RBI MPC Highlights 23

Governor Shaktikanta Das announced the Monetary Policy Committee's (MPC) decision on the RBI. Here are the Key RBI MPC Highlights

“Never lose your faith in the destiny of India.”

- Governor Shaktikanta Das

1. RBI MPC raise the repo rate by 25 basis points to 6.50% on Wednesday.

2. The Governor says that while inflation is expected to moderate in FY24 it will rule above the 4% target-

The Governor of the Reserve Bank of India (RBI) has stated that although inflation is expected to decrease in financial year 24, it may still exceed the target of 4%. The International Monetary Fund (IMF) has also revised its global growth projections for the years 2022 and 2023, indicating an upward trend.

3. The Governor says the Indian economy remains resilient.-

The Reserve Bank of India (RBI) governor reported that capacity utilization increased to 74.5% in the second quarter, indicating positive growth in the private sector. Investment activity continues to show improvement, with non-food bank credit growing by 16.7% as of January 27, 2023, and robust growth in fixed investment seen in November and December. Despite a decline in merchandise exports, the indicators of fixed investment are showing signs of strength. The governor also stated that there are indications of additional capacity being created in the private sector.

4. RBI GOV says real GDP growth for FY24 is projected at 6.4%-

According to Das, the Consumer Price Index (CPI) inflation for the fiscal year 2023 is expected to be 6.5%, with the fourth quarter estimated to be at 5.7%. There is a considerable amount of uncertainty regarding the trajectory of global commodity prices. Commodity prices are likely to remain high with the easing of Covid-19 restrictions, and this could result in the pass-through of commodity prices keeping core inflation elevated. The low volatility of the Indian rupee compared to other currencies will limit the impact of imported price pressures. The average crude oil basket is projected to be $95 per barrel.

5. RBI projects retail inflation lower at 6.5% for FY23 from 6.7%; 5.3% for the next fiscal-

The Consumer Price Index (CPI) is projected to reach 5.3% in fiscal year 24. Inflation is expected to be at 5% in the first quarter, 5.4% in the second and third quarters, and 5.6% in the fourth quarter. There is concern about the persistent nature of core inflation and it is crucial to see a clear decrease in inflation. It is imperative to maintain a strong commitment to reducing CPI inflation. The monetary policy must be adjusted accordingly to ensure a sustainable reduction in inflation.

6. The RBI has reported that system liquidity remains in surplus, although it has diminished in comparison to previous levels. The central bank has stated that it will remain agile and ready to cater to the productive requirements of the economy. To ensure proper functioning, the RBI will carry out operations on both sides of the liquidity adjustment framework as necessary. In line with this, the RBI has proposed restoring the market hours of the G-Sec market to 9 am to 5 pm. additionally, the RBI has suggested expanding G-Sec lending and borrowing activities to further enhance market liquidity.

7. The current account deficit (CAD) for H1FY23 was 2.2% of GDP, and it will moderate in H2FY23.

Regulatory organizations would receive recommendations from RBI on how to safeguard against the effects of climate change, according to Das. General guidelines for accepting green deposits, Framework for disclosing financial risks associated to climate change, and advice on stress testing and climate scenario analysis would be provided.

8. RBI GOV says MPC will continue to maintain a strong vigil on inflation outlook-

The Monetary Policy Committee of the Reserve Bank of India will continue to closely monitor the inflation outlook. Inflation is expected to remain at 5.6% in the fourth quarter of the financial year 2023. Although the policy rate has increased, it still remains lower than its pre-pandemic levels. When taking inflation into consideration, the policy rate is still lower than its pre-pandemic level. In general, the overall monetary conditions continue to be supportive of the economy.

9. Other Measures to be taken by RBI-RBI proposes to allow some foreign travelers and inbound travelers in India to use UPI for merchant payments. RBI To Launch QR Code-Based Coin Vending Machines that will issue coins against debits to customer's UPI-linked accounts.

