Dear Mr Jaitley, Even though the government overshot its fiscal deficit target—4.1% of gross domestic product—for the year in the first nine months of 2014-15, we are fairly confident that you will succeed in sticking to it by paring expenditure in the January-March fourth quarter, taking care of lower revenue collection. We are also certain that you will reiterate your commitment to fiscal consolidation when you present the Union budget over the weekend.
Nobody is surprised at the number of applications that Reserve Bank of India (RBI) has received for setting up small finance banks and payments banks. If nothing else, the numbers—72 applications for small banks and 41 for payments banks—show how starved of banking services Asia’s third largest economy is. The highest number of applications seeking licences for small banks are from the national capital region (14), followed by Mumbai (12), Kolkata (nine) and Bengaluru (seven).
The government has revised the fiscal year 2014 economic growth to 6.9% from 4.7% after changing the base year and calculation methods of gross domestic product or GDP.
When will we see the second rate cut in the current monetary cycle in India? Those who were looking for a clue to this in the Reserve Bank of India’s (RBI) bimonthly monetary policy review on Tuesday, if not a cut itself, have been disappointed. RBI has not cut the rate and there is no hint either of going in for yet another rate cut outside the policy review—something the central bank did on 15 January. Frankly, nothing has changed between 15 January and now and no fresh set of data has come in which could have prompted RBI to do an encore on Tuesday on the rate front.
Shall we see yet another rate cut on Tuesday at the monetary policy review? To what extent will the policy rate come down in 2015 and at what pace? These questions reverberate through the Indian financial sector even as a quarter percentage point cut in the policy rate on 15 January, little more than two weeks ahead of the Reserve Bank of India’s (RBI) monetary policy review on 3 February, has kick-started an easy money cycle. Has anything changed between 15 January and now that could prompt RBI governor Raghuram Rajan to announce another round of rate cuts on Tuesday? The southward movement of international oil prices has been continuing and the European Central Bank (ECB) has joined the Bank of Japan to infuse loads of money into the system. Beginning March, it would spend $68 billion a month purchasing debt to ward off the threat of deflation in the euro zone.