Daily Financial News Analysis – 6th Dec’19

Table of Contents

Repo Rate

The 6-member Monetary Policy Committee (MPC) vote was unanimous
RBI dashed market expectations
Kept benchmark interest rate unchanged
Reasons: Inflationary pressures
FY20 GDP growth forecast: 5%
Dilemma: prioritising growth or contain prices
Ficci: A cut in the policy rate was also important for boosting the sentiment in the market.

Probably, further rate cut would not have a material impact in the market.
Rate cut would be more reassuring to the increasingly anxious industry.
Inflation has picked up above expectations.
Fiscal deficit is likely to balloon.
Fall in the bank lending rate has been far less than the cumulative cut in the policy rate.
Shaktikanta Das: growth was a “national objective” which was making both GoI and RBI work.
Press Confo: it was of paramount importance that monetary policy and fiscal policy work in coordination to achieve the best results in the national endeavour to revive growth.
Das said hopes were pinned on the upcoming budget and a possible stimulus from the government to revive the economy.

As and when the technology evolves, with adequate safeguards, RBI will certainly look at it seriously at an appropriate time.
Central bank-issued digital currencies
Governor reiterated that RBI is completely against private digital currency.
Because currency issuance is a sovereign function and a private currency cannot overwrite what’s in the sovereign domain.
RBI had called for a banking restriction on all financial institutions offering services to cryptocurrency exchanges.
In July this year, an inter-ministerial committee appointed by the Indian government proposed a blanket ban on cryptocurrencies across the country.

Centre to States: they could face shortfalls in GST compensation.
Reason: lower tax revenues
States’ spending is important to counter the slowdown in the economy.
58% overall government expenditure is done by States
GST compensation Act 2018 guarantees a 14% annual growth in tax revenues for the states from the amount collected by them in 2015-16, for a period of five years that ends in 2022.
GST has subsumed many levies and leaves audit trails on value addition across the production chain, helping shore up indirect taxes, besides helping track past undisclosed incomes.

Union home minister Amit Shah on Thursday chaired a meeting of ministers to discuss onion prices.

CONSUMER AFFAIRS SECRETARY Avinash Srivastava: brief on the demand and supply situation and plans for distribution of onions from producing centres to consumption centres.
The government has, so far, contracted import of over 21,000 tonnes out of the 1.2 lakh tonnes approved by the Cabinet.
It is in the process of floating a tender for another 15,000 tonnes.
Onions will start being shipped in from second week of December.

At World Trade Organization (WTO)
India teamed up with South Africa, Sri Lanka, Tunisia and Zimbabwe.
1. Ecuador and Venezuela joined in expressing their concern.
Objection: some nations are trying to bring in rules to erect barriers to services trade and cross-border movement of professionals.
The European Union, China, Australia, Japan, Korea and Russia
qualification and licensing requirements, and technical standards.

Nirav Modi has been declared a fugitive economic offender by Prevention of Money Laundering Act court in Mumbai..
Nirav Modi, currently under arrest in the United Kingdom.
The fugitive economic offender tag allows Indian probe agencies to confiscate and attach properties of the accused and is targetted at those who flee India to escape prosecution.
Under the FEO Act, a person can be declared a fugitive offender if a warrent has been issued against him for an offence involving Rs 100 crore or more, and he has left the country and refused to return.
The first person to be declared a fugitive economic offender under the act was Vijay Mallya.
Nirav Modi is the second person.