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After raising repo rate in six consecutive policies, the Reserve Bank of India (RBI), in a surprise move, decided to pause its rate hike cycle amid rising concerns over global financial stability.
It was widely expected that the RBI would raise the repo rate by 25 bps and then go for a pause. The decision to keep the repo rate unchanged was taken unanimously by all the six Monetary Policy Committee (MPC) members even as inflation continues to remain above the tolerance band of 2-6 per cent.
The rate-setting panel also decided, by a majority of five out of six members, to remain focused on withdrawal of accommodation to ensure that inflation progressively aligns with the target, while supporting growth.
The RBI’s move will give a breather to borrowers as their lending rates, which are linked to repo rate, will not increase.
The MPC decided to keep the policy repo rate unchanged at 6.5 per cent in this meeting, with readiness to act, should the situation so warrant.
The MPC will continue to keep a strong vigil on the evolving inflation and growth outlook and will not hesitate to take further action as may be required in its future meetings.
Editorial
Pause in the cycle (Page no. 12)
(GS Paper 3, Economy)
The Reserve Bank of India (RBI) has decided to not increase the repo rate amid continuing hikes by important central banks such as the US Federal Reserve (Fed) and European Central Bank (ECB), and domestic inflation concerns.
Given that Mint Road feels money market rates have effectively risen more than the 250-basis-point yank in the repo rate since May 2022, it decided to pause and assess the impact of rate hikes.
But if incoming data point to rising inflation risks, Thursday’s decision could prove to be only a pause in the rate hiking cycle. Options remain open since there is no change in the stance of the withdrawal of accommodation.
To be sure, monetary policy tradeoffs have become sharper and choices difficult amid the banking stress that started with the failure of Silicon Valley Bank. Inflation too hasn’t been reined in yet despite steep rate hikes on both sides of the Atlantic and the US banking sector tumult hasn’t swayed the Fed.
But tightening financial conditions in the US amid the banking stress will create a downside to growth and reduce the need for the Fed to hike the rate to control inflation.
The market and Fed’s communication seem at odds on how quickly that will happen. The Fed dot plot hints at another rate hike and a higher-for-longer rate scenario after that, whereas markets are pricing in an end to the rate hike and quicker rate cut.
Ideas page
Cruelties of states (Page no. 13)
(GS Paper 1, Social Issues)
Chief Minister of Assam Himanta Biswa Sarma makes no effort, unlike some of his colleagues, to conceal his distance from the Constitution of India.
In his speech in the Assembly, he said, in relation to his policies against child marriage, the ratio of arrests of Muslims to Hindus was 55:45.
He reportedly said he had got “some of our people picked up too otherwise you all (the Opposition) will feel bad”. “Our people” — where does such a phrase come from? It is the Hindutva conceptualisation of India where all non-Hindus are not “our people”.
Whether the ratio declared is accurate or not, the communal mindset of the chief minister expressed in his own words is clear enough.
The Preamble of the Constitution states, “We the people of India”, not we the people belonging to this or that religion. All citizens are “our citizens”.
Even after the damning data from the NFHS-5, which put Assam at the bottom of the list on many socio-economic indicators such as increasing child marriage, poor education levels and high rate of domestic violence, the Assam government had taken no steps for redressal.
For example, the Prohibition of Child Marriage Act mandates the setting up of child marriage prohibition officers and committees of citizens at the block level to spread awareness against child marriage and to intervene to directly prevent such marriages if they were to occur.
There was not a single such officer appointed or committee formed till after the arrests in February this year. As the experiences of the more successful states like Kerala have shown, education is critical for the eradication of this social evil.
Perhaps the chief minister, who quoted child marriage statistics from Muslim-populated districts like Dhubri, could learn especially from Kashmir which has one of the lowest percentages of child marriage in the country.
Explained
How ASBA-like facility for secondary market trading benefits customers (Page no. 15)
(GS Paper 3, Economy)
The capital markets regulator, Securities and Exchange Board of India (SEBI), last week approved a framework for Application Supported by Blocked Amount (ASBA)-like facility for trading in the secondary market.
The facility will be optional for investors and stock brokers. To facilitate smooth transition in the market, the framework will be implemented in a phased manner.
ASBA, which was first introduced by SEBI in 2008, is an application by an investor that contains an authorisation to a Self Certified Syndicate Bank (SCSB) to block in the bank account the application money for subscribing to an issue.
An SCSB is a recognised bank capable of providing ASBA services to its customers. The application money of an investor applying through ASBA shall be debited from the bank account only if her application is selected for allotment after the basis of allotment has been finalised. In public issues and rights issues, all investors have to mandatorily apply through ASBA.
In its board meeting on March 29, the markets regulator gave its nod for an ASBA-like facility for secondary market trading. The facility is based on the blocking of funds for trading in the secondary market through UPI (Unified Payments Interface).
Economy
Body to flag fake’ content on govt cleared, PIB reference removed (Page no. 17)
(GS Paper 2, Governance)
The Centre has decided to create a regulatory regime that will allow a fact-check body appointed by it to label online content related to the Union government as “fake” or “misleading”.
Content marked as such by the body will have to be taken down by online intermediaries if they wish to retain their “safe harbour”, which is the legal immunity they enjoy against third-party content.
The Ministry of Electronics and IT notified amendments to the Information Technology Rules, 2021, which allows the Ministry to appoint the fact-check body.
The final rules come months after the Ministry, in January, had first proposed that any piece of news that has been identified as “fake” by the fact-checking unit of the Press Information Bureau (PIB) — the Centre’s nodal agency to share news updates — will not be allowed on online intermediaries. However, the final draft has removed the reference to PIB.
The proposal had earlier drawn criticism. The Editors Guild of India had said that the “determination of fake news cannot be in the sole hands of the government and will result in censorship of the press”.
The News Broadcasters & Digital Association said it will “have a chilling effect on the media” and should be withdrawn.
On paper, what the final rules now say is that an online intermediary — including social media platforms like Facebook, YouTube and Twitter and internet service providers like Airtel, Jio and Vodafone Idea — should make “reasonable efforts” to not host content related to the Central Government that is “identified as fake or misleading” by a “fact check unit” that may be notified by the IT Ministry.