Slowing inflation boosts odds for India to cut interest rates
INDIA’S inflation eased and factory output slowed, boosting the odds that central bank governor Raghuram Rajan will cut interest rates for a third time this year.
Consumer prices rose 4.87 percent last month from a year earlier after a revised 5.25 percent increase in March, the statistics ministry said yesterday. The median of 36 estimates in a Bloomberg survey of economists had predicted a 4.9 percent gain.
Industrial production grew 2.1 percent compared with an estimated 3 percent rise.
Rajan refrained from lowering borrowing costs at a scheduled review last month and said the next move would depend on data showing the balance of risks to inflation. A rebound in oil prices and a drop in the rupee had raised concern about whether the Reserve Bank of India will meet its target of keeping price pressures within 6 percent.
“This allays some of the concerns that had built up around the space for further INDIAN legislators yesterday delayed voting on a proposal to create a national sales tax, setting back Prime Minister Narendra Modi’s plans to boost growth in Asia’s third-largest economy.
A committee would now scrutinise the bill and submit its report in the first week of the next parliamentary session that typically starts in July, Finance Minister Arun Jaitley told lawmakers. The delay makes it tougher for Modi to meet his April 2016 deadline for implementing the goods and services tax, one of India’s biggest economic reforms in decades.
“The honeymoon is over,” said Sandeep Shastri, pro vicechancellor at Jain University. “Things won’t be getting easier for the government.”
Modi has found it difficult to pass legislation through the monetary easing,” said Jyotinder Kaur, an economist at HDFC Bank in Gurgaon, near New Delhi.
She predicts Rajan will cut opposition-controlled upper house despite winning control of the lower house in an election a year ago.
India’s benchmark stock index, among the top gainers globally last year, has been the world’s worst performer over the past month, losing more than 9 percent in that time.
The tax bill aims to ease the transfer of goods across the country and reduce opportunities for bribery. The National Institute of Public Finance and Policy initially estimated it would add about 2 percentage points to India’s gross domestic product before it was diluted to win political support.
The bill would amend India’s constitution, a move that would need to be approved by more than half of the country’s 29 states. – Bloomberg the benchmark repurchase rate by a quarter percentage point when he reviews policy at the start of next month.
While India’s inflation has slowed from an average of 6.7 percent last year, it is still among Asia’s fastest. The yield on the 10-year sovereign bond jumped 13 basis points last month, the most since September 2013, as a 21 percent rally in Brent crude and the weather department’s forecast of belownormal monsoon rains reignited inflation.
Rajan said in February that 1.5 to 2 percentage points was a reasonable inflation-adjusted
concern
about rate for India. According to the monetary authority’s forecasting model, consumer price gains will moderate to 4 percent by August. – Bloomberg GREECE tapped emergency reserves in its holding account at the International Monetary Fund (IMF) to make a crucial
750 million (R10 billion) debt payment to the fund on Monday, two government officials said yesterday. With Athens close to running out of cash and a deal with its international creditors still elusive, there had been doubts whether the leftist-led government would pay the IMF or opt to save cash to pay salaries and pensions later this month. Member countries of the IMF have two accounts at the fund – one where their annual quotas are deposited and a holding account to be used for emergencies. One official said that Athens used about 650m from the holding account to make the payment. Made a day early, the payment calmed immediate fears of a Greek default. – Reuters
AUSTRALIA