The 6-member Monetary Policy Committee (MPC) headed by RBI Governor Urjit Patel today started two-day deliberations amid expectations of at least 0.25 per cent cut in the key lending rate as inflation has cooled to record low levels. The meeting’s outcome tomorrow is being keenly awaited by all stakeholders including industry and stock markets. Encouraged by significant price improvement, bankers expect Reserve Bank of India to change its monetary stance and cut benchmark lending rate by at least 0.25 per cent.Some expect that the central bank may go for an even more aggressive rate cut as the retail inflation touched historic low of 1.54 per cent in June. The panel, in its previous bi-monthly review in June, had retained the repo rate at 6.25 per cent for the fourth straight time citing risk to inflation.“The MPC will meet on August 1 and 2, 2017 for the Third Bi-monthly Monetary Policy Statement for 2017-18. The resolution of the MPC will be placed on the website at 2.30 pm on August 2, 2017,” the central bank had said last month. Commenting on the retail inflation data, Chief Economic Advisor Arvind Subramanian had said the “paradigm shift” in inflationary process has been missed by all, who have made “systematic inflation forecast error”, apparently referring to the RBI.In the last MPC, Patel had argued for avoiding “premature policy action” and waiting for more inflation data. “Incoming data is expected to provide greater clarity on the durability of recent food and non-food disinflation,” he had opined. One of the MPC members, Ravindra Dholakia, however, had advocated a 50 basis point cut in the repo rate, saying several noteworthy developments recently on prices and output fronts warrant a decisive policy action. In a significant move, country’s largest lender and market leader SBI had yesterday reduced interest rate on savings bank deposits by 50 basis points, a development which will have implications of the interest rate regime.
Indian Minister of State of Commerce and Industry Nirmala Sitharaman on Tuesday sought China’s help in reducing the trade deficit between the two countries. Meeting China’s Commerce Minister Zhong Shan on the sidelines of the 7th BRICS Trade Ministers meeting in Shanghai, Sitharaman said China should facilitate greater market access and provide a level playing field for Indian IT, pharmaceuticals and agro products. The meeting comes after their first meeting on the sidelines of the Regional Comprehensive Economic Partnership Ministerial meeting in Hanoi in May 2017.The ministers underscored the complementarities between the two fastest growing economies and agreed to further intensify efforts to realize the full potential of their mutually beneficial cooperation. They exchanged views, in a candid manner, on further development of a strong, balanced and sustainable trade and investment partnership between India and China. The ministers also agreed to further intensify Sino-Indian cooperation in the plurilateral and multilateral frameworks such as WTO, BRICS and SCO. Sitharaman reiterated her invitation to Zhong Shan to visit India for the 11th Joint Economic Group (JEG) meeting.
The amount of corporate loans restructured by lenders has seen a decline in the last three financial years, according to the data tabled by Finance Minister Arun Jaitley in the Rajya Sabha today. Banks restructured loans, that were sanctioned to companies, of worth Rs 3,70,279 crore in FY2014-15 and Rs 2,99,111 crore in 2015-16. The amount of restructured corporate loans came down to Rs 2,04,884 crore in the last financial year, as per the data. The finance minister was responding to a question seeking names of companies whose loans have been restructured and at what terms. “Any restructuring is to be carried out in accordance with detailed guidelines issued by RBI on restructuring like Joint Lenders’ Forum (JLF), Strategic Debt Restructuring (SDR) and Scheme for Sustainable Structuring of Stressed Assets (S4A),” Jaitley said. The finance minister further said that “the names and details of borrowers are covered under section 45E of RBI Act, 1934 and banking laws. “… which (the Act and banking laws) oblige financial institutions to maintain secrecy about the affairs of their constituents.” On provision for restructuring of farm loans in case of natural calamities, he said banks can facilitate restructuring, including conversion of short-term debt to term loan or re-schedulement or repayment time-frame to such borrowers with benefit of retention of asset classification.“For agricultural accounts that became impaired on account of reasons other than natural calamities, restructuring is allowed in terms of RBI guidelines on Income Recognition and Asset Classification (IRAC),” Jaitley said.
The Brics countries will continue to play a key role in the global economy although they reported slower growth in recent years, said an expert with the Paris-based Organisation for Economic Cooperation and Development (OECD). Federico Bonaglia, deputy director of OECD Development Centre, told Xinhua news agency that slowdown in the growth of the Brics economies will not have a significant impact on their joint share in the world economy. “China and India continue to maintain a very sustained growth, a situation that both Russia and Brazil are expected to reach next year,” Bonaglia said. Latest OECD economic outlook expected a return to growth in Brazil and Russia. Meanwhile, China and India are projected to expand their GDP by more than 6 per cent. He said India is the only Brics country that has not experienced a slowdown in the past few years, with a growth rate of around 8 per cent in 2015 and 7.7 per cent projected for 2018. Brazil and Russia are poised for economic recovery, Bonaglia said. The Brazilian economy contracted 4 per cent in 2015 and 3.6 per cent in 2016. “The good news is that (it) is expected to return to a positive growth in 2017 and reach a growth rate between 1.5 and 1.6 per cent in 2018,” he estimated. Russia, which has experienced “a very complicated situation”, will be able to shake off recession in 2017 and reach a growth rate around 1.4 per cent, he said.However, the outlook for South Africa remains clouded, said the expert, who put the country’s growth rate for 2017-2018 at 1 per cent. Bonaglia told Xinhua that Brics economies play a very important role by injecting dynamism into the world economy.“In 2000, the Brics represented 40 per cent of the GDP. In 2010, they represented over 50 per cent and in 2015 they reached 54.7 per cent of world GDP,” he recalled. However, despite this strong progress, the Brics face challenges in terms of productivity growth and innovation, the OECD expert noted.