Get ready for more rate hikes. On Thursday the Reserve Bank increased key rates during its mid-quarter review. As expected, the repo, which is the rate at which it lends to banks, is up 25 basis points to 7.5%. And the reverse repo, which is the rate at which it absorbs excess cash, is now at 6.5%. This is RBI’s tenth hike since March of last year. And at the heart of its concerns is core inflation. The RBI also said that while commodity prices were easing and growth was slowing down, inflation still remained above the comfort zone. Wholesale inflation rose to 9.06% in May compared to 8.66% in April.
Some good news for the government, as food inflation has eased marginally on the back of cheaper pluses and vegetables. India’s food price increased by 8.96% in the period to the 4th of June. The previous week it had gone up by 9.01%. The moderation of food prices is expected to continue due to prospects of a good monsoon.
Power company NTPC is making fresh moves in its bid to revive to two stalled power projects. It has got Russian firms Technoprom Exports and Power Machines to commit to new deadlines. Mint has learnt the commitments were extracted last month, when NTPC officials visited Russia. The two projects in question have been delayed for three years now. One of them, in Sipat in Chhatisgargh has a projected capacity of nearly 3,000MW. The other, in Barh in Bihar state, is supposed to be of 3,330MW. Both have been in limbo because of corruption controversies and changes in the terms of the deals.
UK-based oil explorer Cairn Energy has announced a sweeping board shake-up on Thursday. Company founder and Chief Executive Officer Bill Gammell will now step up to the role of chairman. Gammell’s post will be filled by Simon Thomson who was the legal and commercial director. Cairn Energy is currently battling to complete the planned sale of most of its stake in its Indian subsidiary, Cairn India to Vedanta Resources. Meanwhile, India’s cabinet did not discuss the Cairn-Vedanta deal when it met on Thursday. This could further delay what could be one of the largest agreements in the Indian oil and gas sector.
Indian markets which again ended the day in red as a result of revised rates by the RBI. The sensex was down by 146 points to close at 17,986 while nifty slumped 51 points to slip below the 5,400 mark.