RBI's Rates: Holding Steady or Just Being Stubborn?

Thursday, June 15^th 2023

Good Morning ☕

Well, it seems like the Reserve Bank of India is playing the "keep it real" game with interest rates. While some may argue that their policy inaction is increasing real rates and hindering growth, I can't help but imagine them as the guardians of financial reality, determined to keep things "real" no matter what. It's like they're saying, "Hey, let's keep those real rates high and give growth a challenge to overcome!

1. India's May WPI inflation at -3.48%, lowest in seven-and-a-half years

India's wholesale price index (WPI) inflation fell to -3.48% in May, the lowest in seven-and-a-half years, due to a favourable base effect and easing input costs brought about by lower commodity prices. The all-commodity index of the WPI fell 0.9% compared to April, the biggest sequential fall in the index in five months. The food index fell 1.59% year-on-year against a rise of 0.17% in April, while fuel and power fell 9.17% compared to a rise of 0.93% in the previous month. The decline in the rate of WPI is expected to ease inflation pressure in the country.

2. Policy inaction by the RBI is hiking real rates, growth calls for lower rates

The Reserve Bank of India's (RBI) policy inaction is increasing real rates, which is not conducive to growth. The RBI's desired response in an environment of falling inflation and a declining dollar index is to lower rates, not hold them steady. Lower real rates, whether negative or mildly positive, are better than high real rates from the perspective of fueling growth. The real rate of interest is the difference between the rate of interest paid on a loan and the rate of inflation. When the nominal rate remains unchanged when the rate of inflation dips, the real rate goes up.

3. US trade advocacy body urges PM Modi, Joe Biden to target $500-billion-a-year bilateral trade goal

A US trade advocacy group has urged Prime Minister Narendra Modi and President Joe Biden to work towards achieving a bilateral trade goal of $500 billion per year. The group represents US businesses and believes that the two countries can achieve this goal by reducing trade barriers and increasing investment in each other's economies. The current bilateral trade between the US and India was $190 billion last year. The group's call comes as Americans for Free Trade, a coalition of more than 150 industry associations, urged the Biden administration to end "misguided" tariffs.

4. Disinflation to be ‘slow and protracted’, says RBI Governor Shaktikanta Das

Reserve Bank of India (RBI) Governor Shaktikanta Das has said that India's disinflation process is "likely to be slow and protracted" and the central bank may meet its 4% target only in the medium term. He added that the cumulative impact of RBI's monetary policy actions over the last year is still unfolding and yet to materialize fully. RBI's price-gains forecast of 5.1% for the current financial year is well above its aim. Last week, India's rate-setters kept the benchmark repo rate unchanged for a second straight meeting, reiterating the need to align inflation near the mid-point of its 2%-6% range on a durable basis.

5. Aggregate state GST collections growth to moderate to 12-14% in FY24: Crisil

According to domestic rating agency Crisil, the growth in aggregate GST collection for states is likely to moderate to 12-14% in FY24 from 20% in FY23. This means that the top 18 Indian states are expected to record revenue growth of 6-8% in FY24. The gross GST revenue collected in March 2023 was ₹1,60,122 crore, which is the second-highest collection since the implementation of GST. The total gross collection for 2022-23 stands at ₹18.10 lakh crore, and the average gross monthly collection for the full year is ₹1.51 lakh crore. The gross revenues in 2022-23 were 22% higher than last year.

6. Everest Fleet raises $20 million in funding led by Uber, eyes EV expansion

Everest Fleet, a Mumbai-based fleet management company, has raised $20 million in funding led by Uber, with the aim of expanding its electric vehicle (EV) fleet. The company, which operates in the shared mobility space in India and is already a partner of Uber and Ola, plans to transition from a CNG-dominated fleet to one with CNG and EVs in the next five years. By 2026, Everest Fleet aims to have 10,000 EVs as part of its overall fleet. The recent investment will fuel the company's expansion plans, enabling Everest Fleet to extend its presence to additional major cities and explore new territories worldwide.

7. Motilal Oswal appoints Sukesh Bhowal as CEO of Motilal Oswal Home Finance

Motilal Oswal Group has appointed Sukesh Bhowal as the Chief Executive Officer of Motilal Oswal Home Finance Limited (MOHFL) effective June 14, 2023. Bhowal has more than 27 years of experience in various sectors including business management, sales and distribution, retail lending, mortgage lending, and real estate lending. He will work closely with Motilal Oswal, Group MD & CEO in his new role. The company has also appointed Shobhit Doru as the Chief Operating Officer (COO), Rajesh Maiya as the Chief Business Officer (CBO), and Priyanka Shrivastav as the head of Human Resources Officer.

8. SEBI issues demand notices to 4 entities in Fortis Healthcare fund diversion case

The Securities and Exchange Board of India (SEBI) has issued demand notices to four entities in the Fortis Healthcare fund diversion case. The four entities that received notices are Fortis Global Healthcare, RHC Finance, Shimal Healthcare, and ANR Securities. The demand notices came after the entities failed to pay the fine imposed on them by SEBI in May 2020. The matter goes back to 2018 when a media report came out alleging that the Singh brothers, who were the promoters of Fortis Healthcare, had taken out money from the company.

9. Power minister RK Singh urges ISA to promote solar projects in Africa

India's Power Minister, R K Singh, has urged the International Solar Alliance (ISA) to promote grid-scale solar energy projects in African countries to help them get green funds. During a bilateral discussion with a French delegation, Singh emphasized the need for the ISA to take up more solar energy projects, especially in Africa. He suggested that the ISA should set up a de-risking mechanism and tap more green funds to promote grid-scale solar energy projects in the African continent. The two sides also discussed the idea of holding a conference by ISA in Kenya.

10. Indian Oil Corp to set up aviation fuel plant with LanzaJet in Haryana

Indian Oil Corp (IOC) will set up an 80,000-tonne sustainable aviation fuel plant with LanzaJet in Haryana, with an investment of about INR 23 billion ($280.1 million), according to IOC's chairman, S.M. Vaidya. The refiner is also running a pilot project for green fuel in association with Praj Industries in Maharashtra.

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