RBI springs surprise, keeps interest rates unchanged
Mumbai, Oct 5 : After back-to-back hike since June, the Reserve Bank of India (RBI) Friday kept interest rates unchanged, surprising markets that had expected a rate hike to support tumbling rupee and combat inflationary pressures from high oil prices.
With five of its six members voting for a status quo, RBI's monetary policy committee (MPC) left repo rate at 6.50 per cent and changed policy stance to 'calibrated tightening' from 'neutral', which RBI Governor Urjit Patel said meant there would be no rate cut in the current cycle.
Vowing to keep the inflation rate under targeted 4 per cent, RBI warned that volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to growth and inflation.
A majority of the analysts and bankers had expected that RBI will raise interest rate by at least a 0.25 per cent with some even rooting for a 0.50 per cent increase in view of the developments over the last few days where rupee had continued to slide and international oil prices hit four-year high.
Soon after the monetary policy announcement, the rupee slid to a new record low, falling past the 74 to a dollar mark, before closing down 0.3 per cent to 73.7650. The domestic unit has fallen 14.5 per cent since January, making it the worst performing major Asian emerging market currency.
"Today's stance of calibrated tightening essentially means that in this rate cycle a rate cut is off the table, and that we are not bound to increase rates at every meeting," Patel told reporters here. "As new data comes in we would look into changing our policies accordingly".
Welcoming the decision of RBI to keep rates unchanged, Economic Affairs Secretary S C Garg said the government's assessment of inflation is in line with the MPC's assessment.
"We believe growth should turn out to be higher than that projected by MPC," Garg said.
The RBI forecasted GDP growth of 7.4 per cent in the current financial year ending March 31, 2019 and 7.6 per cent in the next.
"The MPC reiterates its commitment to achieving the medium-term target for headline inflation of 4 per cent on a durable basis," the resolution of the MPC after a three-day meet said.
It projected an inflation rate of 4.8 per cent by June 2019, slightly better than the 5.0 per cent August forecast.
The repo rate, at which the RBI lends to the system, will continue to be at 6.5 per cent, the reverse repo, at which it absorbs excess funds, will be at the same level of 6.25 per cent.
The MPC voted 5:1 in favour of a status quo, with only Chetan Ghate voting for a 0.25 per cent hike.
The resolution said actual inflation outcomes have been 'below projections' as the expected seasonal increase in food prices did not materialise and inflation, excluding food and fuel, moderated.
Lowering its inflation projections from the August review, the MPC headed by RBI Governor Urjit Patel said headline inflation is expected to rise to 3.7 per cent by September quarter-end, excluding HRA impact, 3.8-4.5 per cent by the second half of the fiscal and 4.8 per cent by the first quarter of the next fiscal.
He said food inflation, a key component of the inflation basket, has been 'unusually benign' and added that the price situation will be influenced by the hike in minimum support prices, global crude prices, second round impact of the HRA allowance for government employees and currency movement.
However, the RBI warned that "global headwinds in the form of escalating trade tensions, volatile and rising oil prices, and tightening of global financial conditions pose substantial risks to the growth and inflation outlook. It is, therefore, imperative to further strengthen domestic macroeconomic fundamentals".
Taking note of the petroleum price cut on Thursday, the MPC said that the recent excise duty cuts on petrol and diesel will moderate retail inflation.
The government announced a Rs 2.50 per litre cut in petrol and diesel prices after it reduced excise duty by Rs 1.50 a litre and asked oil companies to absorb another Re 1.
The hike in minimum support prices for the winter crop was announced by the government Wednesday.
Rising protectionist tendencies, threats of currency wars and policy normalisation in the US pose the biggest risks for domestic growth prospects, it said.
RBI's study of professional forecasters put the inflation at 4.5 per cent by March quarter and go up further to 5.1 per cent by March 2020 quarter.
