Can you please explain to me how will inflation increase while the CRR and money supply remains same as before by reducing lending rates? I think you are now confused about the whole thing trying to defend the undefendable.
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Because oil prices have continued increasing. And are expected to further climb with the Iran sanctions taking effect. With the US expected to continue raising their rates, it will continue to weaken the rupee, so the import bill will continue rising. When the govt influences the central bank, foreign investors lose confidence in the country's financial system, so they will pull out of the economy. All these are external factors, but they lead to rise in inflation.
Bhai, what has happened to you? aap to aisay na thay? Oil prices have reduced by over 10% internationally in last ten days. Please check.
Sanctions against Iran have come into force and no one in the world is expecting oil price to go up. See the futures for oil and you will know.
India's unemployment rate jumps to 2-year high of 6.9%
Unemployment rate in the country rose to 6.9 percent in October -- the highest in two years -- according to a report by Centre for Monitoring Indian Economy (CMIE). The estimated number of people employed during October 2018 was 397 million. This was 2.4 percent lower than the rate in October 2017. Around 407 million individuals were estimated to be employed during the same period last year. Only 39.5 percent of the adult population was employed in October, the report suggests.
Labour participation lowest since January 2016
According to the report, 42.4 percent of India’s adult population was willing to work in October 2018. The labour participation rate is a measure of the proportion of adults who are willing to work. This labour participation rate was the lowest recorded since January 2016. Labour participation rate was around 47-48 percent before demonetisation. However, the participation rate fell sharply after note ban and has still not recovered, the report suggests. The report adds that the rise in proportion rise in September was negated in October.
Job seekers on the rise
According to the report, the number of people unemployed who are actively looking for a job has been on the rise.
As of October 2018, 29.5 million unemployed individuals were actively looking for jobs. This was more than the 21.6 million unemployed individuals looking for jobs in during the same period last year.
India's unemployment rate jumps to 2-year high of 6.9%
Unemployment rate in the country rose to 6.9 percent in October -- the highest in two years -- according to a report by Centre for Monitoring Indian Economy (CMIE). The estimated number of people employed during October 2018 was 397 million. This was 2.4 percent lower than the rate in October 2017. Around 407 million individuals were estimated to be employed during the same period last year. Only 39.5 percent of the adult population was employed in October, the report suggests.
Labour participation lowest since January 2016
According to the report, 42.4 percent of India’s adult population was willing to work in October 2018. The labour participation rate is a measure of the proportion of adults who are willing to work. This labour participation rate was the lowest recorded since January 2016. Labour participation rate was around 47-48 percent before demonetisation. However, the participation rate fell sharply after note ban and has still not recovered, the report suggests. The report adds that the rise in proportion rise in September was negated in October.
Job seekers on the rise
According to the report, the number of people unemployed who are actively looking for a job has been on the rise.
As of October 2018, 29.5 million unemployed individuals were actively looking for jobs. This was more than the 21.6 million unemployed individuals looking for jobs in during the same period last year.
India's unemployment rate jumps to 2-year high of 6.9%
Very nice post. This is what I have been suggesting all this while. Don't lower your CRR, don't give money to GOI as demanded by them but at least boost growth by lowering lending rates which alone will boost employment and rural income which in turn will boost growth. Banks earn by lending and interest. By keeping high interest rates and reducing credit growth, we are directly hurting the bottomline of banks. Can that happen by default or is there a design? Yes dear Watson, its by design as traitors are doing what they have to do.
If I may use the dialogues from Sherlock Holmes.
RBI doesn't change rates looking at small changes over short periods of time, they look at the entire picture. Until ground situation actually changes, they will rely on our own inflation numbers to change the rates. If oil prices are in a downward trend, then RBI will make changes accordingly. But right now, since June, inflation was rising.
I think you have run out of arguments. I will rest me case.
We are behaving like victims in front of OPEC. There is need to form our own cartel of oil importers and start buying from countries which offer oil at cheaper rate. I mean aren't consumers supposed to be the king ?
