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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SC refuses to entertain plea against deletion of names from WB voter list, terms it ‘premature’
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New Delhi (PTI): The Supreme Court on Monday declined to entertain a plea by a group of 13 people seeking its intervention in the deletion of their names from the voter list during the Special Institutional Revision (SIR) in West Bengal, where polling for the first phase of the assembly election will be held on April 23.
A bench comprising Chief Justice Surya Kant and Justice Joymalya Bagchi termed the petition "premature", directing the aggrieved parties to approach the established appellate tribunals instead.
"Since the petitioners (Quaraisha Yeasmin and others) have already approached the appellate tribunals… in our considered view, the apprehensions expressed in the petition are premature. If the plea is allowed, then necessary consequences will follow,” the bench said in its order, adding that it has not expressed any views on the merits of the plea.
The plea alleged that the Election Commission was summarily deleting names without following due process, and that appeals against these deletions were not being heard in a timely manner.
The Chief Justice of Calcutta High Court has set up as many as 19 tribunals headed by former HC chief justices and judges to decide appeals against deletions of names of persons from the voters’ lists.
Senior advocate D S Naidu, appearing for the poll panel, informed the court that there are approximately 30 to 34 lakh appeals currently pending. "Every tribunal now has over one lakh appeals to handle," the bench said.
The petitioners’ counsel argued that the EC had failed to place necessary orders before the relevant judicial authorities and that the "freezing date" for the electoral rolls should be extended.
"If I am not allowed to argue, then what is the use? Will these appeals be decided within a timeframe or just kept extending?" the counsel asked.
Justice Bagchi, during the hearing, referred to the sanctity of the electoral process and said the right to vote is not merely a constitutional formality but a "sentimental" pillar of democracy.
"The right to vote in a country you were born in is not just constitutional, but sentimental. It is about being part of a democracy and helping elect a government," he said.
He, however, said that the tribunals, manned by former judges, cannot be overburdened by fixing the timelines for adjudications.
"It is not the end justifying the means, but the means justifying the end," Justice Bagchi said.
"We need to protect due process rights. The voter should not be sandwiched between two constitutional authorities," he said, adding that it would not interdict the election process at this stage.
Justice Bagchi noted that the Calcutta High Court Chief Justice had already formulated the manner and mode for appeals, which began on Monday.
"Unless and until an enormous number of voters are excluded or it materially affects the election... the election cannot be cancelled," the bench said, adding that judicial intervention is intended to "promote elections, not interdict them."
The CJI emphasised that the petitioners must exhaust their remedies before the appellate tribunals.
Assembly elections in West Bengal will be held in two phases on April 23 and 29, and votes will be counted on May 4.
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