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Space for a cut: On RBI repo rate cut (THE HINDU)

The RBI reduces the policy rate while flagging multiple concerns on the economy

By cutting the policy repo rate by 25 basis points, the Reserve Bank of India has opted to play safe while nominally acceding to the clamour for softer lending rates. The Monetary Policy Committee’s majority decision (one member voted to keep rates unchanged, while another wanted a deeper cut) hinged on its observation that some “upside risks to inflation have either reduced or not materialised”, opening up “some space” for accommodation. Specifically, the bimonthly policy statement refers to the significant slowdown over the past three months in core inflation — retail price gains excluding those for food and fuel. It notes that the monsoon has so far been normal, and the initial roll-out of GST has been “smooth”. Yet, the six-member panel has chosen to retain the “neutral” stance, given that it expects the trajectory of inflation to rise from current lows amid a welter of uncertainties. The factors deterring a more abidingly benign view for the path that prices are likely to traverse bear repeating, given the inflation-targeting remit handed to the MPC: the RBI’s statement does just that. A conclusive separation of “transitory and structural factors” impacting price gains remains elusive. Prices of inflation-sensitive tomatoes and onions are spiking. Pressures may be building that could spur higher animal protein costs for consumers. The implementation of farm loan waivers by States and the “tail risk” that the fiscally expansive measures could pose to long-term price stability that RBI Deputy Governor Viral Acharya referred to in June, continue to be germane. And there is no clarity on whether and when State governments will implement salary and allowance increases following the Centre’s implementation of the seventh pay panel-related hikes.

The MPC acknowledges there are moderating forces at work — a second successive normal monsoon that could check food costs and a stable international commodity price outlook — that could help keep the inflation trajectory favourable. On economic activity, the RBI has flagged multiple concerns. A poll of business sentiment in the manufacturing sector shows respondents expect a moderation in July-September from the preceding quarter. Also, the high levels of stress that continue to be reflected in the balance sheets of both lenders and corporate borrowers presage the unlikelihood of any uptick in new investment. With the underlying impulses for growth in industry and services weakening, the onus is now on the Centre and the States to take enabling steps, through policy measures and directed fiscal actions, to give a thrust for the revival of private investment. Surely, as Mr. Acharya cautioned in June, it will serve nobody’s interests if the rate reduction doesn’t have “the desired amplifier effects on the economy” and ends up only temporarily masking the true problems in the banking and real sectors. 

Important Words form Article & Their Meaning

1) Presage (verb)  ( संकेत या चेतावनी ):  pres-age
Meaning -  to give a warning something unpleasant may occur in the future
Synonyms - portend, augur, foretell.
Antonyms - contraindicate, design
Example -Dark clouds normally presage a storm.

2) Germane (adjective) (सार्थक):jer-meyn
Meaning - relating to a subject in an appropriate way
Synonyms - relevant, pertinent; appropriate; related
Antonyms - irrelevant, unsuitable, unrelatable
Example -The president will only respond to media questions that are germane to the economic crisis.
3) Welter (noun) (भ्रमउलझन):  wel-ter
Meaning - wild disorder
Synonyms - confusion, tangle
Antonyms - orderly, peace , calm
Example - The classroom was in a welter when the teacher did not show up for class.

4) Elusive (adjective)(मायावी) :   ih-loo-siv
Meaning - difficult to find, catch, or achieve
Synonyms - Evasive, subtle, deceptive
Antonyms - easy, identifiable, obtainable 
Example - Since I am not very good at math, earning an “A” in geometry is an elusive goal for me.

5)Accede (verb)  (मान लेना): dis-enchant-ment
Meaning - to agree with someone or give in to his or her wish
Synonyms - agree to, consent to, accept/endorse.
Antonyms - deny, demur, disagree
Example -The company president made a wise decision to accede to consumer pressure and lower the prices of his goods.
6)Clamour (noun)  (कोलाहल): season-ed
Meaning -  a loud and confused noise, especially that of people shouting.
Synonyms - demands, calls; protests.
Example -During the annual meeting, the disappointed shareholders are expected to clamour for the president’s resignation.

7) Abidingly (adverb) (निरंतर):   espell
Meaning - in a way something is enduring, 
Synonyms -lasting, persisting.
Antonyms - changeably, fugaciously
Example - It is abidingly important to show that this country stands for freedom for every faith.’

8) Transitory (adjective) (क्षणसाथी) : over-throw
Meaning - not permanent; temporary
Synonyms - temporary, short-lived, short-term.
Antonyms - permanent, perpetual, lasting 
Example - Unfortunately, the homeless people can only stay in the transitory shelter for a short period of time.
9) Thrust (noun)   (जोर)   : 
Meaning -to force something in a certain direction
Synonyms - force, push ,pressure.
Antonyms -  decline, apathy , deduce
Example -To catch a fish, the savage was taught by his tribal leader to thrust the spear at an angle down into the water.

10) Hinge on (verb)  (निर्भर करना  )   : 
Meaning - to be determined or decided by (something
Synonyms - be dependent,  be based.
Antonyms - autonomous, independent ,self-sufficient
Example - How well the corn crop does all hinges on the weather.

Now considering the article above as a Reading Comprehension, try to answer the following questions-
  • What is the basis for the RBI to reduce the policy rate according to the passage?
  • What could help keep the the inflation trajectory favourable as per the article given ?
Now it's time to check your vocabulary. We have given below some words from the same article. Try to make sentences with these words in the comment section which will be reviewed by us.
  • Moderate 
  • Uptick
  • Deter
  • Revival
  • Onus
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