There is a need to further diversify the energy supply, India should consider approaching African & South American countries. These morons are controlling the price in free floating price regime even when there is very low demand.
There is no chance of that happening. It's the seller's market when it comes to oil. We are just lucky that the GCC is so very weak compared to the consumers.
The only way out is to diversify, and the consumer govts are using that as a bargaining chip to keep checks on oil prices so that it does not spiral out of control.
Right now, fossil fuels are the only assured means of power. All other sources of power are unreliable, whereas nuclear power requires massive capital. Unless battery technology improves, the oil cartel rules supreme when it comes to energy.
We buy plenty of oil from Nigeria and Venezuela. We even buy oil from Malaysia, Mexico, Brazil etc. Even the US for a short period of time.
India's second diamond trading centre with 66 lakh sq ft area to open in 2020
Spread over an area of 66 lakh sq ft, Surat Diamond Bourse (SDB), India's second diamond trading centre is set to be completed by 2020. Built at a cost of nearly Rs 2,400 crore, the centre comprises 11 towers of 11 storeys each. The SDB website mentions that the centre is expected to create more than 1.5 lakh jobs. The centre that will house more than 4,200 diamond offices can accommodate 67,000 professionals.
The construction work for the giant complex began in October 2017. The diamond hub for all diamond traders will have offices for both national and international diamond traders.
The SDB Diamond Bourse is not-for-profit organisation, promoted by the SDB Diamond Bourse company that will provide state-of-the-art infrastructure to organisations that manufacture and trade diamonds.
The centre will provide facilities such as safe deposit vaults, custom office, auction house, banking facilities, diamond testing laboratories and online trading inside the bourse. There are 125 elevators in the complex and a 20 lakh sq ft parking lot in the basement.
The SDB is expected to generate business worth of Rs 90,000 crore annually.
Here's how the SDB will look once it is complete:
(Edited by Anwesha Madhukalya)
India's second diamond trading centre with 66 lakh sq ft area to open in 2020; see pics
Spread over an area of 66 lakh sq ft, Surat Diamond Bourse (SDB), India's second diamond trading centre is set to be completed by 2020. Built at a cost of nearly Rs 2,400 crore, the centre comprises 11 towers of 11 storeys each. The SDB website mentions that the centre is expected to create more than 1.5 lakh jobs. The centre that will house more than 4,200 diamond offices can accommodate 67,000 professionals.
The construction work for the giant complex began in October 2017. The diamond hub for all diamond traders will have offices for both national and international diamond traders.
The SDB Diamond Bourse is not-for-profit organisation, promoted by the SDB Diamond Bourse company that will provide state-of-the-art infrastructure to organisations that manufacture and trade diamonds.
The centre will provide facilities such as safe deposit vaults, custom office, auction house, banking facilities, diamond testing laboratories and online trading inside the bourse. There are 125 elevators in the complex and a 20 lakh sq ft parking lot in the basement.
The SDB is expected to generate business worth of Rs 90,000 crore annually.
Here's how the SDB will look once it is complete:
India's second diamond trading centre with 66 lakh sq ft area to open in 2020; see pics
India October inflation likely hit 12-month low, below RBI target: Reuters poll
Indian retail inflation likely slowed to its slowest pace in 12-months in October after food and fuel costs fell, keeping the official consumer prices gauge below the central bank's medium-term target for a third consecutive month, a Reuters poll found.
With the battered rupee gaining slightly against the dollar, a recent cut in fuel taxes and easing global crude oil costs, consumer price inflation likely slowed to 3.67 percent in October from 3.77 percent, according to the poll of 35 economists.
If the data meets forecasts, October will mark the third straight month retail inflation has been below the Reserve Bank of India's medium-term target of 4 percent, supporting the central bank's surprise decision to hold interest rates at its meeting last month.
