: Not walking alone: A bond and macro update (Opinion) #IndiaNEWS #Commentary By Suyash ChoudharyThe government announced a series of steps aimed at providing some relief against the unprecedented commodity
Not walking alone: A bond and macro update (Opinion) #IndiaNEWS #Commentary
By Suyash ChoudharyThe government announced a series of steps aimed at providing some relief against the unprecedented commodity price shocks being felt post the geopolitical escalations. Chief amongst these was a Rs 8 and Rs 6 cut, respectively in excise duties on petrol and diesel prices per litre. Apart from these, a Rs 200 subsidy on LPG cylinders has been provided under the Ujjwala scheme. Additionally, customs duties are being cut on some inputs for plastic and steel. Finally, export duties are being hiked on items like pellets, iron ore, and some steel products. All told, these constitute a substantial set of measures and come at just the time when monetary policy was turning quite wary of the developing supply side inflation dynamics. Importantly, this also constitutes a signal that government is equally committed to the battle against inflation (media reports suggest more measures may be taken later if required).
Some Observations
A government unwilling to expand fiscal deficit through resisting subsidizing parts of the consumer basket should ordinarily be seen as complementing monetary policy action in curbing inflation. This is because monetary policy acts to curb aggregate demand by weighing down on parts of its components (Private consumption, Investments, Government consumption, Net exports). As can be seen, an expansion in government spending works at cross-currents to this. Thus by extension, a government unwilling to expand deficit is working in tandem with monetary policy. However, a different approach may have been required in case of fuel items and some other essential inputs owing to the risk of cascade of these prices through the entire manufacturing value chain. It is for this reason, presumably, that RBI/MPC members seem to have been encouraging the government to act. If media reports are to be believed, it is disappointment on this front that may have led monetary policy to come on the front foot on rate adjustments. A theoretical question may be asked to clarify the point: Would the inter-meeting hike have occurred if the government had announced these steps ahead of that meeting?
We dont really know the answer to the above question. Notwithstanding that, with a government now seemingly also focussed on bearing the burden (and after having made a hefty down-payment on the same with these latest measures) the pressure on monetary policy should lessen, ceteris paribus. Now this statement needs to be interpreted carefully. After the April policy and before the May inter-meeting hike, the market as per the swap curves was pricing in 275 bps hikes over two years from the overnight rate of 3. 75 per cent then. Around 75–100 bps of these were expected in year two.
Stock Market NEWS Best intraday tips Intraday Stocks below 100
0 Reactions React
More posts by @IndiaNEWS
: India at Cannes: Team T unveils poster, trailer highlighting issues of transgender community #IndiaNEWS #Bollywood Mumbai, May 23 | The trailer and poster of social film T was showcased at the India
0 Reactions React
: Dal Chawal in Disney World: NRI’s Homemade Desi Food Creates Magic in the US #IndiaNEWS #Food Passion fills one with energy. This was true for 37-year-old Devyani Patel, a resident of Orlando,
0 Reactions React
0 Comments
Sorted by latest first Latest Oldest Best
Terms of Use Create Support ticket Your support tickets Powered by ePowerPress Stock Market News! Top Seo SMO © hashkaro.com2024 All Rights reserved.