“The impact of the base effect will be seen as food prices generally come down in winter season... so I do believe inflation will come down sharply and that might provide the correct environment in which the RBI can act further in the direction of easing action,” PMEAC chairman C Rangarajan said
New Delhi: Prime Minister’s Economic Advisory Council (PMEAC) chairman C Rangarajan today said the Reserve Bank of India’s (RBI) move to keep all the key policy rates unchanged in its mid-quarterly policy review is on expected lines and the central bank might start revising downwards its monetary stance only if inflation continues to decline further, reports PTI.
“...the move is on expected lines...if inflation continues to show a declining trend, then perhaps the RBI will start reversing its policy. Therefore, it is predicated only on one assumption and that is the inflation going down,” Mr Rangarajan said.
He added that inflation will start declining, “particularly food prices will come down more sharply as we have indicated, not only in December but in January as well”.
“The impact of the base effect will be seen as food prices generally come down in winter season... so I do believe inflation will come down sharply and that might provide the correct environment in which the RBI can act further in the direction of easing action,” he said.
In its policy review today, the RBI maintained repo (rate at which banks borrow from RBI) at 8.5%, and reverse repo (rate at which the RBI borrows from banks) at 7.5%.
The halt to increase in interest rates comes after the RBI hiked the rates 13 times since March 2010.
The RBI has also decided to retain the cash reserve ratio (CRR), the amount banks need to park with the RBI, at 6%. Industry was expecting a marginal cut in the CRR to induce liquidity in the system to promote investments.
Meanwhile, Planning Commission deputy chairman Montek Singh Ahluwalia declined to comment on the RBI’s policy stance.
“If there is no change (in policy rates), then what is there to comment on. I don’t want to speculate (on the impact of the pause),” he said.
The RBI will make an assessment of its growth and inflation projections for 2011-12 in the third quarter review next month, the policy statement said.
“The freezing customs duties amounted to the developing countries ceding their policy space and being denied any recognition for their autonomous liberalisation,” commerce and industry minister Anand Sharma said at the G-20 ministers’ meeting in Geneva
Geneva: India on Thursday rejected proposals of some developed nations to freeze customs duties at current levels (tariff standstill) and taking away rights to ban farm exports as a possible way forward on World Trade Organisation (WTO) talks, saying that if accepted it would tantamount to ceding sovereign rights, reports PTI.
“This (freezing customs duties) amounted to the developing countries ceding their policy space and being denied any recognition for their autonomous liberalisation,” commerce and industry minister Anand Sharma said at the meeting of the Group of Twenty (G-20) ministers here.
Mr Sharma, who is here to participate in the eighth Ministerial Conference of WTO, said that any dilution of the flexibilities available under the WTO regime for imposing export restrictions on agricultural items and taxes was ‘unacceptable’.
The WTO negotiations have been stalled due to differences between rich and developing nations on tariff liberalisation and level of market opening.
Agreeing to tariff standstill means a drastic reduction in duties by developing countries like India, as the country’s applied customs duties is below bound ceiling levels.
To augment domestic supplies, India has banned exports of pulses and also imposed quantitative restrictions on outward shipments of commodities like rice and sugar. Besides, India is planning to bring a food security law under which nearly 64% of its population will have legal entitlement on subsidised foodgrain.
The conference, the highest policy-making of the 154-member WTO body, is meeting to deliberate how to revive the stalled talks for achieving a global trade agreement under the 10-year old Doha Round.
Mr Sharma further said, “It was imperative that the WTO while taking up all manner of new challenges does not forget the traditional challenge of development.”
He called for continued solidarity and reinvigorated engagement so that the current impasse in the Doha negotiations is broken and the attempts to replace the development centric agenda are thwarted.
In his intensive consultations with developing and developed countries, to evolve a common position on the way forward on the Doha Development Agenda, Mr Sharma said India views WTO as an institution to provide a level-playing field in the global trade.
At the meeting of the G-33 countries (a coalition of agricultural economies) he urged for ushering in much delayed changes in the current agricultural trading regime which negatively impact the livelihood concerns of billions of subsistence farmers in the developing world.
Mr Sharma also addressed a gathering of delegates of the G-90 (poorest and smallest developing countries) and Brazil, China and South Africa.
The unique grouping of over 100 countries called the ‘Friends of Development’ reaffirmed their commitment to the centrality of development in Doha Round and the need to keep negotiations transparent and inclusive.
The grouping issued a declaration committing their desire to take forward the Doha Development Agenda without deviating or diluting the core of the round.
As correctly predicted by Moneylife, the central bank had kept repo, reverse repo, CRR and SLR rates unchanged and said that from now onward its actions would respond to the risks to growth
The Reserve Bank of India (RBI) in its mid-quarterly monetary policy review on Friday, kept the repo and reverse repo rates unchanged at 8.5% and 7.5%, respectively. It also did not revise the cash reserve ratio (CRR), which stands at 6% and the statutory liquidity ratio (SLR) at 24%.
Analysts had opined that in view of the slowdown in the economy on account of rising interest rates and the global situation the central bank may take a pause this time. (Read...RBI may take a pause by keeping policy rates unchanged)
While accepting that there is deceleration in growth due to past monetary policy tightening and domestic policy uncertainties, the RBI, said, “From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth.”