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The Monetary Policy Committee of the Reserve Bank of India issued its sixth bi-monthly policy statement for 2017-18. The repo rate, which is the key rate at which the RBI loans to other banks, was retained at 6% by the Central Bank. In December, consumer inflation hit a 17-month high of 5.21 percent, significantly over the Reserve Bank of India’s medium-term objective of 4%. From 2:45 to 3:05 p.m., RBI Governor Urjit Patel, who chairs the Monetary Policy Committee, spoke to the media. The Reserve Bank of India’s policy pronouncement is the first following the introduction of the 2018 Budget, and it comes when global financial markets are in upheaval.
About Bi-Monthly Monetary Policy
Monetary policy is one of two policies that any economy must formulate, the other being fiscal policy. The monetary policy focuses on the money supply and inflation rate in the economy, whereas the fiscal policy looks at the government’s revenues and expenditures. Trade and cultural relations are two things that the two countries have in common. The Reserve Bank of India (RBI) is India’s Central Bank, and it examines the country’s monetary policy every two months.
Highlights of Bi-Monthly Monetary Policy (2017-2018)
The highlights of the RBI’s second bi-monthly monetary policy announcement for 2017-18 are as follows:
- Under the liquidity adjustment facility, keep the policy repo rate at 6.0 percent (LAF). As a result, the LAF’s reverse repo rate remains at 5.75 percent, while the MSF rate and the Bank Rate both stay at 6.25 percent.
- The MPC’s decision is consistent with a neutral monetary policy stance, intending to meet the medium-term target for consumer price index (CPI) inflation of 4% within a +/-2 percentage-point band while supporting growth.
- The central bank’s stance was essentially predictable, as evidenced by the bond and equity markets’ lack of reaction. With headline inflation expected to be above 5% in the first half of FY19 and 4.5-4.6 percent in the second half, there is only a minor change toward a cautious stance. They are still bullish about growth, expecting to return to around 7% in FY19. The Fed’s guidance is still data-dependent, with a move to increase rates necessitating more evidence of rising inflationary pressures.
- Financial stability risks, resulting mostly from global policy normalisation concerns of inflation, are also likely to be monitored by policymakers.
- The implementation of the GST is unlikely to have a significant influence on inflation.
- Allowances under the 7th Pay Commission, as well as geopolitical and financial risks, pose an upside risk to inflation. Private investment must be revived, the banking sector must be restored, and infrastructure bottlenecks must be removed.
- The RBI will collaborate with the government to resolve bank balance sheet problems.
- The MPC points out that the inflation forecast is complicated by various upside risks.
- After the Reserve Bank of India kept the repo rate at 6%, the Sensex declined 113.23 points, or 0.33 percent, to 34,082.71, while the NSE Nifty slid 21.55 points, or 0.21 percent, to 10,476.7.
- Core sector growth declined in December due to contractions or deceleration in coal, steel, crude oil, and power output. The acreage of wheat, oilseeds, and coarse cereals was all lower than the previous year. Consequently, the rabi crop area deficit sewed on February 2 increased to (-)1.5 percent, up from (-)1% on December 29, 2017.
- As global demand increases, export growth is expected to accelerate much further.
- According to the RBI, the GST is stabilising, economic activity is going up, and there are early signs of investment resurgence.
- As a result, the MPC chose to maintain its neutral posture and keep the policy repo rate on hold. The MPC reiterates its goal to maintain headline inflation near 4% on a long-term basis.
- The Indian rupee fell down by 11 paise to 64.14 against the US dollar ahead of the Reserve Bank of India’s MPC decision.
Conclusion
The RBI retained the repo rate under the liquidity adjustment facility (LAF) at 6% in its sixth bi-monthly policy. As a result, the LAF’s reverse repo rate continues at 5.75 percent, while the marginal standing facility (MSF) rate and the Bank Rate both remain at 6.25 percent. The Reserve Bank of India’s MPC (Monetary Policy Committee) kept the benchmark interest rate unchanged in its December review, citing concerns about a possible price rise. The five RBI members that voted in favour of the monetary policy decision were Dr Chetan Ghate, Dr Pami Dua, Dr Viral V. Acharya, Dr Ravindra H. Dholakia, and Dr Urjit R. Patel, while Dr Michael Debabrata Patra voted for a 25-basis-point raise in the policy rate.
Prime Minister Narendra Modi visited Ireland on September 23, 2015. It was the second time an Indian Prime Minister had visited Ireland. The first being Jawaharlal Nehru’s visit in 1956. Ireland is an island nation located in Northwestern Europe and surrounded by the North Atlantic Ocean.
The Prime Minister of Ireland, Enda Kenny, had hosted PM Modi during his visit. The PM was attended by other dignitaries such as the Minister of Foreign Affairs and Trade, Charles Flanagan, and Ireland’s Ambassador to India, Feilim McLaughlin. The main aim of the visit was to create stronger ties and improve trade and cultural relations. Described below is the impact of the PM’s Ireland visit.
