International Developments The Federal Reserve raised the federal funds rate by 25 bps to 1.50%-1.75%, citing a stronger outlook for economic growth, and hinted at a slightly more aggressive pace for hikes in 2018 and 2019. Fed officials project the rate will end this year at 2.10% after two more hikes, and will rise to 2.90% at the close of 2019. The People's Bank of China increased rates on reverse repurchase agreements, or reverse repos, used for open market operations by 5 bps. The seven-day reverse repo rate was raised to 2.55% from 2.50%. It however left unchanged its benchmark one-year lending and deposit rates. The European Central Bank unexpectedly dropped its pledge to expand its monthly bond purchases if needed, signaling its confidence in the euro area economy's ability to reignite inflation. The Governing Council also kept interest rates unchanged and repeated its expectation that borrowing costs will stay at present levels until well past the end of net purchases. Bank of Japan said inflation expectations have been "more or less unchanged." Reserve Bank of Australia left the cash rate unchanged at 1.50%. Governor Philip Lowe lashed out at U.S. tariff proposals which have the potential to turn into 'very big shock' to global economy. Bank of Japan Governor Haruhiko Kuroda said he had no plan now to abandon negative interest rates. People's Bank of China Governor Zhou Xiaochuan said market access reforms should be accelerated and that the world's second-largest economy can be bolder in opening up. Yi Gang was named the next governor of the People's Bank of China, which has been given increased control over making new laws and regulations for the banking and insurance sectors. China plans to merge its banking and insurance regulators and give new powers to policymaking bodies such as the central bank. China announced that it will sharply widen market access for foreign investors this year. Japan's economy grew a better than expected 1.60% in the fourth quarter of 2017. Australia's annual GDP growth slowed to 2.40% in fourth quarter of 2017. China set its GDP growth rate for 2018 at around 6.50%, the same as last year. China recorded a trade surplus of $33.70 billion in February from a year 77
International Developments earlier. Japan recorded a trade surplus of $32 million in February. US CPI was up 2.20% in the year through February, compared with 2.10% in January. The IMF's latest global economic growth forecast was upgraded to 3.90% for 2018 and 2019 - and heralded the broadest synchronised global growth upsurge since 2010. U.S. President Donald Trump announced long-promised tariffs on Chinese goods, stoking fears of a global trade war. The world economy may get a temporary boost from a combination of US tax cuts and Chinese government spending to bolster state-owned enterprises, but longer-term growth prospects remain subdued, the IMF warned. Moody's expects global GDP growth to be around 3% for 2018 and 2019. Chinese companies accounted for $7 trillion of $45.20 trillion in global shadow-banking assets tied to the supply of credit that could pose systemic risks, the Financial Stability Board said. Indian Economy India registered a fiscal deficit of `39,140crore during February 2018 as against deficit of `41,422 crore in February 2017. The fiscal deficit in April- February 2017-18 accounted for 120.30% of the revised budgeted estimates of `5,94,849 crore for 2017-18. India's exports increased 4.48% in February 2018 to $25.83 billion from $24.73 billion in February 2017. Imports rose 10.41% to $37.81 billion from $34.25 billion. The overall trade deficit for April-February 2017-18 is estimated at $87.70 billion as compared to $44.38 billion during April- February 2016-17. The Index of Industrial Production (IIP) grew 7.50% in January 2018 against a growth of 3.50% in January 2017. The IIP registered a growth of 4.10% in April-January 2017-18 as against a growth of 5.0% in April-January 2016-17. The eight core industries with a combined weight of 37.90% in the Index of Industrial Production (IIP) grew 5.30% in February 2018 as against 0.60% in February 2017. Cumulative growth for April-February 2017-18 was 4.30%, as against 4.70% growth in April-February 2016-17. Provisional annual inflation rates based on all India general CPI Rural, Urban and Combined for February 2018 on point to point basis are 4.37%, 78
Indian Economy 4.52% and 4.44% (3.67%, 3.55% and 3.65% in February 2017). Inflation rates (final) for Rural, Urban and Combined for January 2018 are 5.21%, 4.93% and 5.07% respectively. The annual rate of inflation, based on monthly WPI, stood at 2.48% (provisional) for the month of February 2018 as compared to 2.84% (provisional) for January 2018 and 5.51% during February 2017. The year-on-year inflation measured by monthly CPI-IW stood at 4.74% for February 2018 as compared to 5.11% for January 2018 and 2.62% during February 2017. India's holding of US Treasury Securities at the end of January 2018 stood at $148.60 billion vis-à-vis $144.70 billion at the end of December 2017. Direct tax collections up to February 2018 show net collections of `7.44 lakh crore which is 19.50% higher than the net collections for the corresponding period of last year. As per AMFI data, Indian mutual fund industry lost `21,000 crore with its AUM dipping to `22.20 lakh crore in