Established 1961 13 Business Thursday, June 7, 2018 India hikes interest rates for first time in four years ‘GDP growth and projections provide ample room for the RBI to hike rates’

MUMBAI: India’s raised interest rates until its next meeting in August when the monsoon for the first time in over four years yesterday, high- would be almost two months old. lighting concerns over rising inflation. The Reserve Bank of India (RBI) said the benchmark repo rate — ‘A reasonable manner’ the level at which it lends to commercial banks — But all six members of the MPC voted for the rate would be increased by 25 basis points to 6.25 percent. increase. Rate hikes make saving money more attrac- The rate was last hiked in January 2014 when it hit 8.0 tive, helping to rein in consumer spending. Ashutosh percent before a series of cuts. Datar, senior economist at Mumbai-based IIFL, said Retail inflation in India there may be more rate recently touched 4.58 per- increases this year. “GDP cent, above the target set by growth and projections pro- the RBI’s monetary policy vide ample room for the RBI committee (MPC). It is being Stoked by to hike rates and achieve its stoked by rising oil prices inflationary target in a reason- and increased consumer rising oil able manner,” he said. India’s spending as India’s economy economy has shown signs of turns a corner following a prices revival in recent months due to number of disruptive meas- a boost in manufacturing and ures. A predicted normal consumer demand, after a monsoon is also expected to downturn blamed on a shock sustain the Indian economy’s cash ban in late 2016. growth-for which agriculture is a cornerstone-over Demonetisation withdrew most of India’s high-value coming months. banknotes from circulation, putting a brake on the “Against the above backdrop, the MPC decided to economy. The launch of a new nationwide goods and MUMBAI: Reserve Bank of India (RBI) Governor arrives for a news conference at the bank’s increase the policy repo rate by 25 basis points and services tax last year also hit growth. But last week head office. —AFP keep the stance neutral,” said a bank statement. “The India said its GDP for the first quarter expanded by 7.7 MPC reiterates its commitment to achieving the medi- percent-the highest in two years. The RBI retained its um-term target for headline inflation of four per cent growth projections for the 2018-19 fiscal year at 7.4 winds to the domestic recovery. “It is important that highly vulnerable to the increasing cost of crude. on a durable basis,” it added following its meeting in percent but issued a warning. public finances do not crowd out private sector Prices at India’s petrol pumps recently hit record the financial capital Mumbai. Analysts had been divid- “Geo-political risks, global financial market volatili- investment activity at this crucial juncture,” it said. highs. The RBI last cut its main interest rate in August, ed over whether the RBI would hike rates now or wait ty and the threat of trade protectionism pose head- India imports nearly 80 percent of its oil, making it snipping off 25 basis points to 6.0 percent. —AFP

Australia’s economy soars in strong AirAsia not received start to 2018 notice to appear : Australia’s economy recorded a strong start to the year as exports and business inventories rose, before Indian police official data showed yesterday, but analysts warned soft consumer spending would keep a rise in interest NEW DELHI: AirAsia Group Bhd said the company and rates at bay. The 1.0 percent growth in the first three its chief executive had not received notice of a summons months of 2018 was a sharp rise from the revised 0.5 to appear before India’s federal investigators over allega- percent in the previous quarter, and took the annual tions that the airline broke rules to obtain a flying license rate to 3.1 percent. in the country. “We wish to state categorically that nei- The expansion was the strongest since the June ther AirAsia Group nor Tan Sri Tony Fernandes, in his quarter of last year, and above central bank and ana- personal capacity, has received any such notice as of lysts’ expectations. The new figures sent the Australian today,” the company said in a statement on Tuesday. dollar jumping a quarter of a cent to 75.56 US cents. Reuters and other media reported earlier that Fernandes “The Australian economy... is once again back up above had been asked to appear before the Central Bureau of the long-running average (of about 3.0 percent) again,” Investigation (CBI) on June 6. India’s CBI last month Treasurer told reporters in Canberra. accused the airline, some of its employees and third par- “Australia is... leading the advanced economies of the ties of violating foreign direct investment rules while world, bettering the average growth in the OECD, and, obtaining its licence to fly, and of bribing government of course, all of the G7 nations once again.” A container ship is pushed to its berth by a tug at the Port of Melbourne on June 6, 2018. —AFP officials in an attempt to get regulations relaxed to allow The economy has experienced an uneven period of AirAsia India to fly international routes. growth as an unprecedented investment in mining end- A CBI source reiterated to Reuters yesterday that ed, with the Reserve Bank of Australia (RBA) cutting ‘Soft consumer story’ for the rest of 2018. “But it adds weight to the RBA’s view Fernandes had been summoned to appear before investiga- interest rates to a record low of 1.50 percent since late “While this is definitely a strong print in terms of the (and ours) that the next move in rates is expected to be tors but did not clarify if that summons had been delivered. 2011 to boost non-resources industries. Businesses have headline magnitude, the consumption story is still pretty up rather than down.” The source also said that police were likely to give more posted stronger profits and boosted inventories, but soft,” JP Morgan economist Tom Kennedy told AFP. “That RBA governor Philip Lowe said Tuesday as he kept details on the matter later in the day. Representatives for consumer spending has been a weak point amid tepid might be symptomatic of the saving rate already being rates on hold for a 20th-straight meeting that GDP AirAsia on Wednesday did not respond to emailed wages growth. very low and wage levels being very benign. Households growth was expected to average a bit above 3.0 percent requests to clarify whether there had been any contact Growth in exports for the January-March period are constrained... on how much more they can spend.” this year and in 2019. He said there has been strong from India’s CBI. accounted for half of GDP growth and reflected the Uncertainty about consumer spending and wages growth in employment and a significant lift in labor par- AirAsia’s statement on Tuesday said that “if and when” strength in exports of mining commodities, while growth, as well as a weakening housing market after its ticipation, while wages growth remained low with gradual the company receives a notice from CBI through official inventories contributed 0.2 percentage points. recent boom, have seen economists tip the Reserve Bank improvements expected going forward. Capital channels, it will act in accordance with Malaysian laws and Government spending jumped 1.6 percent for the quar- to remain on the sidelines for several more months. “We Economics chief Australia and New Zealand economist cooperate fully with Indian authorities. The CBI has said it ter, as household expenditure increased by 0.3 percent don’t think today’s data shift the needle for the near-term Paul Dales cautioned that an ongoing royal commission has searched five AirAsia locations in Delhi, Mumbai and for the quarter with consumers spending more on fuel outlook for monetary policy,” Commonwealth Bank of probing misconduct among Australia’s finance industry Bangalore, seizing certain documents. The Malaysian low- and financial services and cutting back on eating out Australia senior economist Gareth Aird said in a note, could weigh on the economy if it leads to slower credit cost carrier launched domestic flight operations in India in and buying alcohol. adding that he expected the cash rate to be unchanged growth. —AFP 2014 with local joint venture partner Tata Sons. —Reuters