Latest news with #Sabnavis
India Today
5 days ago
- Business
- India Today
RBI MPC: 25 bps rate cut on the cards? Here's all you need to know
The Reserve Bank of India (RBI) will begin its three-day monetary policy committee (MPC) meeting on June 4, with the policy decision expected to be announced on June 6. All eyes are on whether the central bank will cut the repo rate by 25 basis points (bps) for the third time in a is growing belief among economists and market experts that the RBI will reduce the repo rate again, bringing it down further from the current 6%. The expectation comes as consumer price inflation has stayed below the RBI's target of 4% and economic growth has slowed, partly due to global uncertainties like recent trade actions in the RATE CUTS ALREADY THIS YEARSo far in 2025, the RBI has already cut the repo rate twice, once in February and then in April, by 25 bps each time. These cuts brought the key lending rate down to 6%. Alongside the rate cuts, the RBI also changed its stance from 'neutral' to 'accommodative' in April, meaning it is now more open to supporting economic growth by easing rates further if the earlier rate cuts, several banks have lowered their lending rates, making loans cheaper for individuals and businesses. Many believe another cut this week will help support sectors like real estate and small businesses, which have been looking for EXPERTS ARE SAYINGMadan Sabnavis, Chief Economist at Bank of Baroda, said that inflation has been low and the RBI has managed liquidity well, which makes room for another 25 bps cut. "The commentary on both growth and inflation will be important as there are expectations of revisions in their forecasts for both the parameters," he also mentioned that the RBI is likely to offer more insights into how global developments—like the end of US tariff relief in July—could affect the Indian Nayar, Chief Economist at ICRA, also expects more rate cuts to follow. She said, "A 25 bps rate cut is expected next week, followed by two more cuts over the subsequent two policy reviews, taking the repo rate to 5.25% by the end of the cycle."Manish Singhal, Secretary General of Assocham, agreed that the RBI should support the economy. "Though the INR is likely to come under depreciation pressure in the short term, especially if global interest rates remain high, its impact will depend on crude oil prices and other global factors," he ON HOME LOANS AND HOUSINGIf the RBI cuts the rate again, it is expected to give a boost to the real estate sector. Pradeep Aggarwal, founder and chairman of Signature Global, said that homebuyers could benefit from another rate cut. 'It would act as a catalyst for increased housing demand across segments. As a result, both first-time homebuyers and investors are likely to be encouraged to enter the real estate market,' he Kapur, Chairman of Krishna Group and Krisumi Corporation, echoed this view. 'The real estate sector in particular stands to benefit from a reduction in policy rates, as it makes home loans affordable for buyers. A boost to real estate demand will also help sectors like cement, steel, and construction equipment, driving economic momentum,' he UNDER CONTROLOne of the main reasons experts expect another cut is because inflation is under control. Retail inflation in April 2025 fell to 3.16%—the lowest year-on-year level since July 2019. The RBI has been tasked with keeping inflation at 4%, with a range of 2% on either side. So, the current level is well within RBI's annual report, released last week, confirmed that the central bank will continue managing liquidity to support productive sectors of the economy. It also said the RBI will adjust its approach depending on how inflation and growth trends YIELDS AND MARKET REACTIONA recent article in the RBI's May Bulletin said that domestic bond yields have come down to multi-year lows. This is partly due to the back-to-back rate cuts and liquidity-boosting measures taken by the RBI. The report added that both credit and monetary conditions are in line with the central bank's plan to support the economy while keeping inflation under GDP growth is estimated to have dropped to 6.5% in FY25, the lowest in four years. A lower interest rate can help push demand in the economy and encourage investments. advertisement
The Hindu
28-05-2025
- Business
- The Hindu
IIP growth slows to an 8-month low of 2.7% in April
Growth in industrial activity in the country slowed to an eight-month low of 2.7% in April 2025, dragged down by lower activity in the mining & quarrying, electricity, primary goods, infrastructure & construction, and consumer non-durables sectors. According to the Index of Industrial Production for April 2025 released by the Ministry of Statistics and Programme Implementation, growth in industrial activity was last slower in August 2024, when it had contracted 0.1%. Also read | Industrial production slows, IIP at 6-month low of 2.9% in February 2025 In April this year, the mining and quarrying sector contracted 0.2%, its worst performance since August 2024. The manufacturing sector, however, saw a growth of 3.4%, a three-month high. The electricity sector saw growth slowing to 1.1% in April, also the slowest since August 2024. Similarly, the primary goods category contracted by 0.4% in April, an eight-month low. Notably, the capital goods sector saw very strong growth of 20.3% in April 2025, albeit on a low base of 2.81% in April last year. Also read | IIP grows 3% as electricity, manufacturing output surge 'On the forefront was a smart increase in capital goods supported by both electrical and non-electrical machinery,' Madan Sabnavis, chief economist at the Bank of Baroda said. 'While there was a favourable base effect, growth of 20.3% is impressive. It needs to be seen if this is maintained in the coming months as one is looking at investment to pick up.' The consumer durables segment saw growth quickening to 6.4%, a three-month high. 'The successful rabi crop as well as the upcoming marriage season has helped to prop up production,' Mr. Sabnavis added. 'The auto sector was also a driver of production with growth of 15.4%.' The consumer non-durables sector, however, saw a contraction of 1.7% in April 2025, the third consecutive quarter of contractions. In fact, the sector has contracted in four out of the last five months.
