Professional Documents
Culture Documents
Business News › News › Economy › Policy Search for News, Stock Quotes & NAV's
CHOOSE
11:08 AM | 05 DEC LIVE ெசன்ெசக்ஸ் நிஃப் 50 ேகால் (எம் எக்… எஸ் /ஐஎ… CREATE LANGUAGE
PORTFOLIO
MARKET STATS 35,920 -213.80 10,785 -84.00 30,900.00 -52.00 70.58 0.10 TAM
Investors are watching how Patel will respond to the state’s push for more say over the
central bank’s role. Economic Secretary Subhash Chandra Garg, a government
representative on the RBI’s board, has called for the bank’s governance structure to be
changed and panels set up to oversee its functioning.
The RBI will issue a statement at 2:30 p.m. in Mumbai followed by a press conference by Patel 15 minutes later. Here’s a look at what
else to watch out for:
Tight Liquidity
Since the last meeting in October, liquidity in the financial system has declined, forcing lenders to raise rates. Some of the reasons
include sales tax payments to the government, a seasonal pick-up in loans and intervention by the central bank in the foreign-exchange
market to prop up the rupee.
The RBI may seek to assure investors about liquidity conditions by stepping up bond purchases and pumping more cash into the
system. The central bank -- which has limited its bond purchases to 400 billion rupees ($5.7 billion) a month since October -- is expected
to increase that to 500 billion rupees a month in the March quarter, according to Indranil Sen Gupta, an India economist at Bank of
America Merrill Lynch.
https://economictimes.indiatimes.com/news/economy/policy/india-decision-guide-watch-for-rbi-governors-views-on-autonomy/printarticle/66947647.cms 1/4
12/5/2018 India decision guide: Watch for RBI Governor's views on autonomy - The Economic Times
Subdued Inflation
First the good news. Inflation eased to a 13-month low of 3.31 percent in October, well below the 3.9 percent lower end of the RBI’s
forecast range for the second half of the financial year to March. The miss may prompt the RBI to lower inflation projections amid a slide
in the price of crude oil, the nation’s top import, and a rebound in the rupee from record lows.
Now to the bad news. A subdued inflation reading on account of falling food prices is likely to translate into lower incomes for farmers,
which in turn could be a drag on economic growth. Higher guaranteed crop prices announced by the government hasn’t really been of
much help so far.
“If public sector construction slows following the national elections in 2019 as the government shifts its focus back to fiscal consolidation,
we believe that rural incomes, and with them food inflation, will remain contained for longer,” said Pranjul Bhandari, chief India
economist at HSBC Holdings Plc.
Slower Growth
Gross domestic product growth in the July-September quarter was disappointing, slowing to 7.1 percent from 8.2 percent in the previous
three months to June.
https://economictimes.indiatimes.com/news/economy/policy/india-decision-guide-watch-for-rbi-governors-views-on-autonomy/printarticle/66947647.cms 2/4
12/5/2018 India decision guide: Watch for RBI Governor's views on autonomy - The Economic Times
While activity might rebound as some high-frequency data suggest, consumption -- the backbone of the economy -- is likely to suffer due
to tighter liquidity conditions stemming from the shadow banking sector.
Prachi Mishra, chief India economist at Goldman Sachs Group Inc., estimates the cash crunch could lower its growth forecast for the
current fiscal year by 12 to 21 basis points.
Stay on top of business news with The Economic Times App. Download it Now!
https://economictimes.indiatimes.com/news/economy/policy/india-decision-guide-watch-for-rbi-governors-views-on-autonomy/printarticle/66947647.cms 3/4
12/5/2018 India decision guide: Watch for RBI Governor's views on autonomy - The Economic Times
Copyright © 2018 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service
https://economictimes.indiatimes.com/news/economy/policy/india-decision-guide-watch-for-rbi-governors-views-on-autonomy/printarticle/66947647.cms 4/4