The Reaction of the Market

Following the Reserve Bank of India's announcement of a lesser-than-anticipated interest rate increase, Indian equities were trading higher on Wednesday. As of 10:06 a.m. IST, the S&P BSE Sensex was up 0.68% to 60,695.09, while the Nifty 50 index was up 0.72% at 17,849.85.

Indian government bond rates increased slightly on Wednesday as a result of the Reserve Bank of India (RBI) maintaining its monetary stance while raising the repo rate as anticipated. As of 11:30 IST, the benchmark 10-year yield was 7.3435 percent. Prior to the policy decision, it was trading at 7.3124% after Tuesday's closing price of 7.3102%.

Rupee prices were unchanged at 82.69 to the dollar. The RBI MPC's decision to raise the repo rate by 25 basis points had no significant effect on the currency since the markets had already priced it in.

भारतीय यूनियन बजट में चांदी और चांदी डोर पर इम्पोर्ट ड्यूटी बढ़ा दी गई है। चांदी पर इम्पोर्ट ड्यूटी, सोने की इम्पोर्ट ड्यूटी के बराबर करने के लिए की गई है, जिससे कीमती धातुओं में इम्पोर्ट ड्यूटी का स्ट्रक्चर सामान रहे। हालांकि, उपकर में बदलाव करके, सोने में इम्पोर्ट ड्यूटी यथावत रखी गई है। इम्पोर्ट ड्यूटी बढ़ाने के बाद, सोने और चांदी  में बढ़ोतरी देखि गई।  चांदी में कुल इम्पोर्ट ड्यूटी बढ़ा कर 15 प्रतिशत कर दी गई है, जो सोने की ड्यूटी के बराबर है। कीमती धातुओं से बनी ज्वेलरी पर ड्यूटी 22 प्रतिशत से बढ़ा कर 25 प्रतिशत कर दी गई है। हालांकि, अमेरिकी फेड की बैठक के बाद कीमती धातुओं में हेवेन मांग देखि गई। फेड द्वारा अपेक्षाकृत कम, 25 आधार अंको की बढ़ोतरी की गई जिससे सोने की कीमते एमसीएक्स में 58800 प्रति दस ग्राम और चांदी 72700 रुपए प्रति किलो के स्तरों को छू गई। हालांकि, ब्याज दरों के चरम स्तर को फेड ने अनिश्चित बताया है जिससे सप्ताह के अंत में डॉलर इंडेक्स में बढ़त रही और कीमती धातुओं में मुनाफा वसूली हावी हुई। हालांकि, अमेरिकी अर्थव्यवस्था की धीमी विकास दर, फेड को इस साल के मध्य तक ब्याज दरों में बढ़ोतरी रोकने और इसको घटाने के लिए बाधित कर सकता है। यूरोपियन सेंट्रल बैंक और बैंक ऑफ़ इंग्लैंड द्वारा ब्याज दरों में बढ़ोतरी से भी अमेरिकी डॉलर में दबाव बना हुआ है, जो कीमती धातुओं को सपोर्ट कर रहा है। केंद्रीय बैंको की लगातार ब्याज दर बढ़ोतरी से वैश्विक अर्थव्यवस्था दबाव में है, जिससे सोने में सेफ हेवेन मांग बढ़ी है।

इस सप्ताह फेड चेयर जेरोम पॉवेल और एफओएमसी मेंबर विलियम की स्पीच कीमती धातुओं के लिए महत्वपूर्ण रहेगी।

तकनिकी विश्लेषण

इस सप्ताह कीमती धातुओं में तेज़ी रहने की सम्भावना है। सोने में सपोर्ट 57500 रुपये पर है और रेजिस्टेंस 59000 रुपये पर है। चांदी में सपोर्ट 68000 रुपये पर है और रेजिस्टेंस 73000 रुपये पर है।

The Adani Group, one of India’s biggest companies, recently launched the country's largest Follow-on Public Offering (FPO) to raise ₹20,000 crores from investors. However, the response has been surprisingly low, with only 1% of the shares being subscribed and just 2% of the retail portion taken up. This poor response is mainly due to a report released by Hindenburg Research just before the FPO, which has caused a lot of controversy.

