oppn parties RBI-MPC Keeps Rates Unchanged

News Snippets

  • EMI's set to rise after the RBI hikes key policy rate
  • Calcutta HC says that the right to privacy does not end with the death of a person
  • Supreme Court says that a delayed order of preventive detention makes it invalid
  • Shashi Tharoor posts an erronous map of India in his manifesto, rectifies the error after criticism
  • Sonia Gandhi to take a call on who will be Rajasthan chief minister
  • Mallikarujun Kharge to be the new candidate to oppose Shashi Tharoor in the Congress presidential elections
  • RBI says that the September inflation rate may be higher than 7%
  • RBI hikes key rates by 50bps, downwardly revises FY23 growth rate to 7% from 7.2% earlier
  • Stocks recover well on Friday: Sensex gains 1016 points to0 57426 and Nifty 276 points to 17094
  • Mirabai Chanu wins gold easily at the National Games
  • In a first, the Supreme Court recognizes marital rape, although for the limited purpose of allowing married women the right of abortion up to 24 weeks if they conceived as a result of forced sex by their husbands
  • Air India cuts discounts on base fare to students and senior citizens from 50% to 25%
  • Mallikarjun Kharge and Digvijay Singh are being touted as frontrunners to take on Shashi Tharoor in the elections for the post of Congress president
  • Sonia Gandhi will decide who will be Rajasthan CM if she feels there is a need to change guard after the near-rebellion by MLAs in the state
  • Ashok Gehlot bowed out of the race for being Congress president after meeting Sonia Gandhi
RBI hikes key rates by 50bps, stocks jump and recover 50% of the losses incurred in the last few session
oppn parties
RBI-MPC Keeps Rates Unchanged

By Ashwini Agarwal
First publised on 2017-12-07 09:23:39

The MPC of the RBI has decided to hold interest rates at their current levels in its 5th bi-monthly policy review this year. Hence repo rate remains at 6 percent, despite a clamour for its reduction from industry captains and even the government. Similarly, bank rate remains at 6.25%, reverse repo at 5.75 and marginal standing facility at 6.25.

It is a sensible move on part of the MPC. The RBI had decided that inflation was the first demon it needed to tackle and had fixed a 4% rate of inflation that it could allow to happen. Since too many things have happened recently – the festival and marriage season, GST and demonetization – that have all pushed prices north and the inflation index is hovering close to 4%, there is no way the MPC could have lowered rates this time without going against its own set standards.

In any case, lower interest rates are not a guarantee for fresh investments. This is just a ruse by industrial barons to lower costs and make additional profits. If one has a good project, knows that the product will sell and has all other things in place, one will not junk, or even delay, it just because the interest rate is slightly higher. The main point is availability of funds and Indian banks are flush with funds which they can lend to good projects and clean borrowers.

The latest figures have shown that demand is picking up across all sectors. Factory output is also higher than last quarter. In such a scenario, industry should identify products that need more production and set up projects instead of waiting for lower rates. Lower rates will happen in due course. But if competitors cater to the rising demand of goods and services, those who are waiting for lower rates will be left wringing their hands.