Highlights of Third Quarter Review of FY09 RBI Monetary Policy

q  All key rates viz. bank rate, CRR, repo and reverse repo kept unchanged.

q  Liquidity has improved significantly, but extends the special refinance facility to banks for liquidity management to Sep 30 from Jun 30 earlier also extends the special repo facility to NBFCs, housing finance companies, MFs till Sep 30.

q  Inflation target is revised below 3% till Mar-end vs previous target of below 7% on the back of fall in global commodity, oil price fall and local supply-demand management.

q  RBI says that the looming global crisis will dent India's growth trajectory and there is a period of painful adjustment ahead; revised the domestic GDP target to 7% with downward bias vs 7.5-8.0% in its previous forecast.

q  RBI’s FY09 stance is to give comfortable liquidity to meet loan growth, expects fiscal deficit at 5.9% of GDP vs 2.5% earlier.

q  RBI says it continues to maintain vigil, and monitor domestic and global events and is ready to act swiftly, decisively as demonstrated earlier as and when warranted.

q  RBI says that maintaining financial stability was immediate challenge as there have been severe disruptions in global money, foreign exchange markets with the local share market severely impacted by global asset price fall.

q  RBI says that the transmission of policy rate signal to credit market is subdued and transmission of policy rate signal to G-Sec market is effective; adds that there is more room for bank to cut rates in response to policy cues.

q  The global economic environment continues to be uncertain, even though central banks in advanced countries have reduced their policy interest rates to historically low levels; the major global concern now is to forestall the worst recession since the 1930s

 

Indian Economy

q  The Central Statistical Organisation maintains its estimate of 9.0% growth in the Indian economy in 2007-08; however, it scaled up India’s GDP growth for 2006-07 to 9.7% from 9.6% estimated earlier and also revised 2005-06 growth to 9.5% from 9.4%

q  India's key infrastructure industries slowed down to 2.3% growth in December from 3.2% a year ago; December growth was, however, higher than 1.8% a month ago

q  India’s government's fiscal deficit rose 181.3% on year to Rs.2.183 trillion in Apr-Dec 2008-09, which accounted for 163.8% of the Budget target; revenue deficit during Apr-Dec was Rs.1.738 trillion, up 215.0% from the Budget target

q  Government's total receipts during Apr-Dec fell 4.5% to Rs.3.790 trillion, while net tax revenues grew 4.7% to Rs.3.099 trillion; the total spending during Apr-Dec rose 25.9% from a year ago to Rs.5.972 trillion

q  Government's tax collection for December fell 18.6% on year to Rs.69354 cr from Rs.85240 cr a year ago; corporate tax collection for December fell 17.1% on year to Rs.35455 cr, while income tax mop-up was down 31.5% to Rs.10906 cr in the same period

q  India’s forex reserves fell to $247.62 bn for the week ended Dec 23 from $252.18 bn a week ago.

q  Finance Minister Pranab Mukherjee said that the fundamentals of the Indian economy are sound, and the country is likely to grow around 7% in the current financial year ending March.

q  IMF cuts its forecast on India's growth in 2009 to 5.1% from 6.3% estimated in November, due to the deepening of the global financial crisis.

q  The Indian economy is expected to recover faster from the global meltdown than the rest of the world says Commerce and Industry Minister

q  NCAER cuts India's growth forecast for the year ended March to 6.7% from 7.6% earlier

q  India's headline inflation rate rose to 5.64% for the week ended Jan 17 from 5.60% a week earlier

q  Minister of State Finance says the cut in petroleum prices will bring down inflation by more than one percentage point

q  RBI Deputy Governor says that there is a need to look at inflation expectation over medium term and commodity price fall will take time to impact product price

q  India’s direct tax mop up for Apr 1-Jan 27 rose only 11.8% on year to Rs 2.46 lakh cr from Rs 2.20 lakh cr a year ago

q  India’s excise collections in December fell 40% on year to Rs 6488 cr, while customs mop-up declined 11% to Rs 7391 cr; service tax collections during the month fell 4% YoY to Rs.4244 cr

 

 

Thanks & Regards

 

Aditya Kachru

Investment Consultant & Associate Broker

PgPM-Finance, BCA

ARN-40736, NCFM-187929

Delhi-NCR

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