What Did Hindenburg Say?

Hindenburg Research, known for investigating companies they believe are overvalued or involved in wrongdoing, published a 106-page report making serious allegations against the Adani Group. Here are the key points:

1. Pledged Shares: Hindenburg raised concerns that a large portion of Adani Group shares has been used as collateral for loans. This is risky because if the share prices fall, the lenders might sell these shares, causing prices to drop even more.
2. Tax Evasion and Financial Tricks: Despite being one of India’s richest people, Gautam Adani is reportedly only the 10th highest taxpayer. Hindenburg accused the Adani Group of avoiding taxes through activities like diamond trading, over-invoicing, and other financial schemes.
3. Offshore Payments: The report highlighted a ₹780 crore payment made by Adani Enterprises to an offshore company in Australia. Hindenburg suggested this payment might not have been transparent because the offshore company was allegedly owned by the Adani Group itself.
4. Market Manipulatioeased their holdings, which raised suspicions of manipulation.
5. Complicated Corpon: Hindenburg claimed that in 2019, Adani Green, part of the Adani Group, used a broker involved in market rigging for its share sale. After the sale, some foreign investors incrrate Structure: Hindenburg criticized the Adani Group’s complex structure, with 578 subsidiaries and over 6,000 related-party transactions in one year. This complexity makes it hard to track financial activities, raising concerns about transparency.
6. Questionable Shareholdings: Hindenburg questioned the large number of Adani Group shares held by offshore funds, suggesting these funds might be controlled by the Adani Group to manipulate stock prices.
7. Silencing Journalists: Another serious accusation was that the Adani Group has used its influence to silence journalists who report critically on the company, with some even being jailed.

Hindenburg’s Key Points

Hindenburg’s report wasn’t just about new accusations; it also pointed out existing issues:

• Overvalued Stocks: Hindenburg claimed that the seven key listed companies of the Adani Group are overvalued by as much as 85%, even without considering the new allegations.
• High Debt Levels: The Adani Group has taken on a lot of debt, much of it backed by shares that Hindenburg claims are inflated. This puts the group in a risky financial position.

Financial Health of Adani Group

Despite these allegations, the Adani Group has shown some positive financial trends:

• Lower Debt: The group has managed to reduce its debt-to-EBITDA ratio, meaning its debt is now smaller compared to its earnings.
• Earnings Growth: The group’s earnings have been growing at a healthy rate of 22% per year.
• Continued Borrowing: However, the group’s debt has also been growing, showing it still relies heavily on borrowing.

Adani Group’s Response

In response to the Hindenburg report, the Adani Group issued a 413-page rebuttal, strongly denying all allegations and defending its practices:

• Transparency and Compliance: The group argued that most of the issues raised by Hindenburg were already disclosed in their financial reports.
• Legal Standards: Adani stated that it follows the highest standards of governance and accused Hindenburg of not understanding Indian laws.
• Market Manipulation Claims: The group suggested that Hindenburg’s report was a deliberate attempt to manipulate the market for financial gain, as Hindenburg stands to profit from a decline in Adani’s stock prices.

Impact on Adani Group Stocks

The Hindenburg report has significantly impacted the Adani Group’s stock prices:

• Massive Losses: The group has lost over $48 billion in market value since the report was published, causing a sharp decline in investor confidence.
• Stock Performance:some text
  • Adani Enterprises: -1.50%
  • Adani Green: -3.08%
  • Adani Ports: -6.59%
  • Adani Transmission: -8.85%

These sharp declines have also affected the broader Indian stock market, with Adani Group stocks dragging down the indices.

Conclusion

The clash between Hindenburg and the Adani Group has created significant turmoil in the Indian stock market and raised serious questions about the Adani Group’s business practices. While the Adani Group has strongly denied the allegations, the controversy has led to a massive drop in stock prices and a loss of investor confidence. The long-term impact on the Adani Group remains to be seen as the situation continues to unfold.

