This initiative stems from the announcement made by Finance Minister Nirmala Sitharaman during the Union Budget 2021–22. Under the new provisions, states will be permitted to borrow an additional 0.5 percent of their gross state domestic product (GSDP) annually for four years, starting from 2021–22 and continuing until 2024–25. However, this extra borrowing space is conditional upon the implementation of specific power sector reforms by the states.

In line with these developments, the Ministry of Finance has given its approval for 12 state governments to raise financial resources amounting to a total of Rs 66,413 crore through additional borrowing permissions. The Ministry of Power has assessed the reforms undertaken by these states in the power sector during the financial years 2021–22 (FY22) and 2022–23 (FY23) and made recommendations based on their performance.

Let’s take a closer look at the breakdown of the approved amounts for each state. Andhra Pradesh has been granted Rs 9,574 crore, Assam Rs 4,359 crore, Himachal Pradesh Rs 251 crore, Kerala Rs 8,323 crore, Manipur Rs 180 crore, Meghalaya Rs 192 crore, Odisha Rs 2,725 crore, Rajasthan Rs 11,308 crore, Sikkim Rs 361 crore, Tamil Nadu Rs 7,054 crore, Uttar Pradesh Rs 6,823 crore, and West Bengal Rs 15,263 crore.

These financial incentives are designed to provide states with the necessary resources to facilitate crucial reforms in the power sector. By granting additional borrowing permissions, the government aims to incentivize and enable states to take proactive measures to improve the efficiency and performance of their power infrastructure.

Reforms in the power sector are essential for achieving the nation’s energy goals. They aim to address various challenges faced by the sector, such as distribution losses, the financial viability of power distribution companies, and the integration of renewable energy sources. Through the implementation of these reforms, states can streamline their power sector operations, enhance consumer satisfaction, and attract private investment.

The government’s decision to link borrowing permissions to specific reforms ensures accountability and progress in the power sector. It sets a clear expectation that states must undertake tangible steps to improve their power infrastructure, thereby ensuring the efficient and reliable supply of electricity to their citizens.

States will be able to meet their funding needs for putting these reforms into effect with the help of the government’s financial assistance. It will also ease the burden on their finances and allow them to allocate resources more effectively towards strengthening the power sector.

In conclusion, the government’s announcement of financial incentives through additional borrowing permissions demonstrates its commitment to power sector reforms. By empowering states with the necessary resources, it aims to foster an environment conducive to the efficient functioning of the power sector. These reforms are crucial for ensuring a reliable and sustainable power supply, driving economic growth, and meeting the energy demands of the nation.

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According to a report by the news agency Reuters, a senior official from the United States said that the State Department has already been working extremely hard to find innovative methods to make adjustments to the situation. A knowledgeable individual on the subject said, “We all acknowledge that the mobility of our people is a huge asset to us.”

The spokesman for the State Department has refused to comment on the different categories of visas that would be eligible for the pilot programme’s debut at the current time. The spokeswoman for the organisation said that the pilot initiative will begin with a limited number of participants, with the goal of expanding it over the course of the following several years.

According to the article, the stages might be different in the future; however, they have not yet been finalised.

According to the source, the pilot project would cover certain employees who have L-1 visas. These visas are granted to individuals who are moving to the United States to work for their own companies.

Companies in the United States that are in need of talented employees from other countries may apply for one of the 65,000 available H-1B visas, while people with advanced degrees can apply for one of the 20,000 available visas. These visas have a validity period of three years, after which they must be renewed for another three years.

In the meantime, Indians remain the most active users of the H-1B programme, accounting for 73% of the almost 442,000 people who had an H-1B visa in the fiscal year 2022. Organisations located in India, such as Infosys and Tata Consultancy Services, are among the organisations that use the most H-1B employees. Other companies, such as Amazon, Google, and Meta, are also among the top employers of H-1B workers.

Concerns were voiced by India about the difficulties that Indian citizens have been having in obtaining visas to reside in the United States. Because of the epidemic, the United States Visa Services has ceased practically all visa processing across the globe as of March 2020.

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The most recent reading on the WPI inflation rate, which came in at -3.48 percent, is the lowest it has been in seven and a half years. The figures on wholesale inflation were released a few days after the statistics ministry announced, on June 12, that headline retail inflation reached a 25-month low of 4.25 percent in May. The data on wholesale inflation were released a couple of days after that.