Hans India
24-05-2025
- Business
- Hans India
RBI to pay record Rs 2.69 lakh-crore dividend to govt
New Delhi: The Reserve Bank of India will pay Rs 2.69 lakh crore—the highest-ever surplus—as dividend to the central government for fiscal 2025, the central bank said in a statement on Friday. This compares with Rs 2.1 lakh crore and Rs 87,420 crore transferred to the government in the financial year-ended March 2024 and 2023 respectively. Economists had pegged the surplus transfer to the government in the range of Rs 2.5-3.5 lakh crore for the fiscal. The RBI board also revised the Economic Capital Framework. The revised framework stipulates the risk provisioning under the Contingent Risk Buffer be maintained within a range of "6.0 ± 1.5% of the balance sheet size as against the existing level of 6.5%, with a lower bound of 5.5%". The surplus transfer this year is likely a function of higher forex sales by the RBI, higher earnings on forex assets, and higher earnings on VRR operations as this was a deficit year, Madan Sabnavis, chief economist at the Bank of Baroda said. The government targeted Rs 2.56 lakh crore this year from RBI plus PSBs and other government FIs. "With this increase, we believe there could be an additional Rs 50-60,000 crore that will be available assuming that banks' dividend could be lower in a declining interest rate era," said Sabnavis. Still, he does not expect any substantial impact on the government's fiscal deficit. "At best there could be a benefit of around 0.1% in deficit which can improve from 4.4% to 4.3%," he said.
Mint
09-05-2025
- Business
- Mint
Economists predict short-term impact of rupee depreciation, but border tensions may worsen impact
New Delhi: Economists expect the impact of the Indian rupee's sharp drop against the US dollar to be short-lived, despite concerns over inflation, foreign investment, and fiscal stability, as escalating India-Pakistan tensions, a strengthening US dollar, and a market sell-off drive the currency's decline. At the same time, they warned that things could take a turn for the worse if the conflict with Pakistan lingers. The rupee's 88-paise drop on Thursday marked its steepest single-day fall in more than two-and-a-half years. On Friday, it opened 0.2% lower at 85.85 against the US dollar, and thereafter depreciated 15 paise to 85.869 in early trade. In comparison, the rupee stood at 83.51 against the dollar a year ago (9 May 2024), according to Bloomberg data. 'The rupee is echoing the turmoil in the political space, as well as the limited gains made by the dollar,' said Madan Sabnavis, chief economist at the Bank of Baroda. 'This will continue until the situation stabilises. The dollar can strengthen as agreements are reached on tariffs with other countries.' Sabnavis noted that while a falling rupee may slightly increase import costs, weaker global commodity prices—particularly oil—should help offset this effect. 'Investors would compare this with changes in other countries, but the impact is more of a short-term nature,' he added. The currency's sharp decline is linked to the latest flare-up in India-Pakistan tensions that followed from a terrorist attack in Kashmir's Pahalgam. Tensions have since escalated with India targeting terror infrastructure in Pakistan, after which both countries have been targeting each other's military facilities in different locations. According to Debopam Chaudhuri, chief economist at Piramal Enterprises Ltd, the rupee's depreciation against the US dollar is driven by a stronger dollar that has been boosted by optimism over US-China tariff talks, and rising India-Pakistan tensions. 'Despite these dual pressures, USD-INR has so far held above its record low of 87, last seen in March 2025,' said Chaudhuri, adding that this would suggest the weakness in the rupee is temporary, provided the military situation stabilizes. 'However, if the conflict escalates further, the USD-INR could once again fall to 87 or below in the near term,' he added. In a report on Friday, Bajaj Broking Research said a short-term geopolitical crisis could disrupt investor sentiment and slow economic activity. 'However, India's structural growth drivers—such as domestic consumption, digital transformation, and policy reforms—are likely to sustain momentum,' it said. 