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कॉमेक्स में सोने की कीमते 9 महीने की उचाई 1941 डॉलर प्रति औंस, की उचाई पर चल रही है जबकि एमसीएक्स में सोना उच्चतम स्तरों पर चल रहा है। हालांकि, चांदी की कीमतों में, औद्योगिक मांग में कमी के रहते दबाव देखने को मिल रहा है। साल 2023 में आर्थिक मंदी का डर अभी बना हुआ है और कीमती धातुओं में निवेशकों को आगे के नज़रिये के लिए अमेरिका के प्रमुख आकड़ो का इंतजार है। पिछले सप्ताह चीन में लूनर न्यू ईयर हॉलिडे के चलते वैश्विक बाज़ारो में कारोबार कम रहा। बेंचमार्क अमेरिकी ट्रेज़री यील्ड में दबाव बना हुआ है जिसके कारण अमेरिकी डॉलर, जो सोने के विपरीत दिशा में चलता है, में दबाव बना हुआ है और पिछले सप्ताह यह 101 के स्तरों को छु चूका है। अमेरिकी फेड द्वारा ब्याज़ दर वृद्धि पर नरमी दिखाई गई है जबकि यूरोपियन सेंट्रल बैंक अगली दो बैठकों में 0.50 प्रतिशत वृद्धि करने का अनुमान है। हाल के सप्ताहों में, कीमती धातुओं के भाव में हैवन मांग और फेडरल रिजर्व द्वारा आने वाले महीनों में ब्याज दरों में वृद्धि की गति को धीमा करने की बढ़ती उम्मीदों से, कीमती धातुओं में तेजी आई है। निवेशकों की इन उम्मीदों से डॉलर और अमेरिकी ट्रेज़री यील्ड में गिरावट आई है और कीमती धातुओं को इससे फायदा हुआ है। हालांकि, फेड द्वारा ब्याज दर वृद्धि को धीमा किया गया है, लेकिन इसके उच्चतम स्तर के बारे में कोई संकेत नहीं है और मुद्रास्फीति अभी भी 40 साल की उचाई के करीब बनी हुई है। अमेरिकी डेब्ट सीलिंग लिमिट की चिंता भी निवेशकों को कीमती धातुओं की और आकर्षित कर रही है।

इस सप्ताह अमेरिकी पैरोल के आंकड़े, एफओएमसी और यूरोपियन सेंट्रल बैंक की बैठक, और भारतीय आम बजट कीमती धातुओं के लिए महत्वपूर्ण है, जिससे इनके भाव को नई दिशा मिल सकती है।

तकनिकी विश्लेषण

इस सप्ताह कीमती धातुओं के भाव में महत्वपूर्ण इवेंट्स के चलते अस्थिरता रहने की सम्भावना है। सोने में सपोर्ट 56000 रुपये पर है और रेजिस्टेंस 58000 रुपये पर है। चांदी में सपोर्ट 66500 रुपये पर है और रेजिस्टेंस 70500 रुपये पर है।

A day before the Union Budget, which will be unveiled by Finance Minister Nirmala Sitharaman on Wednesday, February 1, 2023, the Economic Survey for 2023–24 was introduced in Parliament on Tuesday, January 31, 2023. The Economic Survey, which is issued every year a day before the budget and analyses the performance of every area of the economy before making recommendations for the future, is a report card on the state of the economy.

Key Highlights

• India's economy will expand by 6.5% in 2023–2024 compared to this fiscal's 7% growth and 2021–2022's 8.7% expansion. In the upcoming fiscal year, nominal GDP (gross domestic product) is expected to reach 11%.
• Private consumption, more capital expenditures, a better corporate balance sheet, increased financing to small enterprises, and the return of migrant workers to cities all contributed to growth.
• Depending on global economic and political developments, real GDP growth is expected to be between 6 and 8.0% in the upcoming fiscal year.
• The probability of additional interest rate increases by the US Fed presents a challenge to the rupee's decline.
• As long as global commodity prices stay high and the pace of economic expansion is maintained, the current account deficit (CAD) may continue to increase. The rupee may see devaluation pressure if CAD widens much more.