However, the RBI's shift in its stance to "calibrated tightening" from "neutral" at its October 5 meeting suggests it may raise rates again, tracking other emerging market central banks grappling with weaker currencies as the US Federal Reserve proceeds with a series of rate rises that have propped up the dollar.
"The key factors driving inflation are muted fuel and food prices. Both factors should keep monetary policy on a slightly sombre note," said Shashank Mendiratta, economist at ANZ Bank, one of the most accurate forecasters of Indian inflation last year.
"But the tightening cycle has not ended yet, because there is still some upside risk to oil prices."
The latest inflation data, due 1200 GMT on November 12, will be the first since a set of accusations have surfaced from top RBI policymakers that the government is attempting to influence central bank policy.
While the government appears to have called a truce, economists say the administration's demands that the central bank relax lending curbs and relinquish surplus reserves pose a significant risk to the inflation outlook.
"The RBI has had success in anchoring inflation expectations over the past five years. Any erosion of independence could permanently reverse this trend, affecting spending and saving decisions and wage negotiations and ultimately push up actual inflation," noted Shilan Shah, senior Indian economist at Capital Economics.
While core price pressures likely remained elevated again in October, wholesale price inflation probably eased to 5.00 percent from 5.13 percent in September.
Industrial output likely expanded at an annual 4.3 percent pace in September, the same pace as in August, according to the median forecast of 24 economists.
India October inflation likely hit 12-month low, below RBI target: Reuters poll
Indian retail inflation likely slowed to its slowest pace in 12-months in October after food and fuel costs fell, keeping the official consumer prices gauge below the central bank's medium-term target for a third consecutive month, a Reuters poll found.
With the battered rupee gaining slightly against the dollar, a recent cut in fuel taxes and easing global crude oil costs, consumer price inflation likely slowed to 3.67 percent in October from 3.77 percent, according to the poll of 35 economists.
If the data meets forecasts, October will mark the third straight month retail inflation has been below the Reserve Bank of India's medium-term target of 4 percent, supporting the central bank's surprise decision to hold interest rates at its meeting last month.
However, the RBI's shift in its stance to "calibrated tightening" from "neutral" at its October 5 meeting suggests it may raise rates again, tracking other emerging market central banks grappling with weaker currencies as the US Federal Reserve proceeds with a series of rate rises that have propped up the dollar.
"The key factors driving inflation are muted fuel and food prices. Both factors should keep monetary policy on a slightly sombre note," said Shashank Mendiratta, economist at ANZ Bank, one of the most accurate forecasters of Indian inflation last year.
"But the tightening cycle has not ended yet, because there is still some upside risk to oil prices."
The latest inflation data, due 1200 GMT on November 12, will be the first since a set of accusations have surfaced from top RBI policymakers that the government is attempting to influence central bank policy.
While the government appears to have called a truce, economists say the administration's demands that the central bank relax lending curbs and relinquish surplus reserves pose a significant risk to the inflation outlook.
"The RBI has had success in anchoring inflation expectations over the past five years. Any erosion of independence could permanently reverse this trend, affecting spending and saving decisions and wage negotiations and ultimately push up actual inflation," noted Shilan Shah, senior Indian economist at Capital Economics.
While core price pressures likely remained elevated again in October, wholesale price inflation probably eased to 5.00 percent from 5.13 percent in September.
Industrial output likely expanded at an annual 4.3 percent pace in September, the same pace as in August, according to the median forecast of 24 economists.
India October inflation likely hit 12-month low, below RBI target: Reuters poll
Here is what proves my oinion about Raghuram Rajan and Urjit Patel correct.
India's economic growth held back due to demonetisation, GST: Raghuram Rajan - Times of India
These guys are now blaming the govt while it is them who are directly responsible for the mess.
India's economic growth held back due to demonetisation, GST: Raghuram Rajan - Times of India
These guys are now blaming the govt while it is them who are directly responsible for the mess.
This is a common observation made by all large economic groups in the world. He is just pointing out the obvious.
