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Centre plays T20, we play test: RBI Deputy Governor slams govt

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Mumbai: Pitching for “effective independence”, RBI Deputy Governor Viral Acharya said governments that do not respect central bank’s independence would sooner or later incur the wrath of financial markets.

Amid instances of apparent differences between the government and the RBI, Acharya emphasised that undermining a central bank’s independence is akin to committing a “self goal” for any government.

Wiser politicians will give a central bank necessary autonomy so that they reap electoral benefits of stable macroeconomic conditions which such independence will bring, Acharya said.Delivering the A D Shroff Memorial Lecture, he said, “What matters is the effective independence with which these powers (vested in the Acts governing the RBI or any central bank) can be exercised in practice.”

 

“Governments that do not respect central bank’s independence will sooner or later incur the wrath of financial markets, ignite economic fire and come to rue the day they undermined an important regulatory institution,” Acharya said.

Noting that markets have a keen eye on this aspect, he said that if uncertainty grows and confidence in central bank’s independence and credibility erodes, “then markets rap bond yields and exchange rate on the knuckles!”

“Wiser governments which accord the necessary leeway will benefit through lower costs of borrowing, the love of international investors and longer life spans,” he said.

In recent months, the RBI and the government have been apparently differing on approach to certain issues, such as those pertaining to payment systems regulator and Prompt Corrective Action (PAC) norms for banks.

In his over 85-minute long speech, the academic-turned-central banker seemed to be expressing some satisfaction with the level of independence achieved by the RBI but underlined the need for more leeway, especially for regulating state-run banks where the RBI cannot effect any management changes, balance sheet management where fiscally pressured government eyes the surplus, and “regulatory scope” like its ongoing tussle on who manages the payments landscape with government.

To illustrate the achievements, he pointed out the inflation targeting framework and the setting up of the rate setting panel and introduction of bankruptcy laws.

He termed the RBI as a “friend” of the government, which will “tell the government unpleasant but brutally honest truths and correct, to the extent it can, any adverse long-term consequences of government policies”.

Acharya cited global experience to point out that not maintaining independence of central banks has led to deep economic troubles as in Argentina in 2010 and also pointed out that issues faced by countries like Turkey have their roots in central bank’s independence.

The basic difference between a central bank and a “myopic” government is of the time horizon for which decisions are made, he said, comparing central banks with cricket Test teams and the executive arms of the government as T-20 teams looking for quick results.

The speech comes amid a host of issues on which the RBI is reportedly sparring with the government. It comes exactly a week after it decided to go public with its displeasure on who will regulate payment systems by posting a dissent note, and amid pressure from the government to relax the prompt corrective action (PCA) norms which restrict lenders’ activities for having high levels of dud assets and depleting capital reserves.

“Sweeping bank loan losses under the rug by compromising supervisory and regulatory standards can create a facade of financial stability in the short run, but inevitably cause the fragile deck of cards to fall in a heap at some point in future, likely with a greater taxpayer bill and loss of potential output,” he said, pointing to the over Rs 10.50 lakh crore NPAs the banking system is plagued with.

He also spoke about the scenarios which can compromise the central bank’s independence such as appointment of government officials rather than technocrats to key positions such as governor, erosion of its powers through “piece-meal legislative amendments”, blocking of rule-based central bank policies and setting up of parallel regulatory agencies.

Acharya concluded his speech asserting that “independent central bankers will remain undeterred”, making clear the institutional resolve.


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Business

Sensex sheds 298.82 to close at 38,811; Nifty shrinks to 11,650

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Mumbai: The benchmark BSE Sensex erased early gains to end 299 points lower Thursday as investors booked profits after stocks soared to record highs after BJP’s strong showing in the Lok Sabha polls.

Sensex and NSE Nifty went on to record highs even as Lok Sabha election results showed that PM Modi-led NDA leading on over 300 seats. However after the euphoria during the morning session, Sensex shed 298.82 to close at 38,811 and Nifty shrank to 11,650 on the closing bell.

During the day, the Sensex hit the 40,000 mark while the Nifty crossed the 12,000-level for the first time ever. However, the indices succumbed to profit booking towards the fag-end of the session.