Impact on trade and commerce
India and Ireland have strong bilateral trade and business relations. Before the PM’s visit, trades with Ireland were valued at €650 million in business in 2014. This included exports worth €248m and imports worth €402 million.
The indigenous exports increased from €32 million in 2012 to €55 million in 2014. In 2019, the total bilateral trade was around €1.2 billion. The exports and the imports have also increased to €636 million and €480 million respectively. Currently, the total trade between India and Ireland is valued at €4.2 billion. This resulted from improved bilateral ties between the two nations, owing to Prime Minister Modi’s visit to Ireland.
Indian Companies in Ireland
Many Indian companies carry out trade and commerce in Ireland. They provide services to Irish markets and consumers across various industries. Pharmaceutical giants such as Reliance Genemedix and Amneal Pharmaceuticals operate in Ireland. Major IT companies such as Wipro, Infosys, TCS, and HCL also have a strong presence in the country. The trade relations were bolstered after Indian Prime Minister Narendra Modi visited Ireland.
Other companies like Crompton Greaves, Deepak Fasteners, Jain irrigation systems, and Shapoorji Pallonji provide consumer goods and services. Likewise, many Irish companies conduct their business in the Indian market. These companies include pharmaceutical and nutrition players like ICON and Glanbia, IT firms like Globoforce and other companies like Keventer, CRH Taxback Group, and Connolly Red Mills.
Impact on Education
Ireland has been a coveted destination for higher education for Indian students. Over 5000 Indian students have enrolled for higher studies in various institutions in Ireland. The students are admitted to engineering, technology, medicine and management colleges. More than 30 research agreements have been signed between the two nations that allow institutes in both countries to collaborate.
Many reputed institutes like Trinity College, Dublin, and Thapar University, Patiala, have signed MOUs for engineering and science disciplines programmes. Thus, Ireland is an essential collaborator in graduate and doctoral research. This collaboration is also considered an impact of the PM’s Ireland visit.
Indian Community in Ireland
Ireland is diplomatically significant for India also due to the large number of Indian citizens residing there. The Indian origin population is approximately 45,000 people, of whom 18,500 are Non-Resident Indians (NRI), and others are Persons of Indian Origin (PIO). The majority of the residents are working professionals employed in engineering, healthcare and management positions.
It has helped in establishing many policies for the Indian origin population. Two such policies in practice are wearing hijab as a part of the police uniform and the non-requirement of obtaining an additional work permit for the spouse or the partner of Critical Skill Employment Permit holders.
Cultural Impact
As a result of a large population of Indian origin citizens in Ireland and the relationship between the two nations, Ireland promotes Indian culture in various forms. One such example is the celebration of Diwali in Ireland since 2008. The event is organised every year in collaboration with Irish and Indian committees.
Further, an annual contemporary film festival is also a part of the celebration of Indian culture. The promotion of such events indicates the importance of cultural exchange between the two nations. The Irish communities also take a keen interest in conventional practices such as cultivating and consuming Indian herbs and spices. This connects the agricultural practices between the two nations. The cultural ties between the countries were strong, and Prime Minister Modi’s visit to Ireland helped strengthen them further.
Another significant practice is the celebration of International Yoga Day in Ireland. The Irish communities have accepted Yoga as a form of a healthy lifestyle. The practice is similar to the Indian tradition.
Tourism
India attracts around 44,000 Irish tourists every year. Indian tourists too visit Ireland in similar numbers. This was facilitated by the introduction of the common British-Irish visa scheme. This scheme allows the tourists to visit the U.K. and Ireland under one visa, rather than applying for two separate visas. It is valid for short stays. India also extended its Electronic Tourist Visa facility to Ireland to digitally facilitate visa approval and generation. The impact of the PM’s Ireland visit was such that it has also helped establish the tourism sector in both countries.
Conclusion
The diplomatic ties between Ireland and India have been impacted positively after Prime Minister Modi visited Ireland in 2015. It was an essential step toward strengthening the bilateral relationship between these two nations. India and Ireland have been important to each other since the 1900s.
In 2010 and 2017, two honorary consulates were established in Chennai and Kolkata. Later in 2019, a formal and fully functional consulate general in Mumbai. Ireland and India have also shown their allegiance to fighting terrorism after the Pulwama attack. India has also hosted several Irish dignitaries on various occasions. These visits were directed toward engagement in business, education, health and tourism.
Further, many agreements were signed to provide opportunities for employment to people of both countries. Prime Minister Modi’s visit to Ireland helped revive relatively stagnant relations between these two nations. Several cultural and historically similar instances bind these two nations. From Yeats and Tagore to cricket and Diwali, the cultural semblance between these two nations has helped create a strong tie between them.
