By Pavas Gupta
Last week’s economic news comprised primarily of measures to stop the contagion effect of both the free-fall of the rupee and the US-China trade war. Read to find out more about stories from around the world that you may have missed last week.
RBI maintains repo rate at 6.5%
On Friday, the six-member monetary policy committee of the Reserve Bank of India (RBI) chose not to increase the repo rate – the short-term lending rate – that stands at 6.5%. The policy-making committee, headed by Governor Urjit Patel, opted to take a break after hiking the rate in its last two successive policy meetings.
Centre takes measures to bring down petrol, diesel prices
On Thursday, after facing harsh criticism for spiralling auto fuel prices, the Narendra Modi led government decided to lower excise duty by ₹1.50 a litre. Further, it asked the public-sector oil-marketing companies – Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation – to strike prices by ₹1 per litre.
Addressing the media, Finance Minister Arun Jaitley claimed that he had written to state governments to lower their Value Added Tax (VAT)/ Sales Tax by Rs 2.50 a litre.
These measures, taken in conjunction, are expected to bring down petrol and diesel prices by Rs 5 per litre.
RBI relaxes overseas borrowing norms for oil companies
On Wednesday, the Reserve Bank of India (RBI) announced “liberalisation” of the External Commercial Borrowings (ECB) policy in an attempt to improve dollar supply. This move comes against the back-drop of a freely-falling fiat.
Under the new norms, state-owned Oil Marketing Companies (OMCs) will be allowed to raise $10 billion from the overseas market to meet their working capital needs. The previous individual limit of $750 million of equivalent and mandatory hedging requirements per the ECB framework have been waived.
The central bank further permitted OMCs to raise their ECBs from all recognized lenders under the automatic route for 3-5 years.
Going extra length to get India substitute oil suppliers: US on Iran sanctions
According to statements by the White House, the US is taking serious measures to find substitutes for Iranian oil for countries like India and Iraq. This statement was made on Thursday, as the White House reiterated its warning to all purchasers of Iranian oil to completely choke supply by November 4 or face imminent sanctions.
“I’ve had conversations (with Indian officials on purchase of Iranian oil). Others in the administration have had conversations with senior Indian officials,” the US National Security Advisor John Bolton told reporters at a White House news conference.
“One of the things I think that’s important, whether it’s for Iraq or India or anyone else — particularly that’s been a purchaser of Iranian oil — we’ve gone to really extra lengths to try and find substitute sellers of oil so that there would be alternative supplies at market rates,” Bolton added.
Pavas Gupta is a writing analyst at Qrius
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