TOPIC OF THE DAY–
“Prudent Increase: On RBI’s Rate Hike”
The decision by the Reserve Bank of India’s Monetary Policy Committee to raise benchmark interest rates again by 25 basis points is a prudent one. This is the second successive rate increase in as many months, a response to mounting uncertainties on the inflation front. Continuing volatility in crude oil prices, the recent softening notwithstanding, and its vulnerability to geopolitical tensions and supply disruptions is one of the main risks to the inflation outlook. Among the RBI’s other concerns are volatile global financial markets, possibilities of fiscal slippage at the Central and State levels, the likely impact of the increase in the minimum support price for kharif crops, and the staggered impact of upward revisions to house rent allowance paid by State governments. Rainfall has so far been 6% below the long-period average and deficient over a wider area than last year — more than a fifth of the country’s 36 sub-divisions have reported shortfalls. This has resulted in a drop in the total sown area under kharif. The monetary authority has flagged the need to keep a close watch on rain over the remainder of the season, given the risks regional imbalances may pose to paddy output and CPI inflation. The June round of the RBI’s own survey of household inflation expectations reveals that families see prices hardening even further over both the three- and 12-month horizons. Domestic economic activity having strengthened to a point where the output gap has ‘virtually closed’, manufacturers polled by the central bank have reported higher input costs and selling prices over the April-June quarter.The portents could not be clearer. With retail inflation having accelerated to 5% in June, the RBI has revised its projection for CPI inflation in the second half of the current fiscal year to 4.8%, from the June forecast of 4.7%, and now sees price gains accelerating to 5% in the April-June quarter of 2019. Policymakers on the MPC have understandably spotlighted the risks to the domestic economic rebound from global developments. While rising trade protectionism threatens to impactinvestment flows, disrupt global supply chains and hurt all-round productivity, depreciations in the value of most currencies against the strengthening dollar have rippled through many major advanced and emerging economies, spurring inflation across these markets. The MPC’s primary remit is to ensure that retail inflation stays firmly within a band of 2-6%, and preferably anchored at 4% over the medium term. So there is no room to quibble over the committee’s majority decision to raise borrowing costs while retaining a ‘neutral’ policy stance. With inflation widely accepted as a hidden tax on the poor, the containment of price gains justifiably ought to be the raison d’etre of monetary policy.
MEANINGS AND WORD:-
1.Prudent
Meaning: Acting with or showing care and thought for the future.
Example: “No prudent money manager would authorize a loan without first knowing its purpose”
Synonyms: Wise, Judicious
Antonyms: Unwise, Imprudent
- Mounting
Meaning: Organize and initiate (a campaign or other course of action).
Example: “The company had successfully mounted takeover bids”
Synonyms: Organize, Stage
- Vulnerability
Meaning: The quality or state of being exposed to the possibility of being attacked or harmed, either physically or emotionally.
Example: “Conservation authorities have realized the vulnerability of the local population”
- Staggered
Meaning: Astonish or deeply shock.
Example: “I was staggered to find it was six o’clock”
Synonyms: Astonish, Amaze
- Deficient
Meaning: Insufficient or inadequate.
Example: “The documentary evidence is deficient”
Synonyms: Lacking, Wanting
Antonyms: Excessive, Perfect
- Flagged
Meaning: Become tired or less enthusiastic or dynamic.
Example: “If you begin to flag, there is an excellent cafe to revive you”
Synonyms: Tire, Falter
Antonyms: Revive, Increase
- Depreciations
Meaning: A reduction in the value of an asset over time, due in particular to wear and tear.
Example: “Provision should be made for depreciation of fixed assets”
Synonyms: Devaluation, Markdown
Antonyms: Rise
- Rippled
Meaning: (Of a sound or feeling) spread through a person, group, or place.
Example: “Applause rippled around the tables”
- Spurring
Meaning: Promote the development of; stimulate.
Example: “Governments cut interest rates to spur demand”
Synonyms: Stimulate, Encourage
- Anchored
Meaning: Secure firmly in position.
Example: “The tail is used as a hook with which the fish anchors itself to coral”
Synonyms: Secure, Attach
- Quibble
Meaning: Argue or raise objections about a trivial matter.
Example: “They are always quibbling about the amount they are prepared to pay”
- Stance
Meaning: The attitude of a person or organization towards something; a standpoint.
Example: “The party is changing its stance on Europe”
Synonyms: Attitude, Opinion
- Raisond’etre
Meaning: The most important reason or purpose for someone or something’s existence.
Example: “Seeking to shock is the catwalk’s raison d’être”