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“The cumulative effect of our monetary policy actions over the last year is still unfolding and has yet to fully materialise,” Governor Das said at an event hosted by Central Banking magazine in London. He also said that the RBI’s price gain forecast of 5.1% for the current financial year is well above its goal.

India’s rate-setters met last week for the second time in a row and didn’t change the benchmark repo rate. They kept saying that inflation needs to stay near the middle of its 2%–6% range for a long time.

Das said that the MPC didn’t give any future advice on when and how high the final rate would be because guidance during a rate-tightening cycle was “risky.”

The central bank of India thinks that the country will grow by 6.5% in the current fiscal year. Das said that the government’s continued focus on capital spending is making more room for growth and encouraging private investment. Additionally, he claimed that strong domestic demand—particularly from private spending and investment—helped the economy.

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The headline inflation, also known as consumer price inflation (CPI), was 4.25 percent last month, which meant that it stayed below the upper barrier of the medium-term objective that the Reserve Bank of India has set at 4 plus or minus 2 percent.

The rate of retail inflation has remained within the RBI-established range of acceptable variation for the third month in a row. When compared to its level in March, which was 5.66 percent, India’s retail inflation decreased to an 18-month low of 4.70 percent in the month of April.

In May, the consumer food price index (CFPI) came in at 2.91 percent, down from 3.84 percent in April.

The inflation rate in urban areas of India was 4.27 percent in the most recent month, while the inflation rate in rural areas was 4.17 percent.

The Reserve Bank of India lowered its prediction for India’s inflation to 5.1 percent for the fiscal year 2024 from 5.2 percent in its most recent biweekly monetary policy statement. At the same time, it prolonged the hold on repo rate hikes and maintained the benchmark lending rate at 6.50 percent.

The central bank said, “The pace of monetary tightening has slowed in recent months, but uncertainty remains on its future trajectory as inflation continues to rule above targets across the world.”

“(For India) Close and continued vigil on the evolving inflation outlook is absolutely necessary, especially as the monsoon outlook and the impact of El Nino remain uncertain,” it added.

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In spite of this, a number of financial analysts predicted that the MPC would vote differently on the attitude, even if it didn’t move to neutral, since the inflation rate has been lowering. This was the case despite the fact that the inflation rate had been declining. “While the monetary policy committee might vote unanimously to keep rates unchanged, the decision to extend the stance could see a split as the doves would prefer to close the door on further tightening as inflation beats a retreat,” said Radhika Rao, an economist at DBS Bank, in a note dated June 5 that “while the committee might vote unanimously to keep rates unchanged, the decision to extend the stance could see a split.”

An economist from Deutsche Bank AG called Kaushik Das told Bloomberg that a neutral posture would signal that the RBI can hike, pause, or reduce interest rates at a later stage, depending on whether the data and transmission delays trigger a rise, stop, or reduction. “If the RBI maintains its neutral stance, it will signal that it retains the ability to raise, pause, or lower interest rates at a later stage.”

Why not simply maintain your neutrality?

At its meeting in April, the MPC agreed to put a hold on additional rate rises after having implemented a series of gradual hikes in the repo rate over the course of nearly an entire year. These rate increases took place virtually every month. Jayanth Varma, one of the most outspoken rate-setters in the organisation, expressed some scepticism about this topic, despite the fact that five other members of the organisation had decided to continue focusing on the withdrawal of housing. Varma voiced his concerns about the problem. Regarding it, there have been no developments. The same five members decided once again to keep focused on removing accommodation in order to guarantee that inflation progressively meets the goal while boosting growth. This decision was carried out by the Federal Open Market Committee. Varma once again expressed his concerns over this component of the resolution.

A shift in stance would have raised expectations of a pivot in the near future, but given the unpredictability of the impact that weather may have on food prices, it does not seem likely that there will be a rate cut anytime soon. The actions taken by central banks throughout the globe indicate vigilance on inflation as well as concerns for financial stability, according to Rao, who works for DBS Bank. This is a reaction to the decision made by the Australian meteorological office to raise the probability of an El Nino event happening.