A surge in oil prices to USD 88 from the present USD 86 can push the headline inflation number up by 0.20 per cent and dent growth by 0.15 per cent, it said.
The RBI has hiked rates twice in the last two policy reviews by 0.25 per cent.
The headline inflation for August softened to 3.69 per cent in August as against 4.17 per cent in July. The medium-term target set for the RBI by the government is 4 per cent.
The six-member MPC led by the RBI governor began its three-day meeting on October 3. The rupee has been depreciating to new lows as against the US dollar along with the global crude prices breached the USD 86 to a barrel mark.
The government and RBI have taken a slew of measures to arrest the slide, but those have been termed as ineffective by analysts.
The rupee depreciation is due to the overall strengthening of the US dollar against local currencies, widening of trade and current account deficits due to higher crude prices, portfolio outflows and risk aversion among portfolio investors, it said.
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CM Siddaramaiah alleges ‘criminal conspiracy’ in Sringeri recount, vows legal action
Bengaluru (PTI): Alleging a “criminal conspiracy” by BJP candidate D N Jeevaraj in the Sringeri Assembly poll recounting, Karnataka CM Siddaramaiah on Tuesday said the outcome was manipulated after valid postal ballot votes in favour of Congress leader T D Raje Gowda were tampered with during the recounting process.
Following a Karnataka High Court order on an election petition filed by Jeevaraj, challenging Raje Gowda’s election, the reverification and recounting were conducted on Saturday.
After the reverification and recount of postal ballots for the Sringeri Assembly constituency, votes polled in favour of Raje Gowda were reduced by 255, the returning officer said.
A report on the matter has been submitted to the Election Commission of India for further action, the officer added.
Congress leader Raje Gowda had won the 2023 Assembly polls from Sringeri by 201 votes, defeating his nearest rival Jeevaraj.
Addressing a press conference in Bengaluru, Siddaramaiah said the High Court had directed the recounting of postal ballots and that irregularities were noticed during the exercise conducted on May 2.
“This is a clear case of criminal conspiracy,” Siddaramaiah said, alleging that valid votes cast in favour of Raje Gowda were altered after being accepted by counting agents of all parties, including Congress, BJP, and JD(S).
He claimed that during the recounting of postal ballots, 255 votes were initially accepted as valid by all agents but were later tampered with by subordinate officials.
“There is a second mark on the votes polled in favour of Raje Gowda. They had accepted these as valid votes. Subsequently, another mark was made by officials. This is a clear case of criminal conspiracy,” he said.
When asked who was behind the alleged conspiracy, the CM replied, “It was hatched by Jeevaraj and others. It is planned.”
Siddaramaiah further alleged that the returning officer acted improperly by declaring the result despite the presence of an Election Commission observer during the recounting.
“Immediately after the counting, the returning officer announced the result. He should not have done so; this is against the law,” he said.
He pointed out that Raje Gowda had originally won by 201 votes, but after the recounting, the BJP candidate was declared the winner by 52 votes.
“The BJP has committed a criminal act of conspiracy. This is not vote chori but vote dacoity,” he alleged.
The CM said a police complaint had already been filed by Raje Gowda’s election agent, Sudhir Kumar, and emphasised the need for electoral integrity.
“We want transparency and free and fair elections. That is what our Constitution mandates,” he added.
Stating that the government would pursue legal remedies, Siddaramaiah said, “We are preparing an appeal challenging the returning officer’s announcement in a court of law.”
Responding to a separate query on elections in other states, the CM said there appeared to be an anti-incumbency factor in West Bengal, while results in Tamil Nadu were “surprising,” adding that Vijay’s party was emerging as the largest there.
Following the victory of party candidates in Bagalkote and Davanagere South, Siddaramaiah expressed confidence about future electoral prospects in Karnataka.
“Even in 2028, we will win the Assembly elections. We will come back,” the CM said.
Siddaramaiah added that he would order a forensic examination into the alleged tampering of postal ballots.
