|
|
|
Monetary policy to be retained against volatility: Poll
|
|
|
|
Top Stories |
|
|
|
|
SME Times News Bureau | 03 Jun, 2021
Prevailing onslaught from Covid's second wave as well as persistently
high prices will deter the Reserve Bank of India (RBI) from initiating
any tapering exercise, experts told IANS.
Besides, economy
watchers have ruled out any reduction in key lending rates during the
first monetary policy review coming after one of worst phases of
Covid-19 pandemic.
Accordingly, RBI's monetary policy committee
(MPC) is expected to retain rates as well as the current accommodative
stance due to growth concerns amidst resurgence of Covid-19.
"We
estimate the average CPI inflation to moderate to 5.2 per cent in FY2022
from 6.2 per cent in FY2021. Nevertheless, it will remain well above
the mid-point of the MPC's renewed medium term target range of 2-6 per
cent, ruling out the possibility of further rate cuts to support
economic activity and sentiment," ICRA's Chief Economist Aditi Nayar
told IANS.
"However, with the economic outlook remaining
uncertain in light of the continuing pandemic, we expect the monetary
policy stance to remain accommodative for a large part of 2021, until
the vaccine coverage improves dramatically."
As of now, India suffers from a massive spike in Covid-19 infections.
The
latest spike has brought in record number of patients, thereby,
impeding healthcare infrastructure's ability to deal with the surge.
Consequently,
the situation has forced state governments to implement local lockdowns
and travel restrictions which have started to slowdown economic
activity.
"Amidst severe outbreak of second wave, both the
growth-inflation dynamics have worsened, and inflationary risk has
worsened more than the growth," India Ratings & Research's Associate
Director Soumyajit Niyogi said.
"Wholesale inflation, which had
been on the benign side for almost a decade, has now turned wobbly owing
to durable factors like global commodity prices. In the backdrop of
this, no scope for changes in rate or normalisation of policy stance is
largely expected in this policy, however an explicit communication in
sync with the inflation targeting framework is warranted."
However, the country's CPI based inflation increased at a slower pace in April.
Nevertheless,
the sharp downward correction in consumer price index was largely
attributed to the favourable base effect owing to 2020's
pandemic-related lockdown.
"We do not see any change in the repo
rate next week even with elevated risk of input cost and output price
inflation," said Madhavi Arora, Lead Economist, Emkay Global Financial
Services.
"The policy guidance has become more open-ended and
state-based amid new uncertainties and the evolving nature of the
economy, with the MPC stating that the policy stance will remain
accommodative 'as long as necessary' till growth recovers on a durable
basis while ensuring that inflation remains within the flexible target."
The CPI-based inflation rose by 4.29 per cent year-on-year (y-o-y) in April from 5.52 per cent in March.
Likewise,
the Consumer Food Price Index increased on a lower rate to 2.02 per
cent last month from a rise of 4.87 per cent in March.
According
to Dun & Bradstreet's Global Chief Economist Arun Singh said the
rise in inflation is largely related to the input prices and demand for
inventory.
"The inability to fully pass the price increase to
consumers amidst subdued demand conditions might dent the profit margins
of businesses rather than the retail prices. Given that economy is not
yet opened up fully, the rural areas are impacted and there is
uncertainty around the pace of vaccination, the situation does not
warrant a rate change at this juncture."
"Both the policy rate and stance are expected to remain status quo and accommodative till the end of the year."
In
addition, Suman Chowdhury, Chief Analytical Officer, Acuite Ratings
& Research, there is a need to pursue a similar monetary and fiscal
policy framework over the next two-three quarters till the impact of the
second Covid wave tapers-off.
"We expect the policy stance to
remain unequivocally accommodative throughout the current financial
year. While there is virtually no scope for a further cut in interest
rates given the increased commodity prices... the status quo on rates is
likely to continue for a longer time possibly till the end of FY22,"
Chowdhury said.
"Despite the risks of a build up of inflationary
pressures in the near term, RBI is likely to give higher priority to the
concerns around growth recovery."
|
|
|
|
|
|
|
|
|
|
|
|
|
Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
84.35
|
82.60 |
UK Pound
|
106.35
|
102.90 |
Euro
|
91.00
|
87.90 |
Japanese
Yen |
54.30 |
52.70 |
As on 16 Aug, 2024 |
|
|
Daily Poll |
|
|
Will the new MSME credit assessment model simplify financing? |
|
|
|
|
|
Commented Stories |
|
|
|
|
|
|
|
|