The rise in the price of crude oil in the international market and the shortage of coal in the country can put a hindrance in the path of rapid economic growth by increasing inflation. These things are very important because the policy meeting of the Reserve Bank of India (RBI) is going to be held this week, where the speculation of increasing interest rates was being made for the last few days.
Factories can stop the shortage of coal
About 70% of the electricity in the country is generated from coal and about 85% is imported from crude. Shortage of coal can shut down factories, which is a problem. In such a situation, the import of crude oil may increase. That too, when its price in the international market is running at a seven-year high and is putting pressure on the economy.
Heavy pressure on currency and bond markets
The currency and bond markets have been under heavy pressure due to inflation and the prospect of widening trade deficit due to both fuels (crude oil and coal) events. The rupee has been the weakest in Asian currency this month, which fell 0.2% to 74.60 against the dollar on Wednesday. The 10-year bond yield on Tuesday touched an all-time high of 6.28% since April 2020.
'Both incidents are an economic setback for the country'
Sonal Verma, Chief Economist – India, and Asia, Nomura Holdings Inc. says, “Both the incidents are an economic blow to the country. Due to them, inflation may increase, economic growth may be reduced and trade deficit may increase along with budget deficit. As inflationary pressure continues to rise, demand starts coming down.
Core inflation expected to remain at 6%
According to Deutsche Bank, retail inflation is currently in the RBI's comfort zone (4% to 2% above or below) i.e. in the range of 2% to 6%. But core inflation is expected to remain near 6% for at least the next six months. Core inflation does not include inflation in food and fuel at risk of high volatility.
RBI may keep the repo rate the same
It will be challenging for RBI to handle inflation due to supply disruption. To boost growth, it wants to keep the key lending rate (repo rate) at a record low. Developing countries like Russia and Brazil have increased the repo rates to control inflation. But according to a Bloomberg survey conducted on economists, the Reserve Bank may keep the repo rate the same on Friday.
RBI's stance on inflation and cash will be monitored
Bond traders will be on the lookout for what the Reserve Bank gives on the upside in global commodity markets, inflation, and liquidity in the system. They have started adjusting their trading strategy according to the prospects of the RBI slowing down bond-buying for policy normalization and liquidity withdrawals from the market.
The reverse repo rate may be increased to 3.50%
According to Citigroup, the reverse repo rate (the rate at which banks can deposit access funds with the RBI) can be increased by 15 basis points to 3.50%. Madhavi Arora, Lead Economist, Emkay Global Financial Services, says, “Due to the energy crisis and rising interest rates abroad, foreign investors may have started demanding higher risk premium in emerging markets. This poses a risk of a fall here.
Turkey Earthquake: President Erdogan was forced to change strategy due to the earthquake, what assurance is he giving to the public now?
The devastating earthquake that hit Turkey on February 6 left millions of people homeless. Thousands of houses have turned into a pile of rubble. More than 50 people have died and damages have been
Dollar vs Rupee: Rupee strengthened by 26 paise against the dollar, and American currency declined by more than one percent
The rupee strengthened by 26 paise to 81.67 against the US dollar in early trade on Thursday due to the fall in the US dollar from higher levels. On the Interbank Foreign Exchange, the domestic unit
DC vs KKR Playing 11: Will Kuldeep return in today's match? KKR eyes third win, see possible playing 11
Captain Rishabh Pant's half-century against Chennai Super Kings has boosted the morale of Delhi Capitals. The half-century inning not only brought Pant back into form but also gave Delhi its first win
Retirement of 4 lakh doctors in America this year: Government is not doing new recruitment, patients queue in hospitals
America is facing a crisis of doctors. This affects the rural areas as well as the urban areas. There are long queues at the doctor's. On the other hand, appointments have to be taken months in
Nigeria Floods: Nigeria floods havoc, death toll crosses 600
Floods have wreaked havoc in Nigeria. More than 600 people have died in the worst floods in a decade. At the same time, more than 13 lakh people have had to leave their homes and take shelter in safe
China: Chinese government in tension due to decreasing population, now brought this plan to boost birth rate
The decreasing population of China has increased the tension in the Jinping government. New schemes are now being introduced to increase the birth rate in the country. In this sequence, China has come
Indian fan entered the field with a tricolor in hand: He started crying after reaching Rohit Sharma, now a fine of Rs 6.50 lakh will have to be paid
During India vs Zimbabwe match, an Indian fan was forced to enter the field. He will now have to pay a fine of Rs 6.50 lakh. This incident is of the 17th over. When Hardik Pandya was bowling the 5th
Endosulfan victims got justice, the government will give 2 billion rupees compensation, know what is the whole matter
After a long rebuke by the Supreme Court, the Kerala government has finally released Rs 2 billion as compensation to the victims of Endosulfan pesticide. The Supreme Court, in its several orders of
Rahul Gandhi told the police at the Ghazipur border- take me in your car but let me go to Sambhal.
Leader of Opposition in Lok Sabha Rahul Gandhi is going to Sambhal in UP. Meanwhile, the police have stopped him at the Ghazipur border. Rahul is accompanied by his sister and Wayanad MP Priyanka
Day 12 of the attack on Ukraine: PM Modi can talk to Zelensky on the phone; Message from the Ukrainian President - may be seeing me alive for the last time
Today is the 12th day of the ongoing war between Russia and Ukraine. In this war that started on 24 February, now the lives of the common people of Ukraine are also being lost. Due to this, the
