RBI may hike rates in 2022 March quarter; coal and chip shortages a worry, says report

By: |
October 11, 2021 5:47 PM

It can be noted that the latest move by the (RBI last week to narrow the excess liquidity in the system through stated targets is being seen by some as the normalisation of the policy.

RBI 02The country is reporting coal shortages and power sector companies face the prospect of importing coal at significant cost. (File)

The Reserve Bank is likely to change the stance of its monetary policy and hike rates from the first quarter of 2022, a Japanese brokerage said on Monday.

The central bank will start with liquidity normalisation moves this month, narrowing the difference between the rate at which it funds the system and at which it absorbs excess liquidity in December, Nomura said.

It can be noted that the latest move by the Reserve Bank of India (RBI) last week to narrow the excess liquidity in the system through stated targets is being seen by some as the normalisation of the policy, which has been very accommodative since the onset of the pandemic to boost growth.

The brokerage upped its consumer price index (CPI) inflation target for 2022 to 5.2 per cent from 5 per cent earlier.

Demand remains strong in India, but there are supply-side headwinds in areas like chips which is bothering the auto sector and coal shortages which threatens to put parts of the country into darkness, it said.

The country is reporting coal shortages and power sector companies face the prospect of importing coal at significant cost.

With power demand likely to rise amid the continued economic normalization and upcoming festive sales, supply-side disruptions pose an important near-term downside risk to growth momentum, it warned.

For the week ended last Sunday, its Business Resumption Index rose to 105.1 from 103.4 in the prior week.

“If power outages become more widespread, then industrial output could suffer in the near term, while higher energy costs may squeeze firms’ margins and add to consumer price inflation,” the brokerage said in the report.

Do you know What is India expected to grow 10 pc during current fiscal: NCAER Director General Poonam Gupt,FinMin releases Rs 9,871 cr grant to 17 state, Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Impartial audit essential for resilient economy, says RBI Governor Shaktikanta Das
2India-UAE FTA talks: Duty relief likely for job-intensive sectors
3MGNREGS Outlay: Ministry seeks additional Rs 25,000 crore for rural jobs scheme