Posts Tagged ‘monetary’

RBI’s Move to Modify the ECB Guidelines

India Inc cautiously welcomed the RBI”s move to modify the ECB guidelines and said this also indicates a gradual withdrawal of stimulus measures announced to help the industry tide over the global crisis.

However, Ficci said that the RBI”s step may make availability of funds through ECB route more expensive while the ECB route is frequently used by SMEs for raising funds, which are even otherwise available at a high price from the domestic banking system.

Meanwhile, it also said that the relaxation of certain ECB norms given by the RBI during the liquidity crisis period to India Inc have been gradually withdrawn that is an indicator of a gradual withdrawal of the stimulus package.

Further, CII said that RBI”s steps are an indication of slowly unwinding of the liquidity enhancing measures while these measures should not be seen as a precursor to monetary tightening through a rate hike.

On the other hand, the chamber welcomed the central bank”s decision to allow NBFCs exclusively involved in financing infrastructure projects to avail of ECBs.

RBI’s Monetary Policy – Analyst View

Hello Friends, last month we witnessed loads of action with the RBI’s monetary policy being laid down.

Just an extension of our previous blog “RBI’s Monetary Policy Stance – Part 3.

 

 

Analyst View RBI policy

RBI Monetary Policies and Projections Part 4

 


In this Blog we would read the Analyst views with respect to the monetary point of view.

Analysis from the Analyst from monetary point of view:

Though there is a hike in SLR to 25 % but we think it will not have much more impact because the total investment book of commercial banks is already at 30.4% of total NDTL.

Although key rates of CRR, reverse repo and repo rates have been left unchanged, special repo facilities have been withdrawn.

Real estate loans provisioning are set to become more expensive.

NPA norms for banks have been tightened while liabilities of scheduled banks arising from transactions in CBLO with Clearing Corporation of India Ltd. (CCIL) will be subject to maintenance of CRR.

🙂

The RBI is thus attempting to withdraw liquidity from areas where excess liquidity had reached a point it was more than comfortable with, while also targeting better quality management of credit.

Another point is that in the policy stance, RBI has given first priority to keep a vigil on trends in inflation and to be prepared to respond swiftly and effectively through policy adjustments to stabilize inflation expectations.

Second, it will monitor the liquidity situation closely and manage it actively to ensure that credit demands of productive sectors are adequately met while also securing price stability and financial stability.

Lastly, RBI will maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process.

🙂

In conclusion, it bears emphasis that the Reserve Bank is mindful of its fundamental commitment to price stability.

It will continue to monitor the price situation in its entirety and will take measures as warranted by the evolving macroeconomic conditions swiftly and effectively.

🙂

To conclude all the factors it seems that with the withdrawal of special liquidity measures together with an imposition of CRR in borrowing in CBLO market, RBI has taken a first to step towards controlling liquidity.

 

With prioritizing inflation it is expected that the next step of RBI could hike in CRR as it has also reduced the indicative growth of Broad money to 17% from 18%.

🙂

Note : For More Finance Gyan, Latest Industry, Stock Market, Economy News and Updates, please click here


RBI’s Monetary Policy Stance – Part 3

Just an extension of our previous blog “RBI, Monetary Projections And Indian Economy


RBI’s Monetary Policy Stance - Part 3

RBI’s Monetary Policy Stance - Part 3

In this Blog we would touch upon the aspects as that of RBI’s Monetary Policy Stance and few more facts which carries direct or indirect connection with the RBI Policies.

🙂

For example, business confidence index ,industrial recovery status, overall consumption and investment, export-imports status etc;

The True Facts:

So far business confidence has also improved, and demand conditions seem to have picked up, as seen by better order book and increased capital finance requirements.

Industrial recovery seems to be on its way with 5.8% growth in IIP during April-August ’09.

A revival in capital flows, and stronger performance of the core infrastructure sector (4.8% for April-August ’09) seems to be indicating a slight recovery in the economy.

However, there has been a deceleration in growth of private consumption and investment demand, and raw material prices are expected to rise on account of inflationary pressures.

The deficient monsoon could also reduce rural demand.

First quarter earnings of corporates reflect a decline in sales, and non-food credit growth has decelerated, with credit card and consumer durables related credit turning negative.

Exports have continued to decline as external demand dependent services remain sluggish.

The economy is showing some signs of recovery, while a rising CPI has now pushed WPI into the positive territory, mainly on account of higher food prices.

The RBI’s stance will thus have to manage the trade-off inflationary pressures between supporting growth and controlling .

