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RBI may hike repo rate by 25 bps on Friday

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Reserve Bank of India RBI

Mumbai, Oct 3 The Reserve Bank of India is widely expected to increase its repurchase rate by 25 basis points (bps) when it unveils the monetary policy on Friday, as it seeks to curb the potential inflationary impact from rising crude oil prices and a weakening currency.

At its bi-monthly review in August, the central bank lifted the key short-term lending rate, also called repo rate, by 25 basis points for a second straight time to 6.5 per cent, citing upside risks to inflation on account of an increase in the minimum support price for crops, and higher crude oil prices.

“The RBI policy meet is the key event and the market is pricing in a 25 bps hike,” said Vinod Nair, Head of Research at Geojit Financial Services.

Global oil prices have been on a boil, hurting the rupee, as India imports nearly 80 per cent of its crude requirements.

Higher interest rates in the US, and a tariff war initiated by President Donald Trump have also sent the Indian currency on a downward spiral. On Wednesday, the currency hit a record low of 73.42 against the US dollar.

Concerns about rising inflation, intensifying trade war and capital outflows have had an adverse impact on the Indian currency, analysts said. It has fallen nearly 15 per cent so far in 2018, the worst performer among its other Asian peers.

Brent crude oil price was hovering near $85 per barrel in trade on Wednesday.

Last week, the US Federal Reserve raised interest rates for a third time this year, boosting the dollar. The Fed is on course for at least another increase this year.

A higher interest rate in the US will likely prompt the RBI to tighten the policy rate despite a relatively tame inflation, as the central bank seeks to cushion the rupee’s fall, the analysts said.

Retail inflation in August increased 3.69 per cent, slowing from 4.17 per cent in the previous month.

State Bank of India in its Ecowrap research report last week said that the RBI will likely hike the repo rate by 25 bps in October, warning that the increase may not be the last one in the current fiscal year to March 31.

“We rule out a hike of 50 basis points, as it may spook the market. However, there is a probability that the central bank would change the stance from ‘neutral’ too, as three successive rate hikes with a ‘neutral’ stance could contradict the RBI message,” the report said.

The RBI maintained its “neutral” stance in the August policy review, as it had done over the previous five bi-monthly policy reviews, which allows it to move either way on rates.

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Vodafone Wins Arbitration Against India In Rs 20K Cr Retrospective Tax Dispute Case

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New Delhi: Vodafone has won the case against India over a retrospective tax demand of more than Rs 20,000 crore.

The Permanent Court of Arbitration at The Hague has ruled that the conduct of India’s tax department is in breach of “fair and equitable” treatment.

Voafone had moved the International Court of Justice (ICJ) in 2016 due to a lack of consensus between the parties’ arbitrators in finalising a judge for the tax dispute.

Following this, a tribunal was constituted in June 2016 after Vodafone challenged India’s use of a 2012 legislation that gave it powers to retrospectively tax deals like Vodafone’s $11 billion acquisition of a 67 per cent stake in Hutchison Whampoa in 2007. The retrospective tax law had been enacted after the Supreme Court judgement went in Vodafone’s favour.

Vodafone had challenged the tax department’s demand of Rs 7,990 crore as capital gains taxes (Rs 22,100 crore after including interest and penalty) under the Netherlands-India Bilateral Investment Treaty (BIT).

Buoyed by the arbitration award, Vodafone Idea stock closed 12 per cent higher at Rs 10.20.

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GST E-Invoicing Mandatory From October

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New Delhi: No further relaxation is likely in terms of e-invoicing as the Centre is set to go ahead with the decision to make GST e-invoicing mandatory for companies with annual turnover of over Rs 500 crore for their business-to-business transactions starting October 1.

Industry representatives, however, have urged the government to not make it mandatory and rather allow voluntary compliance.

The relief, however, would be there for relatively smaller businesses, as the threshold for mandatory e-invoicing, a step to improve tax compliance, was earlier planned to be kept at Rs 100 crore, is set to be raised to Rs 500 crore on the recommendations of an empowered panel of the Goods and Services Tax (GST) Council.

The initial date for its roll out was April 1, 2020, but the Centre notified October 1, 2020, as revised date for implementation of e-invoicing.

As per the website of the Good and Service Network ‘e-invoicing’ has many advantages for businesses such as standardisation, interoperability, auto-population of invoice details into GST return and other forms (like e-way bill), reduction in processing costs, reduction in disputes, improvement in payment cycles and thereby improving overall business efficiency.

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Online grocery to become $18bn industry in India by 2024: Report

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As companies from Reliance to Amazon put their top dollar in serving daily grocery at your doorstep, a new report said on Friday that online grocery is going to be the next battleground for growth, expanding to over $18 billion by 2024.

According to a joint report by a joint initiative by Bengaluru-based market consulting firm RedSeer and Bigbasket (Brand Intelligence), driven by the significant rise in organic adoption during Covid-19, eGrocery has been on a surge with clocking 1.7 times in gross merchandise value (GMV) in June this year as compared to January.

Online grocery will remain steady for the rest of the year to reach more than $3 billion, the report mentioned.

“The industry has seen more than 70 per cent ARR (annual recurring revenue) jumps in the last quarter across categories. This brings the opportunity to serve a larger set of customers, and some challenges with it,” said Hari Menon, co-founder and CEO of BigBasket.

The report found that demand for comfort foods like noodles and cookies, immunity boosters like lemon and hygiene products like sanitizers picked up after the pandemic while essentials remained strong.

Snacks and branded foods grew by 5 per cent quarterly pre-Covid, however growth jumped to 75 per cent in the June quarter.

Within snacks and branded foods, biscuits and cookies was the largest sub-category and grew the most in Q2.

Beverages grew by 2 per cent quarterly pre-Covid, however growth jumped to 50 per cent in Q2.

“Personal Care grew by 5 per cert quarterly pre-Covid but jumped to 24 per cent in Q2 due to Covid.

“We have observed that traditional brands which pivoted quickly to be digitally ready brands have seen 2x+ jump in sales compared to offline brands. We are excited to have this opportunity to serve the ecosystem,” said Anil Kumar, founder and CEO of consulting firm RedSeer.

Home utilities grew by 6 per cent quarterly pre-Covid but jumped to 11 per cent in Q2.

Within home utilities, detergents and dishwash were the largest sub-category but grew the least in the last quarter.

According to the report, home utilities were not severely affected by the pandemic.

-IANS

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