IMF, World Bank and ADB have this common observation on Modi’s GST and demonetisation
World Bank said, “India’s economy has bottomed out from the deceleration caused by one-time policy events such as demonetisation and GST introduction.”
If you recall, Rajan did not support demonetisation. As for GST, he wasn't in power when it happened.
DM did shake up our economy and that is what it was supposed to do. But look at what he is talking about? What was the growth rate under him without DM and GST? What was our FD and Inflation under him? Why the hell is he not talking about that? The jaichand of India is calling Prithviraj Chouhan of India a traitor.
I don't see anything wrong with what he said. He in fact fixed out FD and inflation. He even charted a course in dealing with our NPAs.
Our FD and inflation went bad under Subbarao. In fact, the economy picked up drastically under Rajan. In Rajan's 2nd year, India grew at 8.2%. And in his third year, India grew at 7.9%. India survived the effects of demonetisation because of Rajan's policies.
The repo rate fell really fast under Rajan.
Had he actually spoken of the falling inflation and rising growth during his tenure, then he would only be praising himself.
The fact that our inflation has been low ever since Rajan and Patel showed up, while also maintaining high growth, is actually a testament to their abilities as very good governors.
How about a growth rate which is lower than what it actually could have been? I am sure you are reading newspapers and what all is being published there? GOI did not ask for 3.6 lakh crores or any money for that matter to meet FD targets.I don't see anything wrong with what he said. He in fact fixed out FD and inflation. He even charted a course in dealing with our NPAs.
Our FD and inflation went bad under Subbarao. In fact, the economy picked up drastically under Rajan. In Rajan's 2nd year, India grew at 8.2%. And in his third year, India grew at 7.9%. India survived the effects of demonetisation because of Rajan's policies.
The repo rate fell really fast under Rajan.
Had he actually spoken of the falling inflation and rising growth during his tenure, then he would only be praising himself.
The fact that our inflation has been low ever since Rajan and Patel showed up, while also maintaining high growth, is actually a testament to their abilities as very good governors.
What was better? 5.1% FD, over 11.5% inflation, CAD of over 4% or present day FD of 3.3%, Inflation of 3.6% and CAD below 2%? Don't give him credit and make him a Hero, he is the villain. What reserves did RBI have in 2014 in terms of Forex and its own reserves and what does it have today on both accounts? And you don't want to reduce Repo rates or give money to GOI. Can anyone justify this stupid approach of RBI? The fight has been started by RBI to show this govt in low light in an election year at the behest of foreign powers.
The political part of Raghuram Rajan's life has spoken. He was a Vatican appointee and his lid is blown off for ever.
Fiscal math on track, no call to RBI for funds: Government
Fiscal math on track, no call to RBI for funds: Government
Fiscal math on track, no call to RBI for funds: Government
India’s shadow banks fear credit crunch will deepen
The skyline of Mumbai’s fashionable Worli district has in recent years become increasingly cluttered with partially built luxury apartment blocks, promoted with huge roadside billboards. Such developments in Mumbai and greater Delhi were financed largely with loans from India’s fast-growing non-bank financial companies (NBFCs), which in turn funded much of that lending through short-term bonds.
Now, a sudden liquidity squeeze in the debt market is prompting concerns about a serious hit to economic growth – and there are growing fears that distress in the high-end property sector, which has suffered stark shortfalls in demand, could trigger a crisis. “If the NBFCs continue to face liquidity problems, they may need to recall some of these loans,” said Sanjeev Prasad, co-head of Kotak Institutional Equities. “And the developers don't have the cash to repay the money immediately. They are sitting on a huge pile of semi-completed projects.”
The problems for Indian shadow banks began in earnest in September after the first in a series of missed loan repayments from entities within IL&FS, a large unlisted infrastructure and finance group. This brought a crunch in the short-term corporate debt market – a key funding source for NBFCs, with IL&FS among the largest issuers. Over the past two years, India’s relatively small corporate debt market enjoyed a surge of investment from debt-focused mutual funds, which have faced a huge wave of redemptions since the IL&FS defaults.