February from `22.41 lakh crore in January, due to outflows from debt funds. Goods and Service Tax (GST) collections fell to `85174 crore in February in comparison to `86318 crore in January. As per the Labour Bureau's seventh quarterly employment survey data, 1.36 lakh jobs were created across eight sectors, which account for 81% of the total organized workforce, in July-September 2017. The Indian economy now seems to be on its way to recovering from disruptions caused by demonetisation and roll-out of goods and services tax, the IMF said. In its biannual publication 'India Development Update: India's Growth Story', the World Bank said India's economy will grow 6.70% in FY18, 7.30% in FY19 and gather pace in FY20, expanding at 7.50%. In its Global Economic Outlook report, Fitch projected the Indian economy to clock a growth rate of 6.50% in FY18, 7.30% in FY19 and further rise to 7.50% in FY20. Goldman Sachs lowered its real GDP forecast on India for FY19 to 7.60% from 8% earlier. India has emerged as one of the Asian economies most vulnerable in an environment of rising interest rates in the US, according to Credit Suisse. 79
Reserve Bank of India: (Source: http://rbi.org.in) RBI converted a security from its portfolio maturing in 2018-19 having total face value of `15,968 crore to longer tenor securities maturing in 2028-29 and 2031-32. RBI issued the borrowing calendar for marketable dated securities for April- September 2018. RBI issued the borrowing calendar for Treasury Billsfor quarter ending June 2018. Government of India set the borrowing limits through Ways and Means Advances (WMA) for the first quarter of the financial year 2018-19 ( to June 2018) at `60,000 crore. The existing limits of WMA for States will be retained till the review of the limits by the next committee effective from 2020-21 taking into account the then fiscal positions of the States. RBI notified the meeting schedule of the Monetary Policy Committee for 2018-19. The Insolvency and Bankruptcy Board of India (IBBI) signed a MoU with the RBI. FBIL assumed the responsibility for administering valuation of Government securities with effect from March 31, 2018. RBI discontinued the practice of issuance of LoUs/LoCs for Trade Credits for imports into India by AD Category -I banks with immediate effect. RBI notified the Hedging of Commodity Price Risk and Freight Risk in Overseas Markets (Reserve Bank) Directions. The applicable average base rate to be charged by Non-Banking Financial Company - Micro Finance Institutions (NBFC-MFIs) to their borrowers for the quarter beginning April 01, 2018 will be 8.99%. RBI released the data on performance of the private corporate business sector during the third quarter of 2017-18. RBI released the web publication 'Basic Statistical Returns of Scheduled Commercial Banks (SCBs) in India Volume 46', which provides information on various characteristics of bank deposits and credit. RBI released lending rates of scheduled commercial banks based on data for February 2018. RBI released data on sectoral deployment of bank credit for the month of February 2018. RBI released data relating to India's international investment position (IIP) as at end-december 2017. RBI released the data on sources of variation in foreign exchange reserves in 80
Reserve Bank of India: (Source: http://rbi.org.in) India during April-December 2017. RBI released the data on developments in India's Balance of Payments during the third quarter (October-December) of 2017-18. RBI released the data on overseas direct investment for the month of February 2018. RBI released the monthly data on India's international trade in services for January 2018. RBI released a working paper Non-Linear, Asymmetric and Time-Varying Exchange Rate Pass-Through: Recent Evidence from India. RBI placed on its website the latest Report on Measuring Productivity at the Industry Level The India KLEMS Database. RBI released on its website DRG Study titled, Role of Financial Frictions in Monetary Policy Transmission in India. RBI released a working paper Operating Performance of Initial Public Offering (IPO) Firms after Issue in India: A Revisit. Jana Small Finance Bank Limited commenced operations as a small finance bank with effect from March 28, 2018. RBI imposed a monetary penalty of `4 million on State Bank of India for noncompliance with the directions issued by RBI on detection and impounding of counterfeit notes. RBI imposed a monetary penalty of `30 million on Axis Bank Limited for noncompliance with the directions issued by RBI on income recognition and asset classification (IRAC) norms. RBI imposed a monetary penalty of `20 million on Indian Overseas Bank for non-compliance with the directions issued by RBI on Know Your Customer (KYC) norms. CCIL RBI imposed a monetary penalty of `1 million on Equitas Small Finance Bank Limited for non-compliance with one of the licensing conditions stipulated by RBI. RBI imposed a monetary penalty of `50 million on Airtel Payments Bank Limited for contravening the 'Operating Guidelines for Payments Banks' and directions issued on Know Your Customer (KYC) norms. The highest Net position USD 3.82 billion in the USD/INR segment was registered on March 28, 2018. During 2017-18, the Forex settlement segment recorded the all-time high no. of deals 43,49, 548 and gross volume of USD 6.49 trillion 81