oppn parties RBI Cuts Rate, Changes Stance To Accommodative

News Snippets

  • Delhi Additional district judge Nikhil Chopra says there is no legal right for people seeking to worship deity inside Qutab Minar, says it survived 800 years without worship so "let it survive like that"
  • Punjab chief minister Bhagwant Mann sacks state health minister Vijay Singla over corruption charges. Singla was later arrested by the ACB
  • Protestors burn the house of Andhra minister P Viswaroop and MLA Satish Kumar over renaming of Konaseema district as B R Amberdkar Konaseema
  • Gyanvapi: Varanasi district judge decides to first hear the 'maintainability' plea filed by mosque management
  • Delhivery and Venus Pipes shares list at premium of 10% and 8.7% respectively even when market sentiment was down
  • In a bid to cool edible oil prices, Centre allows duty-free imports of 20 lakh tonnes each of crude sunflower oil and crude palm oil per annum this year and next
  • Centre caps sugar exports to ensure availability of stocks in the domestic markets to cool prices
  • Stock markets get the jitters as RBI signals rate hike and government moves in to control inflation: Sensex tumbles by 236 points to 54052 and Nifty goes down by 89 points to 16125
  • IPL: Lucknow Super Giants to meet Royal Challengers Bangalore in the first Eliminator today. Winners to take on Rajasthan Royals for a place in the finals
  • IPL: Sensational David Miller blasts three sixes off the first three deliveries of the last over to help Gujarat Titans beat Rajasthan Royals by 7 wickets and enter their maiden IPL final in their debut year
  • While joining US-led IPEF, PM Modi says it will bring "peace and prosperity in the Indo-Pacific region"
  • Mamata Banerjee says Bengal government will not lower VAT as the excise cut by the Centre will already reduce state's revenue by Rs 641 cr
  • Mamata Banerjee says Central agencies must be made autonomous to save democracy
  • While commuting the death sentence of 2 men and 1 woman, the Supreme Court says convict's conduct before and after crime is vital for death penalty
  • Health minister Mansukh Mandaviya slams the Covid death report of WHO at the 75th session of World Health Assembly in Geneva
US President Joe Biden says India-US ties to be among "closest on earth" //////// China and Russia send bombers near Japan even as Quad leaders were holding meetings there /////// Gujarat Titans enter IPL finals in style, beat Rajasthan Royals by 7 wickets
oppn parties
RBI Cuts Rate, Changes Stance To Accommodative

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Sunil Garodia By our team of in-house writers.

Benign inflation, slowing economy and the return of NDA (that assures continuity in policy and the hope of a renewed sense of fiscal responsibility on the part of the government) has allowed the RBI to change its policy stance from neutral to accommodative and reduce the key repo rate by 25 basis points to 5.75 percent, the lowest since September 2010. The change in stance also means that further rate cuts are in the offing.

Although the markets were not enthused by the rate cut (the Sensex crashed by 554 points after the announcement) there are many positives in the RBI decision. All economic indicators are signaling a slowdown with demand for goods and services not picking up. Some sectors are showing negative growth. Although it is true that projects are not dependent only on the interest rates (promoters factor in the cost of acquiring capital in their overall project costs and go for the project if they can sell the products after acquiring capital at current interest rates), it is also true that some projects that seemed unviable at high interest rates may become viable at lower costs. Lower interest rates on retail loans may also spur the demand for goods thereby giving a boost to the manufacturing sector.

The economy needs a push and making capital available at a lower cost is one of the ways to encourage entrepreneurs to expand capacity or go for new projects. The RBI has made it known that it will prod the banks to pass on the benefit to customers. If there is a renewed demand for products due to cheaper loans which in turn encourages entrepreneurs to expand or install new projects then the economy will come out of the morass it seems to be sliding in. But the government will have to play its part by keeping a tight control on fiscal deficit and making investments in infrastructure.