Assets under management at Indian money market funds fell by 35 per cent in September, with net outflows of Rs2.1tn ($28.8bn). The squeeze in the debt market is a major blow to the NBFCs, with bonds and commercial paper accounting for about 60 per cent of their total borrowings at the end of March, according to Moody’s. Within Mumbai’s financial sector, concern is strongest for non-bank lenders that have extensive exposure to real estate developers.
With Indian banks, hamstrung by bad corporate loans, showing little appetite for real estate lending in recent years, non-banks enthusiastically filled the breach. Their total outstanding loans to real estate developers stand at about Rs2tn, Mr Prasad estimates – a nearly threefold increase in three years. But the developers were hit by disappointing demand for their high-end projects – in part, analysts say, because of government measures such as the shock demonetisation of larger banknotes, which made it far harder to launder money through real estate investments.
Overly extravagant property designs also played a role, said Anuj Puri, founder of property consultancy Anarock. “Many of these developers built very large apartments that really became unaffordable,” he said. As developers struggled to service their loans, some shadow banks came to each other’s aid by refinancing the loans, said Saurabh Mukherjea, founder of Marcellus Investment Managers. “It was a case of pass the parcel – and now the music has stopped,” he said.
Recommended The FT View The editorial board The precarious autonomy of India’s central bank While NBFC loans to real estate developers amount to less than a tenth of the sector’s total assets, they are heavily concentrated in a few relatively large, high-profile companies. Shares in Dewan Housing Finance, for example, have fallen by 65 per cent since the start of September. There could be more serious problems for those highly exposed to developers now struggling to service their loans, which cannot be covered by cash flow from apartment sales.
“I'm not convinced that this is entirely a liquidity problem. I think there is also a solvency problem brewing somewhere,” said Kotak’s Mr Prasad. The pressure on the NBFCs will intensify in November and December, when they will need to pay out about Rs1.6tn on debt held by mutual funds, according to Kotak Securities. NBFCs have already stepped up their pace of asset sales, turning to the huge government-controlled banks from which they have aggressively taken market share in housing and consumer lending.
State Bank of India, the country’s largest lender, last month said it would buy up to Rs300bn of loans from NBFCs in the next six months. The RBI has taken steps to encourage banks’ support for NBFCs, on November 2 announcing that they would be allowed to provide partial guarantees for bonds issued by NBFCs. It has also taken measures to boost liquidity, including a government bond-buying programme worth Rs560bn over the past two months.
Such measures, however, have fallen far short of satisfying the government, which is pushing the central bank to pursue bolder measures. The pressure has prompted a thinly veiled public protest from one of the RBI’s deputy governors, and speculation that governor Urjit Patel could resign after its next board meeting on November 19.
Whatever the outcome of the current crisis, the momentum of the NBFCs has taken a severe blow, says Prabodh Agarwal, chief financial officer of IIFL, one of the largest companies in the sector. “Against the 35-40 per cent loan growth we were looking at, that will be down to 10-15 per cent for the next two quarters,” Mr Agarwal said. “There is a sense of cautiousness, and growth will slow down considerably.” Even stronger NBFCs have been forced to dramatically scale back their growth targets, he added – a blow to economic momentum, with the banking sector showing little sign of picking up the slack.
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The skyline of Mumbai’s fashionable Worli district has in recent years become increasingly cluttered with partially built luxury apartment blocks, promoted with huge roadside billboards. Such developments in Mumbai and greater Delhi were financed largely with loans from India’s fast-growing non-bank financial companies (NBFCs), which in turn funded much of that lending through short-term bonds.
