HOME > BUSINESS > Low Inflation boosts calls for rate-cuts from Industry

Low Inflation boosts calls for rate-cuts from Industry

With wholesale inflation dipping to record lows, industry asssociations have renewed their calls for an immediate cut in interest rates.

ASSOCHAM for example has sought a repo rate cut of up to 50 basis points (bps) in its fifth bi-monthly monetary policy review scheduled on December 2nd, if monsoon forecast for 2015 is normal, crude oil prices average sub-$95 per barrel and exchange rate volatility remains contained.

“A firm anti-inflationary stance over the remainder of FY15 would help to rein in expectations and impart credibility to the RBI’s inflation targets as the economy adjusts towards the medium term inflation target of CPI inflation at 4+/- 2 per cent,” said The Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a communication addressed to the Central Bank governor, Raghuram Rajan.

Assocham and other industry associations have regularly blamed Reserve Bank of India’s high interest-rate regime for keeping India’s industrial growth in check.

However, despite the high rates, growth has started returning, while inflation has fallen as the RBI had wanted.

“Considering that there is a better macro-economic situation subsequent to last monetary policy, the RBI’s next bi-monthly monetary policy is critical for the industry amid expectations of a reduction in key interest rates this time and the apex bank should take all global and economic factors in consideration,” said Mr D.S. Rawat, national secretary general of ASSOCHAM.

The inflation based on the consumer price index (CPI) for September 2014 moderated to 6.5 per cent from an average of about 10 per cent in 2012-13 and 2013-14 and this easing of inflationary pressures is expected to continue in the immediate term, thereby benefitting from factors like easing global commodity prices, a decline in domestic fuel prices, slowing growth of rural wages and a favorable base effect.

Notwithstanding the expected pickup in headline CPI inflation following waning of favorable base post November 2014, ASSOCHAM expects that CPI inflation in January 2015 would be well below the target of eight per cent as per the glide path announced by the Reserve Bank of India (RBI).

Moreover, lower commodity prices would soften the impact of any revival in demand conditions going forward, thereby containing inflationary pressures.

In its note to the RBI chief, ASSOCHAM has also maintained that there is a risk that easing of inflation on account of exogenous factors like lower commodity prices, may delay introduction of some much needed but difficult supply side reforms that would structurally address domestic factors that keep inflation high.

Additionally, monsoon dynamics and extent of rise in minimum support price (MSP) would impact food inflation in 2015-16.

Overall, ASSOCHAM opined that achieving the target of restricting CPI inflation below six per cent by January 2016 remains uncertain.

Though global crude oil prices are expected to remain moderate in the months ahead owing to adequate supplies, however in the event that crude oil prices strengthen, the transmission to output prices in India would be relatively faster as prices of major fuels including diesel is market-linked.

Besides, higher rates in the spot market in some regions as a result of the shortfall in monsoon rainfall and hydroelectricity generation are likely to lead to a modest rise in fuel and power purchase adjustments in coming months.

However, considerable tariff increases remain a risk factor for 2015-16, particularly if pass through of prices of pooled coal/gas imports is permitted, said ASSOCHAM.

The chamber has also expressed concerns over substantial shortfall in production of various kharif crops (as per advance estimates) in 2014 as compared to 2013 like pulses (14 per cent), coarse cereals (14 per cent) and oilseeds (12 per cent) which remains a key near term risk.