 

The 30-share Sensex tumbled 298.82 points, or 0.76 per cent, to close at 38,811.39. Similarly, the broader NSE Nifty settled 80.85 points, or 0.69 per cent, lower at 11,657.05.

IndusInd Bank was the biggest gainer in the Sensex pack, rallying 5.23 per cent, followed by Hero MotoCorp, Coal India, Yes Bank, PowerGrid, ICICI Bank, HCL Tech, L&T, Kotak Bank and Bharti Airtel, rising up to 1.56 per cent. On the other hand, Vedanta, ITC, Tata Motors, HDFC twins, Bajaj Finance, Sun Pharma, Tata Steel, TCS, ONGC and Infosys fell up to 5.53 per cent.

Riding on a massive Modi wave sweeping through most parts of India, the BJP was set to return to power Thursday as it led in 298 seats while the Congress trailed far behind with 52, according to trends released by the Election Commission for all 542 seats that went to polls.

“Markets were initially enthused to see the election results falling in line with the exit polls. However, the run up to the D-day was so sharp that it turned out to be a sell on news phenomenon,” said Devang Mehta, Head – Equity Advisory, Centrum Wealth Management.

Participants would now be keen to know the future course of action for bringing the economy back on track, solution to the liquidity situation, the union budget, onset and progress of monsoon in June and most importantly the earnings trajectory, he added.

According to traders, weak cues from other global markets and a depreciating rupee also weighed on investor sentiment. The rupee depreciated 37 paise to 70.04 against the US dollar in afternoon trade. Globally, bourses in Asia ended in the red.

Indices in Europe were also trading on a negative note in early deals. Brent crude, the global oil benchmark, was trading 1.79 per cent lower at USD 69.72 per barrel.

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Silver up on increased offtake; gold steady

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New Delhi: Silver prices rallied by Rs 200 to Rs 37,400 per kg in the national capital on Thursday, while gold held steady, according to the All India Sarafa Association.

Traders said silver prices rose on pick-up in offtake by industrial units and coin makers at the local spot market. Globally, spot gold was trading marginally higher at USD 1,276 an ounce, while silver was slightly up at USD 14.53 an ounce in New York.

In the national capital, gold of 99.9 per cent and 99.5 per cent purity dropped by Rs 10 each to Rs 32,670 per ten 10 gram and Rs 32,500 per 10 gram. Sovereign gold, however, held steady at Rs 26,500 per eight gram.

 

Silver ready surged Rs 200 to Rs 37,400 per kg, while weekly-based delivery fell by Rs 66 to Rs 36,234 per kg. Silver coins held flat at Rs 79,000 for buying and Rs 80,000 for selling of 100 pieces.

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India PC mkt declines 8.3 per cent to 2.15 mn units in Jan-Mar qarter

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New Delhi: Personal Computer (PC) shipment in India fell by 8.3 per cent in the January-March quarter of 2019 to 2.15 million units, registering a year-on-year decline for the third consecutive quarter, according to research firm International Data Corporation (IDC).

Besides, big commercial deals, market remained weak due to weak consumer demand, high inventory from previous quarters, and supply issues for Intel chips.

Shipments in the consumer segment saw a 26.5 per cent dip in the said quarter compared to the year-ago period. The commercial PC market saw a total shipment of 1.35 million units in the said quarter, a growth of 7.3 per cent over last year.

 

“The announcement of central elections on March 10, 2019 resulted in the model code of conduct coming into immediate effect further resulting in a delay in execution of government projects and impacting the commercial segment,” IDC said in a statement.

However, IDC expects the overall PC market in India to witness a growth in the second quarter. The commercial market is expected to pick up post new government formation in May, while the consumer market is expected to pick up largely driven by back to school campaign by vendors and online sales.

HP maintained its leadership position with an overall market share of 28.1 per cent in the first quarter of 2019, followed by Dell (25.9 per cent), Lenovo (25.2 per cent) and Acer (11.7 per cent).

The notebook PC (laptop) category accounted for 61.4 per cent of the shipment and witnessed a 9.8 per cent year-on-year decline.

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