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Many specialists in the business are of the view that the increased emphasis on reducing inflation down to the RBI’s target of 4 percent may mean that any rate reduction, if it is to come at all, would occur later than the majority of people had anticipated up to this point in time. This is because the majority of people anticipated that any rate reduction would take place sooner.

In an interview with CNBC-TV18, the Chief Economist of Deutsche Bank, Kaushik Das, said that those who  expected the commencement of the rate drop to begin in October would be left disappointed. Das’s comments came as a response to a question about when the rate decrease would begin. The Reserve Bank of India (RBI) projects a growth rate of 6.5 percent for this year, which is higher than the widespread consensus of 6 percent. However, if RBI’s estimates come true, the time for a rate reduction will be pushed back, and it is possible that RBI won’t begin cutting interest rates until April of the following year. If the RBI’s projections come true, the timing for a rate reduction will be pushed back. “For the time being, we are in the midst of a protracted and extended pause,” he remarked. “For the time being.”

In addition to Das, there are others. Even Amandeep Chopra, Group President and Head-Fixed Income, UTI MF, and Ashwini Kumar Tewari, MD-Risk Compliance & Sarg, at the State Bank of India, were of the view that the earliest one can expect a decline in benchmark lending rates by the RBI is February 2024. This is because they believe that the RBI will not be able to maintain its current level of liquidity for very long. This is due to the fact that they hold the opinion that the RBI needs to amass further information before reaching a judgement.

When calculating the interest rates that will be applied to bank loans, repo rates are used as a benchmark. These rates are used for loans ranging from mortgages to automobiles and even loans for businesses. As a result, the Reserve Bank of India (RBI) would have to be the one to take the initiative to reduce the interest rates charged by banks.

The prudent comment was prompted by Governor Das, who, in his lecture after the most recent monetary policy review, said that it is vital to maintain “Arjuna’s eye” on inflation. This statement was the impetus for the cautious remark. This declaration served as an incentive for the statements that emphasised caution. There is a narrative from the Mahabharata, which is a section of Indian mythology, that is being referred to here. The capacity of this story’s protagonist, Arjuna, to hit his target has become a standard for steadfastness, concentration, and good marksmanship over the course of the narrative.

The fact that Das has frequently cited the objective of 4 percent for retail inflation while at the same time failing to underline the 2 percent wiggle space (i.e., up to 6%) that the inflation targeting framework affords him is being interpreted as a hint that the Reserve Bank of India is becoming more hawkish than the market had anticipated. This is because Das has failed to underline the 2 percent wiggle room that the inflation targeting framework affords him.

As a direct result of the Governor of the RBI’s remarks, the euphoria that existed in the Indian equity markets in the morning gave way to a sell-off in the afternoon. This occurred because of the statements.

After hitting their respective daily high points, the Nifty 50 and the Sensex both saw substantial drops in value. The Nifty Bank index, which follows the performance of the nation’s major financial businesses, was trading more than 200 points lower than it had been earlier in the day. This was a significant drop from its level earlier in the day. The index has been moving in the direction of surpassing its all-time high point. Real estate stock values, which are highly sensitive to variations in interest rates for loans, took a significant hit as a result of the shift.

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The RBI said that greater rabi agricultural output in FY2022-23, a projected normal monsoon, and continued buoyancy in the service sector should underpin private consumption and the overall economic activity in the current year when announcing the second bi-monthly monetary policy for the current fiscal year.

The Monetary Policy Statement that the central bank released said that the government’s emphasis on capital spending, a reduction in commodity prices, and solid credit expansion are all factors that are likely to foster investment activity.

“Weak external demand, geo-economic fragmentation, and protracted geopolitical tensions, however, pose risks to the outlook,” the MPC added.

The Governor of the RBI, Shaktikanta Das, said that “taking all of these factors into consideration, real GDP growth for 2023–24 is projected at 6.5 percent, with Q1 at 8 percent, Q2 at 6.5 percent, Q3 at 6 percent, and Q4 at 5.7 percent, with risks evenly balanced.”

In April, the MPC of the RBI made a very small adjustment to the GDP growth prediction for FY24, bringing it up to 6.5 percent from its previous expectation of 6.4 percent.

The Reserve Bank of India (RBI) has stated that its monetary policy committee has reached a consensus and will maintain the current policy repo rate of 6.50 percent.

