy review; the key interest rates were kept unchanged; the Indian industry argued that the central bank overlooked the pressure being borne by it -- there is nothing new in this development. In fact, a number of economists had already predicted such a move. But there are some surprises this time as well. For the first time since the new Governor has taken office, the differences between the central bank and government have spilled into the open, reigniting the growth-versus-inflation debate.

Earlier in the week, the Finance Minister had made a strong case for a lower interest rate regime citing low inflation as well as the need to revive investments and growth, but the RBI this time not only resisted such insistent calls, but also asserted its autonomy by revealing -- in an unusual press conference after the policy announcement -- that the members of its monetary policy committee had not accepted an invitation to meet Finance Ministry officials ahead of the monetary policy review. This was followed by the chief economic adviser's counter argument that the current economic situation warranted a "substantial monetary policy easing".

While the RBI's refusal to bow to the whims of the Centre has been hailed by many, views on its rate hold decision differ greatly, however. Sticky core inflation, rise of food grain stocks, petrol and diesel prices, surging rural wage growth, strong consumption demand and 7th central pay commission's award were viewed by the apex bank as some of the major concerns, but the Indian industry -- a larger part of which has been reeling under heavy debts and high interest costs -- feels that the RBI has chosen to remain overcautious, underestimating growth concerns and industry worries. As to who is right, that remains a thorny question.

Meanwhile, while the RBI policy voices concern also about large farm loan waivers, which may lead to fiscal slippages and rise in inflation, interestingly a latest report argues that the recent farmers' agitation across various states may have its roots in the central bank's aggressive stance to contain retail inflation. In order to keep the CPI under the RBI's 4% target, the rise in prices of food items -- which have about 46% weight in retail inflation -- should be in 5-6% range, which has happened at ground level, the report says, pointing to the danger of targeting food inflation consistently at very low levels without adequate agri reforms. This concern deserves attention of both the RBI and the Centre.

I invite your opinions.
Print the Page Add to Favorite
Share this on :

Please comment on this story:
Subject :
(Maximum 1500 characters)  Characters left 1500
Your name:

rbi interest change
Pradeep Kalekar | Wed Jun 14 05:32:04 2017
While agreeing to RBI's autonomy and decision process, all said and done they could have eased interest rates by 50-75 basis points. Barring govt employees and select private sector employees most of the small and medium class businesses employing less than 700 employees are the worst affected. Though their employees get their salaries, they are delayed by a few days. Their certainly is a demand recession which warrants reduction in interest by 50-75 pts with specific instructions to financial institutions to percolate the change downwards.Modi hasn't taken a press conference so far, why ? How much money finally came back to rbi ? How much of it was accounted and black ? India is now is in a near Sub-Prime like situation. Farmers get waivers, left, right and centre who's funding the waivers? We tax payers don't we deserve some respite. Modi govt would do well if they be transparent on post demo effects / defects, why a defence minister not appointed ?

RBI-Government rift
Anil Kaul | Wed Jun 14 05:07:17 2017
Considering that, in the present times, almost each and every activity is linked to global commercial activity , we need to bring interest rate much lower than the present rate. Its well within the right of RBI to think the way its monetary policy committee has been thinking till now ,but now is the time for out of box thinking and at least give a try to lower interest rate regime and see its spiralling effect on industry , employment etc. etc. Remember all changes , history is there for witness, have been implemented by out of box thinking only keeping aside fears. Reforms introduced by Mr. Late Narsimha Rao & Manmohan singh ji is the example for us. May be we need someone like Mr. Modi at the highest seat at RBI.

Lower interest rate
S A Kulkarni | Wed Jun 14 02:57:44 2017
While there can be stringent rules for defaulters, RBI should understand gov. intentions for growth & not be too conservative. Business is all about taking risk & if not taken, will hamper development seriously. World over interest rates are dropping even in countries having lower GDP / growth than India.

  Customs Exchange Rates
Currency Import Export
US Dollar
UK Pound
Japanese Yen 58.85 56.85
As on 20 Mar, 2018
  Daily Poll
Is counterfeiting a major threat to SMEs?
 Can't say
  Commented Stories
» Starting an import export business: Basic guide for beginners(20)
» Another MSME portal: will it serve its purpose(5)
» Collateral free loans available for MSMEs: Minister(2)
» Govt forms committee to study FinTech, financial inclusion of MSMEs(2)
» Budget boost to MSMEs(1)
About Us  |   Advertise with Us  
  Useful Links  |   Terms and Conditions  |   Disclaimer  |   Contact Us  
Follow Us : Facebook Twitter