🙂

Monetary Policy Stance

On the basis of the above overall assessment, the stance of monetary policy for the remaining period of 2009-10 will be as follows:

– Keep a vigil on the trends in inflation and be prepared to respond swiftly and effectively through policy adjustments to stabilize inflation expectations.

Monitor the liquidity situation closely and manage it actively to ensure that credit demands of productive sectors are adequately met while also securing price stability and financial stability.

-Maintain a monetary and interest rate regime consistent with price stability and financial stability, and supportive of the growth process.

🙂

Stay Tuned for more on the topic.

We would cover Analysis view from the Analyst with respect to the monetary point of view.

Note : For More Finance Gyan, Latest Industry, Stock Market, Economy News and Updates, please click here

BULLION TURNING TO BILLION

Gold has always been one of the favorite avenues for investors to put their money during any economic uncertainty. We’re into a new phase of this bull market that’s been going on since 2004. Factors like the credit crisis, ups and downs in the global economy, the response of the governments and the monetary authorities set up a very positive environment for gold, not only in the near term, but many years to come.
On the contrary,jewelry demand, however, has fallen off a cliff—it’s almost non-existing right now and a lot of scrap is coming into the market due to very high prices. This is also one of the reasons for which we had witnessed some range bound moves in gold prices in past few months. (Two dynamics in the gold market were pulling against each other as strong investment demand and very weak jewelry demand.
Gold is up by roughly 250% since 1999 and approx. 25% from Sept. 2008 till date as we’re seeing money coming into the gold sector. I think the gold market is out of crisis mode. It has been recognized as an alternative, as a safe haven hedge. Sentiment among investors, especially individuals, is very positive. It’s mainly high net worth individuals who are buying the stuff up with a long-term view. Over the period of time we have also seen that investors are putting more and more money into gold as an investment. However, this increase in investment has come from tiny levels. Retail investment in gold remains tiny comparative to investments in equity and bond markets. Also, the physical gold market is such a tiny market comparative to equity, bond, currency and derivative markets that even small flows from these massively larger markets can result in outsize moves up in the gold price in future.

Gold has always been one of the favorite avenues for investors to put their money during any economic uncertainty.
Gold Coin

We’re into a new phase of this bull market that’s been going on since 2004. Factors like the credit crisis, ups and downs in the global economy, the response of the governments and the monetary authorities set up a very positive environment for gold, not only in the near term, but many years to come.

On the contrary,jewelry demand, however, has fallen off a cliff—it’s almost non-existing right now and a lot of scrap is coming into the market due to very high prices. This is also one of the reasons for which we had witnessed some range bound moves in gold prices in past few months. (Two dynamics in the gold market were pulling against each other as strong investment demand and very weak jewelry demand.

Gold is up by roughly 250% since 1999 and approx. 25% from Sept. 2008 till date as we’re seeing money coming into the gold sector. I think the gold market is out of crisis mode. It has been recognized as an alternative, as a safe haven hedge. Sentiment among investors, especially individuals, is very positive. It’s mainly high net worth individuals who are buying the stuff up with a long-term view. Over the period of time we have also seen that investors are putting more and more money into gold as an investment.

However, this increase in investment has come from tiny levels. Retail investment in gold remains tiny comparative to investments in equity and bond markets. Also, the physical gold market is such a tiny market comparative to equity, bond, currency and derivative markets that even small flows from these massively larger markets can result in outsize moves up in the gold price in future.

A Letter by a Common Man to India’s PM :)

A Letter by a Common Man to India's PM :)

Dear Mr. Prime Minister

Greetings,

Soon after you swear in as the PM of India and your initial steps, post your appointment, had exactly fitted the requirements of the situation.

But there was a sad development too : Induction of few ministers in your team whose integrity was widely suspect and who, as per their own affidavits of election nominations, were going under investigations for criminal offenses.

You must be aware being a former top civil servant, that if superior of any government employee has expressed even the slightest doubt about his honesty and integrity in his performance appraisal record, then same Govt employee is barred from promotion and sensitive posts or even retired compulsorily from service before his time.

Ministers who wield power and authority over thousands of crores of rupees worth of public assets and whose decisions can make a whole lot of difference between progress and disaster, need to be, like Caesar’s wife, above suspicion. It is surprising how you overlooked this fact while constituting ministries in both your terms of office.

No Compromises !!

‘We, the People,’ the acknowledged sovereign masters in democracy, can only hope that your own vigilance and the idealism and acute sense of right and wrong of the young blood you have inducted into the ministry will help to contain and terminate any acts of malfeasance and misuse of power.