Additionally, the forecast for annual inflation by the central bank was revised downward, going from 5.2 percent to 5.1 percent. Das said that the headline inflation rate is now higher than the objective of 4% and that this is anticipated to be the case for the remainder of the year.

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In spite of heat waves that have been seen throughout the agriculture-dependent nation, it is anticipated that increases in food prices will be held in line by decreased input costs and frequent action by the government to control price surges.

The inflation rate for food, which makes up over half of the items in the consumer price index (CPI) basket, decreased to 3.84% in April, and it was anticipated that it would have decreased even more in May.

Inflation, as measured by the consumer price index (CPI), is expected to rise at an annual rate of 4.42% in May, down from 4.70% in April and likely to be the lowest since October 2021, according to the predictions of 45 economists who participated in a survey conducted by Reuters from June 2–7.

The range of predicted values was between 4.10% and 5.10%, which is lower than the highest tolerance level of 6.00% established by the RBI for the third month running.

“In May, we are expecting a noticeable decline in the food index, especially vegetables, oils, and cereals. Fuel and core will also be down,” wrote Sonal Badhan, an economist at Bank of Baroda.

“Improvements in supply chains and the base effect are leading to a moderation in domestic food prices. Internationally, oil prices have also come down, which in turn benefits the imported inflation component.”

According to the results of the study, wholesale price inflation, which measures the change in producer prices, most likely decreased to -2.35% annually in May, down from -0.92% in April.

The Reserve Bank of India (RBI) is generally expected to leave its benchmark repo rate steady at 6.50 percent when it concludes its monetary policy meeting on Thursday. Any indications that pricing pressures are beginning to ease would offer the RBI some much-needed breathing space.

According to a second survey conducted by Reuters in May, consumer price inflation is not expected to decrease to or below the RBI’s medium-term objective of 4% any time soon, which suggests that the door is still open for more rate rises.

For the fiscal years 2023–2024 and 2024–2025, respectively, the average rate of inflation was projected to be 5.1% and 4.8%.

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Since February 2022, this is the lowest level that has been reached. Reuters’ survey of economists revealed that they anticipated a reading of 6.3% for the month of May.

The so-called core inflation rate, which strips out the effects of fluctuations in energy and food prices, also declined more than anticipated, from 5.6% to 5.3%.

According to statistics that were announced on Wednesday, annual inflation in Germany and France declined more than predicted in May as prices dropped on a month-over-month basis. Price inflation in the major countries of the euro region has recently slowed to levels not seen in the previous year.

Inflation was also shown to be decreasing at the national level in Spain and Italy. The initial reaction of the markets to the statement about the euro zone was somewhat muted, with European equities trading higher and the euro trading higher in comparison to both the United States dollar and the British pound.

‘Too high’

Christine Lagarde, the president of the European Central Bank, recently delivered a speech in Hanover in which she said that inflation was still “too high” and “set to remain so for too long.”

After gradually raising its benchmark rate from -0.5% a year ago to 3.25% in May — its highest level since November 2008 — the European Central Bank will have a meeting on June 15 to announce its most recent decision about monetary policy.

Following its meeting in May, the ECB did not provide any forward guidance, although it did highlight the fact that underlying price pressures continued to be significant.

“We need to continue our hiking cycle until we are sufficiently confident that inflation is on track to return to our target in a timely manner,” Lagarde said Thursday.

“At the same time, we need to carefully assess the strength of monetary policy transmission to financing conditions, the economy and inflation.”

According to Reuters, the financial markets have factored in the possibility of two further rate rises of 25 basis points from the European Central Bank (ECB), one in June and another in either July or September.

Last week, the President of the Bundesbank, Joachim Nagel, said that he anticipates “several” more rate rises in order to get inflation under control.

“A lot of key drivers of inflation have turned for the better in recent months, which is starting to be reflected in the data,” said Bert Colijn, senior euro zone economist at Dutch bank ING, in a note.

Colijn noted that there should be a “more significant spell of disinflation” throughout the summer owing to the strong reduction in energy inflation caused by base effects; however, he did qualify that the higher trend in wages is a worry.

“More so than in normal times, incoming data will be key for the July and September [ECB] decisions,” he said.

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