'Unless prolonged instability affects key sectors, any setback would be temporary rather than a derailment of India's long-term trajectory.' Abhay Tilak, director and secretary, Institute of Political Economy, said there needs to be constant monitoring of the cost of any expenses incurred in military exercises. 'If the current situation escalates to a full-blown war, the impact on the fiscal deficit as well as the current account deficit would be immense,' he said. 'Due to the depreciated rupee, the import bill will swell and in the face of dismal scenario on the export front, it will eventually lead to widening of the current account deficit.' Tilak added that the colloquial theory of exports benefiting out of rupee depreciation is unlikely to be followed in the current scenario. 'That is because of the global shift towards protectionist measures. Exports simply have not attracted enough demand,' he said. Earlier this week, ratings agency Moody's said that India's macroeconomic stability may hold firm even if tensions with Pakistan escalate, citing India's minimal economic relations with Pakistan. 'However, higher defence spending would potentially weigh on India's fiscal strength and slow its fiscal consolidation,' the ratings firm had said. To be sure, the Pakistani Rupee's exchange value against the US dollar depreciated to ₹ 281.15 on 9 May from ₹ 278.04 a year ago (10 May 2024). Diplomatic ties between the two nations have deteriorated sharply since the Pahalgam massacre, where tourists were gunned down by terrorists. Following this, India suspended the 1960 Indus Waters Treaty, prompting Pakistan to scrap the 1972 Simla Agreement and close its airspace to Indian carriers. Thereafter, India struck terror infrastructure in nine cities in Pakistan and Pakistan-occupied Kashmir under Operation Sindoor, which were 'focused, measured and non-escalatory', the defence ministry has maintained. According to the Indian Army, Pakistan's armed forces launched multiple drone and artillery attacks along the western border on the night of May 8-9, which were 'effectively repulsed'. Pakistani troops have also carried out numerous ceasefire violations along the Line of Control in Jammu and Kashmir, the Army said. However, despite strong rhetoric from both sides and a wider military confrontation, the conflict has yet to escalate into a full-scale war. India and Pakistan, both nuclear-armed, have fought four wars—in 1947, 1965, 1971, and 1999—mostly over the disputed Kashmir region. The latest flare-up marks another chapter in their long history of recurring confrontations. Manas Pimpalkhare in New Delhi contributed to this story.
Economic Times
21-04-2025
- Business
- Economic Times
Electricity demand powers March core growth to 3.8%
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel India's core sector output rose 3.8% year-on-year in March, helped by a pick-up in electricity demand and continued strength in construction-related sectors, official data released Monday core sector comprises eight industries: coal, crude oil, natural gas, refinery products, fertilisers, steel, cement and electricity. February had recorded a core sector expansion of 3.4% from a year ago, while in March last year, the year-on-year growth was 6.3%."The year-on-year rise in the core sector inched up slightly in March, led primarily by the higher growth in electricity generation amid rising temperatures," said Aditi Nayar, chief economist at ICRA Overall, core sector growth in FY25 slowed to 4.4%, the lowest in four years. In FY24, the core sector had grown by 7.6%.In March, six of the eight sectors recorded positive growth, with cement leading at 11.6%. Next was the fertiliser sector with a growth of 8.8%, followed by steel at 7.1%, electricity at 6.2%, coal at 1.6% and refinery products at 0.2%.Coal output was subdued for the second consecutive month."Growth in fertilisers was aided by a negative base effect as well as companies ramping up production in preparation for the kharif sowing," said Madan Sabnavis, chief economist at Bank of Baroda Sabnavis also highlighted strong momentum in cement and steel production, attributing it to higher government spending at the end of the year, as well as significant rise in private sector investment announcements during the fourth quarter. The output of crude oil and natural gas declined by 1.9% and 12.7%, respectively. Sabnavis said the oil and gas sector remained weak due to lower crude prices and a rise in natural gas eight sectors account for 40.27% weightage in the Index of Industrial Production ( IIP ).