Follow ULTRA.news
RBI yet to finish counting demonetized notes – Govt Eight months on, the Reserve Bank of India is yet to finish verifying and counting the 500- and 1000-rupee notes surrendered by the public between Nov 8 and Dec 31, 2016, the finance ministry said.A total of around 2,300 currency notes are estimated to have been returned by t...
Expecting waivers, farmers stop paying back bank loans? The write-off of farm loans in Uttar Pradesh and Maharashtra seems to be encouraging farmers in other states to stop paying back their farm loans to make sure that they will get the benefits of any farm loan waiver program in their state. This has led to a sharp increase in farm ...
IT companies using illegal tactics to force workers to resign: FITE The Forum for IT Employees, arguably the IT workers rights organization with the largest number of well-wishers and supporters, accused IT companies of using illegal and unethical means to force their workers to submit their resignations.In a meeting with Maharashtra Chief Mi...
Demonetization took India forward by 3 years – SBI The demonetization of currency notes late last year has doubled the number of card transactions and helped push India's payment digitisation by three years, State Bank of India said in a note."Even after seven months post demonetization, the transaction value is quite large ...
SBI cuts interest rates on bigger home loans State Bank of India, the largest Home Loan Provider in India has reduced interest rates of high value home loans.Home Loans above Rs. 75 lakhs will now be cheaper by one-tenth of a percentage from 15 June, 2017.The revised interest rates will be 8.55% p.a. for salari...
SBI says free ATM transactions not withdrawn India's largest bank, State Bank of India, denied reports that it had scrapped the facility of providing free ATM transactions.SBI CIRCULARThe bank was responding to media reports that said that all transactions will be chargeable from now on.Under the Reserve Bank o...
Indian IT industry facing layoffs as conditions worsen, warns Assocham Trump unveiled his 'Buy American, Hire American' program yesterdayIndian IT companies are bound to see "some laying off" of their work force back home due to various negative forces impacting the industry, Assocham -- an association of various industries -- warned."With ...
US Fed unlikely to reverse quantitative easing this year: HDFC Securities US Federal Reserve BuildingBroking and financial firm HDFC Securities Ltd said it does not expect the US Federal Reserve to start sucking out the liquidity that it has infused into the global financial market in the last nine years any time soon.The comments came in the ...
Rs 1.7 lakh cr deposited via demonetization may not be withdrawn – SBI Monthly cash withdrawals for all banks | source:SBI ResearchThe Indian banking system is likely to get a permanent liquidity boost of Rs 1.7 lakh cr due to the demonetization of high-denomination bank notes, State Bank of India chief economic adviser said in a note to bank c...
RBI refuses to make exceptions for Tirupati temple, Rs 4 cr old notes junked The Tirumalai TempleThe Reserve Bank of India has told the management of Tirumala Tirupati temple in Andhra Pradesh that the money deposited in the temple's hundis cannot be exchanged for new notes.The move was in response to a letter by the temple management asking if i...
After missing twice, India comfortably meets power sector targets for 12th five-year plan After missing its targets by wide margins in the previous two five-year plans, India is all set to comfortably meet or exceed all its power sector targets for the 12th five-year plan that ends this month.Five-year plans, borrowed from the Soviet Union, are a legacy of Nehruvi...
Wholesale price inflation hits 3-year high on high diesel prices High fuel prices, particularly that of diesel, lifted India's wholesale price index to its highest level since the Narendra Modi government took power almost three years ago.On an overall level, wholesale price of various items jumped 6.55% in February when compared with ...
No immediate plans for universal basic income: Indian Government India's welfare budget, 2016-17The Indian government has no immediate plans or proposals to institute a scheme of 'unversal basic income' in place of the myriad social welfare scheme run by the country at present, the finance ministry said in response to a query.The clar...
Gadkari to miss ambitious highway target for 2016-17 Nitin Gadkari, who is slowly building up a reputation as a pragmatic and capable minister, is likely to face major disappointment in the ongoing financial year as his ministry is unlikely to meet the steep road construction target it set for itself.Unlike the term of the ...
DEMONETIZATION: SBI sees GDP growth fall to 6.1%, miss govt projection of 7% The country's largest bank, State Bank of India, said today that it expects the growth in India's gross domestic product to fall to 6.1% or lower in the current year from 7.9% last year due to the impact of demonetization.It said the projection by government of India's Centra...
Demonetization: RBI removes ‘explanation’ requirement for KYC accounts The Reserve Bank of India has responded to widespread criticism of its directive to collect 'explanations' from those depositing more than Rs 5000 by clarifying that this directive will not apply to bank accounts with proper documentation."On a review of the above, we advise ...
Demonetization: Modi announces bumper prizes; 15 lakh users to get 1,000 rupees Narendra Modi announced several 'prize schemes' to promote cashless transactions.Under the schemes announced today, there will be two sets of prizes for consumers and another for small merchants.Under the first scheme, any customer who uses any electronic form of payment,...
Demonetizaton: Govt places limits on last minute deposits The Reserve Bank of India said that any person who continues to hold old notes of 500 and 1000 rupees in bulk will get only one more chance to deposit them into bank accounts and will also have to provide an explanation for the delayed deposit."Tenders of SBNs in excess of ₹ ...
DEMONETIZATION: Wholesale Price Inflation falls to 3.15% in November The annual rate of inflation, based on monthly WPI, stood at 3.15% for the month of November, 2016 as compared to 3.39% for the previous month and -2.04% during the corresponding month of the previous year.The fall is largely expected due to the impact of the withdrawal of h...
Petrol Pumps, Airlines Will Not Take Old Notes From Saturday | DEMONETIZATION Old notes will no longer be accepted at petrol pumps and airline ticket counters starting from Saturday, according to sources.So far, petrol pumps and airlines had been given an exemption from demonetization of 500 and 1000 rupee notes.However, in an effort to control...
Fitch revises US growth estimates on Trump election, says protectionism to rise The surge in populism and anti-establishment sentiment witnessed in the Brexit vote and Donald Trump's victory in the US presidential election seem likely to push structural policies in the direction of economic nationalism, said Fitch Ratings in its latest global economic outloo...
DEMONETIZATION: How some earned lakhs standing in queues The government has banned over-the-counter exchange of old 500- and 1000-rupee notes due to suspected gaming of the system by those with black money. According to banking industry sources, the over-the-counter exchange system was being massively misused by hawala operators and ot...
Despite Demonetization, India will beat China in GDP growth: Fitch Ratings Despite a moderation in India's GDP growth rate in the short term due to cash crunch, the Indian economy will still grow faster than that of China, global ratings agency Fitch said."We still expect India’s GDP growth to trend higher than China’s in the medium term," said the ...
Fitch says demonetization gains may not last Fitch Ratings said the positive effects are unlikely to be strong and sufficiently enduring "to support credit profiles" and will impact GDP growth in the current quarter.Though the gains will be substantial in the short-term, they may not last as people may still go back...
Hiring slows in October due to festival effect – Naukri.com Hiring activity fell 8% October this year compared to the same month a year ago, according to Naukri.com's Job Speak Index.This dip was primarily caused by the festive season which saw Dussehra, Durga Pooja and Diwali fall in October, the company said. "Hiring activity ge...