Economy News Notes

RBI becoming too predictable

• The Reserve Bank of India's monetary policy statements ever since the framework was changed from monetary targeting approach to multiple indicator approach since April 1998 contained three important elements.
• First, was an assessment of macroeconomic and monetary developments in India in the backdrop of global developments. The second is the stance of monetary policy which clearly presented whether the policy's thrust was biased towards the price stability or inflation control objective or more attuned towards supporting growth by stimulating investment and export demand; and third was policy action in terms of monetary measures using instruments such as cash reserve ratio, repo rate and reverse repo rate.
• The policy statements provided base line projections for growth and inflation, besides some monetary and banking indicators.
• Another important element of policy had been the strategy towards exchange rate and the closely related reserves management which practically did not undergo any change till late 2009.
• T his strand of policy presentation and prescription by and large continued through the tenures of Dr. Bimal Jalan and Dr. Y.V. Reddy till about end of 2008 and extended through the tenure of present Governor Dr Duvvuri Subbarao till about the end of 2009.
• Three broad departures are evident since about late 2009. First, while the macro and monetary projections continue, the upside and downside risks are elaborated in the statement. Second, over a period, the policy statements now provide a forward guidance to policy stance. Earlier, there was no policy guidance for the immediate future except stating broadly that the RBI would act swiftly and decisively as and when evolving external and domestic conditions so warrant. Third, while the reserves management strategy did not seem to have undergone a change, the exchange rate management had become more and more fully market-oriented and the RBI has been following practically a hands-off policy.
• Two implications are evident because of the recent changes. First, the surprise element has been taken out of policy to a great extent. Apparently, almost every policy change was anticipated and discounted invariably by markets even before the announcements. One exception was a 50 bps hike in the repo rate last July when the anticipation was only for a hike of 25 bps. Second, the exchange rate movements are now in a wider range, particularly under global uncertainty. Third, in the absence of exchange market intervention, the extent of reserves accumulation has been limited.

U.S. economy grows 2.5 % in Q3

• The U.S. economy grew modestly over the summer after nearly stalling in the first six months of the year, lifted by stronger consumer spending and greater business investment.
• While 2.5 per cent growth is enough to ease recession fears, it is far below what is needed to lower painfully high unemployment.

Competition Commission clears amalgamation of Alstom Holdings and Alstom Projects

• The competition watchdog, Competition Commission of India (CCI), has cleared the amalgamation of Alstom Holdings India Ltd (AHIL) and its subsidiary Alstom Projects India Ltd (APIL).
• Share swap ratio

  The board of the power project services provider has approved the share swap ratio of 10:41, that is, 10 shares of APIL for every 41 shares of AHIL.

Samvat 2068 starts on cheerful note

• The Samvat Year 2068 began on a cheerful note as the Bombay Stock Exchange sensitive index
• A better trend in global market, as investors awaited an European Union summit on euro zone's debt crisis, further fuelled the market sentiment.
• Trading members of the exchange are hereby informed that due to large movement of Sensex futures observed during the special session conducted as Muhurat trading for Diwali on the BSE, it has been decided to annul all the derivatives trades done on October 26, 2011 under Bye Law 1.46 of Derivatives segment.