Expert Zone

Straight from the Specialists

RBI vs the govt: who will blink first?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

At its mid-quarter monetary policy review on June 18, the Reserve Bank of India (RBI) kept its rates unchanged despite expectations of a cut. To further augment liquidity and encourage banks to increase credit flow to the export sector, the RBI has increased the limit of export credit refinance from 15 percent of outstanding export credit of banks to 50 percent, which will potentially release additional liquidity of over 300 billion rupees, equivalent to about 50 basis points reduction in the CRR.

This is an excellent move as lower rates together with a weak rupee should benefit exporters. The overall policy announcement disappointed the markets with stocks down sharply and 10 year g-sec yields up more than 10 bps post policy.

The Reserve Bank had front-loaded the policy rate reduction in April with a cut of 50 basis points. This decision was based on the premise that the process of fiscal consolidation critical for inflation management would get under way, along with other supply-side initiatives. The assessment of the current growth-inflation dynamic is that there are several factors responsible for the slowdown in activity, particularly in investment, with the role of interest rates being relatively small. Consequently, further reduction in the policy interest rate at this juncture, rather than supporting growth, could exacerbate inflationary pressures.

Foreign borrowing or foreign investment?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The market’s response to the currency measures announced on Monday was a dip in the Sensex. Much was expected after the announcement made over the weekend by the finance minister. What has been actually initiated cannot make much difference either to the rupee or to growth.

India Market Weekahead: Time to buy after a period of caution

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Markets opened with a healthy dose of optimism last week. Two big events were expected to boost sentiment. On the global front, Greece election results eased fears of immediate global financial turmoil. Back home, expectations were high of an interest rate cut by the Reserve Bank of India (RBI) to boost the falling economy.

Can we provide more cover at lower costs?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

When it comes to financial products, does the general rule “low cost = low quality” hold true? By quality, I mean the quality of experience and service levels that should be expected from a standardised product.

RBI makes the right policy call

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(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)

The Reserve Bank of India’s (RBI) monetary policy states that “..it is relevant to assess as to what extent high interest rates are affecting economic growth. Estimates suggest that real effective bank lending interest rates, though positive, remain comparatively lower than the levels seen during the growth phase of 2003-08. This suggests that factors other than interest rates are contributing more significantly to the growth slowdown.”

RBI needs to take bold steps

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Expectations of a rate cut were legitimate. But the RBI preferred to pause, not quite convinced that inflation is under control. That has been its singular target though it is dressed up to look more appealing as growth-inflation dynamics.

Where are the Alphonsos?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

I had my first Alphonso mango of the season a few weeks ago in London. Oddly enough, although so many things are so easy to get hold of in London, Alphonsos aren’t. You either have to go to very expensive food halls — places like Fortnum & Mason or Selfridges or Harrods — or pick them up at one of the more selective South Asian food shops that are scattered around.

Time to think beyond monetary policy rates?

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(Rajan Ghotgalkar is Managing Director of Principal Pnb Asset Management Company. The views expressed in this column are his own and do not represent those of either Principal Pnb or Reuters)

Irrespective of the RBI monetary policy review and its outcome, the fact that policy rates have assumed such obsessive focus needs closer scrutiny.

India market weekahead – Watch out for Greece and RBI policy review

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The markets remained highly volatile during the entire week as investors remained ambivalent about the likely outcome of the elections in Greece and the Reserve Bank of India (RBI) policy meet.

Getting some competition for efficiency

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The Ministry of Corporate Affairs has taken the initiative to bring all sectors of the economy under the purview of the Competition Commission of India (CCI), including those overseen by regulatory authorities.

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