Now, a sudden liquidity squeeze in the debt market is prompting concerns about a serious hit to economic growth – and there are growing fears that distress in the high-end property sector, which has suffered stark shortfalls in demand, could trigger a crisis. “If the NBFCs continue to face liquidity problems, they may need to recall some of these loans,” said Sanjeev Prasad, co-head of Kotak Institutional Equities. “And the developers don't have the cash to repay the money immediately. They are sitting on a huge pile of semi-completed projects.”
The problems for Indian shadow banks began in earnest in September after the first in a series of missed loan repayments from entities within IL&FS, a large unlisted infrastructure and finance group. This brought a crunch in the short-term corporate debt market – a key funding source for NBFCs, with IL&FS among the largest issuers. Over the past two years, India’s relatively small corporate debt market enjoyed a surge of investment from debt-focused mutual funds, which have faced a huge wave of redemptions since the IL&FS defaults.
Assets under management at Indian money market funds fell by 35 per cent in September, with net outflows of Rs2.1tn ($28.8bn). The squeeze in the debt market is a major blow to the NBFCs, with bonds and commercial paper accounting for about 60 per cent of their total borrowings at the end of March, according to Moody’s. Within Mumbai’s financial sector, concern is strongest for non-bank lenders that have extensive exposure to real estate developers.
With Indian banks, hamstrung by bad corporate loans, showing little appetite for real estate lending in recent years, non-banks enthusiastically filled the breach. Their total outstanding loans to real estate developers stand at about Rs2tn, Mr Prasad estimates – a nearly threefold increase in three years. But the developers were hit by disappointing demand for their high-end projects – in part, analysts say, because of government measures such as the shock demonetisation of larger banknotes, which made it far harder to launder money through real estate investments.
Overly extravagant property designs also played a role, said Anuj Puri, founder of property consultancy Anarock. “Many of these developers built very large apartments that really became unaffordable,” he said. As developers struggled to service their loans, some shadow banks came to each other’s aid by refinancing the loans, said Saurabh Mukherjea, founder of Marcellus Investment Managers. “It was a case of pass the parcel – and now the music has stopped,” he said.
Recommended The FT View The editorial board The precarious autonomy of India’s central bank While NBFC loans to real estate developers amount to less than a tenth of the sector’s total assets, they are heavily concentrated in a few relatively large, high-profile companies. Shares in Dewan Housing Finance, for example, have fallen by 65 per cent since the start of September. There could be more serious problems for those highly exposed to developers now struggling to service their loans, which cannot be covered by cash flow from apartment sales.
“I'm not convinced that this is entirely a liquidity problem. I think there is also a solvency problem brewing somewhere,” said Kotak’s Mr Prasad. The pressure on the NBFCs will intensify in November and December, when they will need to pay out about Rs1.6tn on debt held by mutual funds, according to Kotak Securities. NBFCs have already stepped up their pace of asset sales, turning to the huge government-controlled banks from which they have aggressively taken market share in housing and consumer lending.
State Bank of India, the country’s largest lender, last month said it would buy up to Rs300bn of loans from NBFCs in the next six months. The RBI has taken steps to encourage banks’ support for NBFCs, on November 2 announcing that they would be allowed to provide partial guarantees for bonds issued by NBFCs. It has also taken measures to boost liquidity, including a government bond-buying programme worth Rs560bn over the past two months.
Such measures, however, have fallen far short of satisfying the government, which is pushing the central bank to pursue bolder measures. The pressure has prompted a thinly veiled public protest from one of the RBI’s deputy governors, and speculation that governor Urjit Patel could resign after its next board meeting on November 19.
Whatever the outcome of the current crisis, the momentum of the NBFCs has taken a severe blow, says Prabodh Agarwal, chief financial officer of IIFL, one of the largest companies in the sector. “Against the 35-40 per cent loan growth we were looking at, that will be down to 10-15 per cent for the next two quarters,” Mr Agarwal said. “There is a sense of cautiousness, and growth will slow down considerably.” Even stronger NBFCs have been forced to dramatically scale back their growth targets, he added – a blow to economic momentum, with the banking sector showing little sign of picking up the slack.
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