Occasionally, though, to our disappointment, you also take recourse to the age-old excuse of politics being the art of the possible. This has been serving as a cover for corrupt politicians to hide their many sins.

Ideals and principles are not incompatible with clean politics and good governance. In India itself, there have been leaders, alas, though few, who have proved that accountable and fair governance is possible.

Actually, there was, and is, no need for you to make the kind of compromises that are the bane of the country’s politics. You have received a thumping mandate as a prime minister this time and you could have acted as a tough PM in this regard.

Accursed black hole

The respect and trust for you among Indian masses have in fact contributed to the impressive victory for Congress party. The parties in the Opposition are in disarray, and are unlikely to pose any problem in the foreseeable future. You, therefore, are in an unchallengeable position to give a determined drive to the formulation and execution of policies that you judge as the best for the country.

You have got the task of to take the country forward in all directions that matter: Political, economic, social, scientific, technological, fiscal, monetary, budgetary. No doubt you would have received plenty of suggestions and ideas as India has never suffered from any dearth of bright ideas on what needs to be done.

But real issue is not about bright ideas but rather India’s policy maker’s shaky grip on the methods of getting them done within the proposed time frames and cost estimates.

The result is that all the promises held out to the people at large vanish into the accursed black hole of failure of implementation.:(

In nut shell, lack of attention to know-how makes a over indulgence of know-what purposeless.

All who go through India’s ills and cures enumerated in the President’s Address, for instance, will find themselves in full agreement with each one of them.

For the laudable intentions contained in the Address to turn a reality, and reach their benefits to the aam aadmi, it is must for you to inculcate in your ministers a work culture that encourage and adherence to prudence, propriety and probity within their spheres of action.:)

The observations that follow are to help you to that end.

Independent and Transparent committees to evaluate tenders

There is a persistent and growing belief among all sections of aam aadmis by whom your government and party swear that huge sum is demanded and given as bribes for allocation of contracts for purchases and sanction of projects. Any new project or purchase announced, an aam aadmi presumption runs like that purpose of project is just to facilitate high personages in authority to make money, not to serve project’s real interest.

Better make all financial transactions absolutely transparent and pass evaluation of tenders above, say, Rs 100 crores, to an independent committee of former officials of the Comptroller and Auditor General of India (CAG) nominated jointly by the CAG and the Chief Vigilance Commissioner, and go by its findings, besides giving them wide publicity in the Web sites of the respective ministries.

Relentless Monitoring

Effective leadership consists in relentless monitoring and follow-up of orders without remaining content with merely issuing them. It will be great if you can regularly devote little time to review pending matters with ministers.

If you can make your ministers as well as the chief ministers to adopt this practice, it will surely result in an immediate flow in the tempo of action leading to swift service delivery and timely completion of projects. It will also put babudom on notice that there will be zero tolerance for arrogant response towards the aam aadmi.

Accustom Minister to think of Nation not constituencies

Until about 40 or so years ago, Central ministers used to visit every part of India to gauge a personal idea of the prevailing situations and mingle with the aam aadmis to know of their grievances and gain profit from their suggestions.

Nowadays, whether it is the central or state minister, either because he lacks self-confidence or because he is uncomfortable with English or local language, he rarely, if ever, ventures into the rest of the country. His obsession is mostly with channeling funds and jobs to his constituency or his native state.

Accustoming ministers to think of the nation as a whole will help rid the narrow politics of regionalism.

Reviving orientation camps for ministers

Rajiv Gandhi conceived the brilliant idea of a retreat in which ministers, elected representatives, bureaucrats, officers of the police and defence forces and eminent achievers of the civil society would spend a couple of days engaged in informal and friendly exchanges of views, ideas and experiences.

This helped in their cultivating a better understanding of their field of action and built up a better connection in forging a collective front on issues and problems facing the country.

I would earnestly urge you to revive this practice for developing a synergistic approach which may lead to effective and expeditious implementation of projects and schemes.

Reviving Inter-State and Zonal Councils

Mechanisms like zonal councils and the inter-state council, envisaged by India’s far-sighted Constitution makers for mutual reinforcement of the Centre and the states and contingency planning, have remained unused and ad hoc responses to situations have become the rule.

It is high time they were made into potent instruments for building a common front, regardless of parties in power, against present and future challenges.

I shall continue to be in touch with you as and when necessary.

Yours sincerely:

A Common Man 🙂