Indian economy faces liquidity deficit thanks to Reserve Bank of India’s dollar sales, festival demand and Government sitting on cash balances | Daily Round Up

Indian economy faces liquidity deficit again thanks to Reserve Bank of India’s dollar sales, festival demand and Government sitting on cash balances.

The Indian economy starting October has faced liquidity deficit. One of the main factors included Reserve Bank of India’s forex transactions - selling dollars in the system in order to curb the excessive volatility in the foreign exchange market and curb downfall in the rupee leading to withdrawal of rupee liquidity.

Additionally, the festival season demand results in people keeping cash with them instead in the banking system and finally government sitting on cash in its account also results in reduced liquidity in circulation in the economy.

This was clearly visible in the Weighted Average Call Rate (WACR) which on Tuesday closed at 6.11% on 11^th October, 2022. First of all, to clarify, the Weighted Average Call Rate (WACR) is the operational target rate for the Reserve Bank of India which is considered as pivotal for the system rate. Weighted Average Call Rate (WACR) is at its highest since April 2019.

Reserve Bank of India maintains an Interest Rate Corridor, which has Reverse Repo Rate as lower band and Marginal Standing Facility (MSF) as upper band. And Repo Rate is in between these two bands.

Now Weighted Average Call Rate (WACR) at 6.11% as of now is just 21 bps higher than Repo Rate which is 5.90% and just 4 bps lower than Marginal Standing Facility (MSF) Rate which is 6.15%.

Banks need to maintain liquidity levels as per the Cash Reserve Ratio (CRR) and for that purpose they borrow funds from interbank money market and recently for the same purpose they have been taking MSF route. The banks have borrowed Rs.21000 crores overnight from Marginal Standing Facility (MSF) window of Reserve Bank of India.

 This extended deficit in liquidity further increases the pressure on banks to increase their deposits in order the fund the ever growing credit demand. As per latest fortnightly figures as on September 23^rd, 2022 from the Reserve Bank of India, the credit growth in the banking system was at 9-year high of 16.4% year on year and the same for deposit growth was at 9.2%.

Deposit growth has been lower thanks to increased consumption in the economy. The increase in consumption has in turn been a result of several factors like after pandemic recovery demand, inflationary demand, etc. People have felt the pressure of inflation as of late which has resulted into higher spending and lower savings which has in turn affected the deposit growth in the system.

TATA Motor launches new EV

TATA Motors unveiled its latest EV model named TATA Tiago EV. It received an astounding response from the consumers as it received more than 10000 bookings within a span of 24 hours.

TATA Tiago EV was launched at Rs.8.49 lakhs (ex-showroom) price. And for booking the same the customers needed to pay just Rs.21000.

World Economic Forum adds two facilities from India to its Global Lighthouse Community Network

World Economic Forum included 11 facilities into WEF Global Lighthouse Community Network. Out of 11, 2 were from India, one being Dr. Reddy and other bring Mondelez’s Indian facility.

The World Economic Forum’s Global Lighthouse Community Network is a grouping of more than 100 industrial houses leading in the application of 4^th Industrial Revolution technologies including Big Data, artificial intelligence, etc.

 

FSSAI mandates registration for Foreign Food Exporters to India

India’s food regulator FSSAI – Food Safety and Standards Authority of India issued a new order announcing that all the foreign food manufacturers exporting its products to India under 5 mentioned categories will need to register under Food Safety and Standard regulations.

The 5 categories will be nutraceuticals, milk including its products, meat including its products, infant food and egg powder.

The aforementioned regulation will come into effect from February 01, 2023.

 

INOX tie ups with ICC for live screening of Cricket matches

Inox Leisure, the multiplex chain in partnership with ICC under an agreement will screen live all matches of India in the upcoming ICC Men’s T20 World Cup starting from 16^th October, 2022 which is scheduled to be played in Australia.

Inox will screen live matches in India in more than 25 cities all over India. India will play its first match against Pakistan on 23^rd October, 2022.

 

PM Narendra Modi inaugurated the Mahakal Lok corridor at Ujjain in Madhya Pradesh.

Mahakal Lok corridor is more than 900 meters long said to be one of the longest corridor in India is made with a project cost of Rs.856 crores.

 

India’s ranking in 2022 Commitment to Reducing Inequality Index(CRII)

India ranked 123^rd out of 161 countries in the latest rankings of 2022 Commitment to Reducing Inequality Index(CRII). With this India moved 6 places up from its last ranking.

Commitment to Reducing Inequality Index(CRII) is an index tracking the policies formed and action taken by various governments around the world towards reducing inequality over the last 2 years of pandemic.

Norway leads the Commitment to Reducing Inequality Index(CRII) with 1^st Rank followed by Germany and Australia.

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Roger Binny gave his name for nomination for the post of BCCI president.

Roger Binny (67), was part of the 1983 World Cup winning team of India.

 

Ministry of Statistics and Program implementation – MOSPI proposes decriminalizing of offences under its effort to facilitate ease of doing business.

Ministry of Statistics and Program implementation – MOSPI comes up with latest round of proposal to facilitate ease of doing business proposing decriminalizing of offences under the Collection of Statistics Act, 2008.

Ministry of Statistics and Program implementation – MOSPI suggested to remove the provision of imprisonment for offences including obstructing statistics officers and deceiving them and suggested to increase just the monetary penalty.

As of now the provision entails 6 month of imprisonment plus fine up to 2000 for individual and up to 10000 for companies. Ministry of Statistics and Program implementation – MOSPI suggested to remove the imprisonment and increase the fine up to 20000 and 100000 respectively.