While keeping key rates unchanged, the RBI Governor has said if current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year
The Reserve Bank of India (RBI), in its fifth bi-monthly credit policy review on Tuesday has kept repo, reverse repo, cash reserve ratio (CRR) and bank rate unchanged.
With no change in key policy rates, the repo rate (the rate at which the RBI lends money to banks) remains at 8%. Similarly reverse repo rate (the rate at which the RBI borrows from banks), CRR, and bank rate remains at 7%, 4.00% and 9%, respectively.
In a statement, RBI Governor Dr Raghuram Rajan said, “There is still some uncertainty about the evolution of base effects in inflation, the strength of the on-going disinflationary impulses, the pace of change of the public’s inflationary expectations, as well as the success of the government’s efforts to hit deficit targets. A change in the monetary policy stance at the current juncture is premature. However, if the current inflation momentum and changes in inflationary expectations continue, and fiscal developments are encouraging, a change in the monetary policy stance is likely early next year, including outside the policy review cycle.”
Commenting on the policy, Arundhati Bhattacharya, chairperson of State bank of India, said, “The RBI assertion of a possible change in monetary policy stance next year is a clear vindication and acknowledgement of a benign inflation regime. In fact, by advancing the inflation target of 6% to March 2015, RBI has now set out a clear message of the reversal of the rate cycle, sooner than later. With oil prices at historic lows, a stable exchange rate and strong capital inflows, the feel good factor is here to stay.”
According to the central bank, while activity appears to have lost some momentum in Q2, probably extending into Q3, conditions congenial for a turnaround – the softening of inflation; easing of commodity prices and input costs; comfortable liquidity conditions; and rising business confidence as well as purchasing activity – are gathering. "These conditions could enable a pick-up in Q4 if coordinated policy efforts fructify in dispelling the drag on the economy emanating from structural constraints. A durable revival of investment demand continues to be held back by infrastructural constraints and lack of assured supply of key inputs, in particular coal, power, land and minerals. The success of ongoing government actions in these areas will be key to reviving growth and offsetting downside risks emanating from agriculture – in view of weaker-than-expected rabi sowing – and exports – given the sluggishness in external demand. Anticipating such success, the central estimate of projected growth for 2014-15 has been retained at 5.5 per cent, with a gradual pick-up in momentum through 2015-16 on the assumption of a normal monsoon and no adverse supply/financial shocks,” the RBI governor added.
Although the RBI did not move today, Nomura said it believes the rates markets will take the outcome and the clearly dovish guidance positively. "We are more sanguine on the inflation outlook relative to the RBI’s target of 6% by January 2016. Lower rural wages and the lagged impact of a negative output gap should keep CPI inflation around 5.5% in 2015, in our view. Given the RBI’s focus on fiscal developments as an initial condition, it is likely to watch the budget at end-February closely. As such, we expect no change at the next policy meeting either on 3rd February and a possible cut in April compared to our earlier expectation of rate cuts starting in June. All said, we continue to expect a total of 50bp of cuts in 2015, with rates remaining on hold thereafter," it added.
The reverse repo rate under the liquidity adjustment facility (LAF) will remain unchanged at 7%, and the marginal standing facility (MSF) rate and the bank rate at 9%.
Reverse Repo Rate...........7%
The sixth bi-monthly monetary policy statement is scheduled on Tuesday, 3 February 2015.
A Magistrate Court in Latur levied a fine of Rs4,000 after Hindustan Unilever pleaded guilty under the Legal Metrology Act and Rules
Consumer goods company Hindustan Unilever Ltd (HUL) has been fined Rs4,000 by a Court in Latur in Maharashtra after the company pleaded guilty of violating norms.
On 25 August 2013, HUL, owned by Anglo-Dutch company, Unilever, published an advertisement mentioning maximum retail price (MRP) of one of its product. However, it failed to declare net quantity of the product in the advertisement. This led to a complaint from BP Dhumal, Inspector of Legal Metrology (Weights & Measures) before the Judicial Magistrate.
In his judgement on 29 September 2014, Judge RA Malakolikar, said, "Accused (HUL) is convicted under section 252 of Code of Criminal Procedure (CrPC) and sentenced to pay a fine of Rs4,000 for the offence, in default of payment of fine, he shall to undergo Simple Imprisonment for eight days."
The Court had issued notice to Pradeep Banerjee, Director of HUL. However, Banerjee filed an application for being represented through a power of attorney (PoA) holder stating that since he resides in Mumbai, he could not be present in the Court at Latur. Banerjee's PoA holder Rajeshwari Shukla orally submitted before the Court that it was the first offence of the company and he will not repeat such type of offence hereafter. He also requested the Court to impose minimum fine.
Judge Malakolikar, in his order said, "It cannot be said that due to the offence of accused, there are any bad influence on the society. Hence, it will be just and proper to show leniency in prescribed punishment of payment of fine. This is a fit case to take some lenient view. Hence, fine of Rs4,000 for the offence will meet the end of justice."
What is interesting in this case is, why a company as big as HUL preferred to plead guilty instead of contesting the claims? There may be two reasons. One, the Unilever subsidy earned a net profit of Rs988.16 crore during the September 2014 quarter and a fine of just Rs4,000 is meagre for them. Secondly, instead of contesting the claims and spending more money on litigation with the Legal Metrology Organisation, they may have thought it wise to plead guilty and get away with a minimum fine.
However, they may be wrong. Inspector General Sanjay Pandey, who is Controller of Legal Metrology (Weights & Measures), while speaking at a Moneylife Foundation seminar, said, his department is raising the issue before the Registrar of Companies, Ministry of Consumer Affairs, and other Ministries. “What we are doing is that we are writing to ROC, Ministry of Consumer Affairs and Ministries that deal with them, saying that ‘look, this company is convicted so for future government deals you better beware," he added.
Essentially, this means that although the sum paid by HUL is trivial, it will have to mention the conviction in all its statutory and regulatory filings. In addition, since the company has pleaded guilty, there is not scope for it to file an appeal and have the conviction overturned.
Our mail sent to HUL remained unanswered till writing the story. We will incorporate their reply as and when we receive it.
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