×

UPSC Courses

DNA banner

DAILY NEWS ANALYSIS

  • 05 October, 2019

  • 3 Min Read

A welcome move, but it’s unlikely to spur demand

A welcome move, but it’s unlikely to spur demand

News

With the 25 basis points (bps) rate cut, RBI returned to the conventional wisdom of a rate change in multiples of 25bps.

RBI statement

  • MPC decided to continue with an accommodative stance as long as it is necessary to revive growth while ensuring that inflation remains within the target.
  • RBI’s decision to increase the household income limit for borrowers of NBFCs and MFIs is welcome. It will enhance credit delivery to a larger customer base at the bottom of the pyramid.
  • There is an attempt to boost the domestic forex derivatives market. RBI has decided to allow domestic banks to offer foreign exchange prices to non-residents on a 24-hour basis.

Efficacy of rate cuts:

  • This may push the debt markets to take a cue from the second-generation policy signals and yields may soften from the current level.
  • Efficacy of rate cuts is questionable against elevated household leverage, deteriorating company fundamentals, and weak demand.
  • The number of downgrades in H1FY20 grew by 66% vis-à-vis a 20% de-growth for the number of upgrades. The pace of downgrades has been increasing.
  • Financial flows to the commercial sector in H1FY20 are significantly lower due to a decline in funding from banks and non-bank sources.
  • Despite a rising interest scenario, credit had expanded by over 1.65 trillion but contracted by 93,700 crores even as we are in an aggressive rate cut cycle. This indicates credit risk aversion continues to play centre stage for the non-bank sector.

Fiscal policy:

  • Centre has done a remarkable job in maintaining fiscal consolidation.
  • We are increasingly concerned about the fiscal position of the states.
  • Way ahead

    More clarity is needed to crystallize the KYC requirements for off-shore entities as also their tax implications.

    In the current context, only monetary policy rate cuts would not work in isolation. It must be complemented by fiscal expansion

Source: Live Mint


Kirit Parikh Gas Pricing Panel

Kirit Parikh Gas Pricing Panel The government recently appointed a Kirit Parikh committee to review the gas pricing formula. The committee's major recommendations: Maximum cost: A fixed pricing band for gas from old fields, known as APM (Administrative Price Mechanism) gas, is required. These fields produce two-thirds of the co

G20 Presidency of India as a Watershed Moment

G20 Presidency of India as a Watershed Moment On December 1, 2022, India will formally assume the G-20 presidency. India will hold the presidency until November 30th, 2023. According to the Prime Minister, India's theme is "One Earth, One Family, One Future." More on the news: Agenda: The Prime Minister described

Women’s Representation in the Courts

Women’s Representation in the Courts It was only the third time in the Supreme Court's history that a bench comprised entirely of female justices heard cases. More on the news: Apex Court's all-woman bench: Chief Justice of India D Y Chandrachud has appointed Justices Hima Kohli and Bela M Trivedi to the bench. The Supre

Rare Earth Elements

Rare Earth Elements The Confederation of Indian Industry (CII) has urged the government to encourage private mining in the sector and diversify supply sources in light of India's reliance on China for rare earth minerals imports. Despite having 6% of the world's rare earth reserves, India produces only 1% of global output and import

Rooftop Solar Installations

Rooftop Solar Installations According to Mercom Research India, rooftop solar capacity installations in India fell 29% to 320 megawatts (MW) in July-September 2022. What are the Results? Cumulative Installations: As of the end of the third quarter of 2022, cumulative rooftop solar (RTS) installations stood at 8.3 GW. Gujarat overtook

Toppers

Search By Date

Newsletter Subscription
SMS Alerts