MCD’S JHAADU

for bringing change. We have fulfilled the responsibilities that the people of Delhi gave us. I am indebted to you for believing in me,” Delhi chief minister and AAP chief Arvind Kejriwal said, seeking the blessings of all, including Prime Minister Narendra Modi, in running the civic body.

The factors behind the numbers of the 2022 MCD elections were interesting. The definition of wards, and gerrymandering, may have played a role. The BJP’S targeting of AAP over a series of scandals — real or imagined, the courts will decide — may also have played a role. As may have the campaigning strategies of the three parties — the AAP couldn’t use Kejriwal as much as it may have liked to; the BJP didn’t use its trump card, PM Modi, at all; and the Congress’s heavyweights simply chose to stay away.

While the BJP conceded defeat, the party’s Delhi unit chief, Adesh Gupta, said, “People of Delhi have given us almost 40% vote share along with 104 wards and responsibility to work as a strong opposition. We will constructively keep raising the issues concerning the general public.”

But at the end of the day, only the numbers matter in elections.

And they read, 134 AAP, 104 BJP.

There is no anti-defection law in corporations, and the AAP’S majority (just eight over the majority mark of 126) may appear slim given the BJP’S proven ability, showcased across the years and the states from Karnataka to Madhya Pradesh to Maharashtra, to work the numbers to its advantage, but the AAP’S seat tally is 18 over the tally of all others (BJP, Congress and Independents) together, and 31 more than the BJP’S. It’s a gap that’s evident in the numbers.

And they read, 134 AAP, 104 BJP.

The vote share numbers of the MCD elections indicate the surprising nature and intensity of a contest that was expected to be bipolar. The AAP ended up with 42%, the BJP, with 39%, and the Congress with 12%. It may not make much sense to extrapolate these numbers on to even state elections. The AAP won a 54% vote share in the 2015 assembly elections and came to power with 67 seats (in an assembly of 70), but received only 26% of the votes and 49 seats across the three MCDS (total seats: 272) in 2017.

“The BJP’S vote share has remained largely stable in the city. It’s the Congress that’s been the variable — it did better in 2017 but as it faded, the AAP picked up a lot of its votes. This was an unusual MCD election that played out more like a state election because local-level ties and issues didn’t appear to have mattered as much,” said political scientist Neelanjan Sircar, a senior fellow at the Centre for Policy Research.

But at the end of the day, and especially in a first-past-the-post system, only seats matter.

And they read, 134 AAP, 104 BJP.

The AAP now gets its own version of a double-engine (a term popularised by the BJP to advertise the benefits of having the same party in power in a state and at the Centre) government, but will continue to have to deal with Delhi’s unique governance structure that still gives the L-G, a Union government-appointee significant (and veto) powers. The L-G gets to appoint 10 nominated members to MCD, but they will not be voting in the mayoral election.

The AAP, then, is likely to end up with its mayor, and also its person as the head of the standing committee of MCD, giving it control over the body’s Rs 15,200 crore budget, and a critical role to play in the life of the 20 million residents.

“Heartfelt gratitude to the people of Delhi for trusting Aam Aadmi Party. By defeating the world’s biggest and most negative party, the people have made a hardcore honest and working Arvind Kejriwalji win,” said deputy chief minister Manish Sisodia.

anta Das reiterated that “even after this revision in our growth projection for 2022-23, India will still be among the fastest growing major economies in the world”. It expects the economy to expand by 4.4% this quarter and 4.2% next quarter, down from the 4.6% each it had previously projected for them.

But inflation, it is clear, remains the central bank’s primary concern. “On balance, the MPC was of the view that further calibrated monetary policy action is warranted to keep inflation expectations anchored, break core inflation persistence and contain second round effects. These actions will strengthen the medium-term growth prospects of the Indian economy,” Governor Das said in his statement after the meeting. “The main risk is that core inflation (CPI excluding food and fuel) remains sticky and elevated,” Das added, explicitly stating that “the battle against inflation is not over”.

MPC retained its inflation projection for the year at 6.7%, and expects it to be 6.6% this quarter and 5.9% next quarter. Inflation has been above the upper band of the central bank’s comfort level, 6%, since January. It expects inflation to be at 5% in the first quarter of next financial year, 2023-24.

Wednesday’s announcement marks the fifth consecutive rate hike by MPC, which started the current rate-hike cycle in an unscheduled MPC meeting in May. Before the latest hike, MPC increased the policy rate by 40 basis points in May, and 50 basis points each in June, August and September.

One basis point is one hundredth of a percentage point. While the latest policy rate is the highest it has been since March 2019, real rates are likely to be lower as current inflation is significantly higher than what it was back then. “Adjusted for inflation, the policy rate still remains accommodative,” Das said in his statement.

MPC’S latest action is in keeping with the forecast by a Bloomberg poll of economists. Most analysts see MPC delivering yet another rate hike in its February 2023 meeting, but expect it to be of a smaller magnitude.

“Given the RBI’S emphasis on pushing towards lowering core CPI inflation and pushing headline down towards 4%, we now expect a further 25bp hike in February taking the repo rate to 6.50%”, Rahul Bajoria, MD and head of EM Asia (ex-china) Economics, Barclays, said in a note.

“We expect a 25bp rate hike in February 2023, taking the repo rate to 6.5%. This is in line with the real rate math. RBI has estimated India’s real neutral rate at 1%. Combining it with our oneyear ahead inflation forecast of 5.25% gives a repo rate of 6.25%. With inflation trending higher than target, repo rate should be higher than 6.25%,” Pranjul Bhandari, chief India and Indonesia Economist, HSBC Global Research, said in a note. The repo rate, at which RBI lends to commercial banks, is the policy rate.

The logic of real rates still being lower notwithstanding, rate hikes by the central bank are expected to have an adverse impact on credit demand due to higher borrowing costs. “Since the rate hike cycle in May 2022, home loan products have become expensive by around 150bps before today’s hike. The lending rates have risen significantly, especially for the loans linked to External Benchmark based Lending Rate (EBLR) where there has been a 100% transmission of repo rate,” Shishir Baijal, chairman & managing director, Knight Frank India, a real estate consultant firm, said in a note. “This hike will further impact EMIS and reduce home affordability. Simply based on the interest rate impact in this rate cycle, the Knight Frank Affordability Index has recorded a cumulative deterioration of an average of 3% across the country.” Hours after the RBI announcement, the BSE Sensex dropped for the fourth session on the trot, ending the day’s trading at 62,410.68 points after a loss of 215.68 pts, or 0.34%. Similarly, the broader Nifty 50 fell 82.25 points, or 0.44%, to end at 18,560.50.

The benchmark 10-year yield, meanwhile, was at 7.301% on Wednesday as compared to 7.2486% the day before. Bond yields had eased to 7.2113% before the policy decision.

The Indian rupee however recovered to edge higher against the US dollar – settling at 82.47 after a rise of 3 paise over its previous close of 82.50.