According to the most recent Reserve Bank of India (RBI) figures, the nation's current account deficit increased to 4.4% of GDP in the quarter ending in September from 2.2% of GDP during the April-June period as a result of a larger trade imbalance.

• India has enough foreign exchange reserves to cover CAD and participate in the Forex Trading market to control currency volatility.
• The second half of the current fiscal year has seen a slowing in export growth after the first half of the year and the increase in growth rates in 2021–22 caused production processes to move from "mild acceleration" to "cruise mode."
• The loss of export stimulus in the second part of this year was caused by the slowing global economy and declining worldwide commerce.
• On the strength of low inflation and moderate lending costs, bank credit growth is anticipated to be robust in FY24.
• Over 30.5% more credit was extended to small firms between January and November of 2022.
• In the current fiscal year's April to November, central government capital expenditures increased by 63.4%.
• The stock market generated gains in 2022 despite the removal of FPI.
• In the current fiscal year, private consumption and capital formation have driven economic growth and helped create jobs; urban employment rates have decreased while Employee Provident Fund registration has increased.
• The survey suggested that "entrenched inflation" could prolong the tightening cycle, causing borrowing costs to remain higher for longer.

K-Shaped Recovery

A K-shaped recovery happens when various sectors, industries, or groups of people in the economy recover at various speeds, periods, or amounts. In this type of recovery, certain industries flourish while others stagnate or even dip more. K-shaped recoveries are typically brought on by pre-existing discrepancies or by a recession that has distinct effects on different populations and groups.

The image below is an example of a K-shaped recovery wherein certain industries or sectors perform well and grow while others go into decline and continue to stagnate.

(IMG Credits: Drishti IAS)

A K-shaped recovery could be caused by a variety of distinct economic events. First, a K-shaped recovery can represent the creative destruction that takes place in an economy during a recession when new technology and industries displace older ones. Second, it may show how the government has responded to a downturn in terms of fiscal and monetary policy, which might favor particular parts of the economy more than others.

Alternately, it may merely reflect the disparate effects that the initial recession had on the various sectors of the economy, particularly when the recession occurs concurrently with or is brought on by adverse real economic shocks that target particular sectors of the economy and may have longer-lasting effects on those sectors than on others. Keep in mind that these three requirements might not be exclusive of one another; they might all be at work in a particular K-shaped recovery together with additional elements.

It is hard to say for sure if India is experiencing a K-shaped recovery. However, certain indicators which indicate a K-shaped recovery in India are:

- Two-wheelers are a symbol of India's small businesses as well as the economic position of the lower and middle classes. According to a survey by the analytical firm CRISIL, two-wheeler sales are predicted to fall between 3% and 6% in 2021. This is on top of a lower base that was already impacted by the pandemic in 2020. The actual decrease in two-wheeler sales from before the pandemic must be significantly greater as a result of the base effect. Two-wheeler sales are at their second-lowest level in seven years. It is crucial to remember that among two-wheelers, entry-level vehicles are the ones most adversely impacted. The festival season was supposed to address this issue, but it failed to do so. On the other hand, premium cars and premium motorcycles have been resistant to the pandemic slowdown.

- Over 5 lakh people lost jobs after the lockdown started. Post this, there was a need for an increase in NREGA expenditure to accommodate more people for jobs. However, in the year 2021-2022, the Government of India cut its budget allocation towards MGNREGA by 34%. Thus, the unemployment rate didn’t ease off to pre-COVID levels even after the lockdown was lifted.

A deeper dive into the data of disposable income of the lower, middle, and upper class will show a similar trend which is the reason for the K-shaped recovery.