The Reserve Bank of India (RBI) released the August 2022 issue of its monthly Bulletin stating that the apex bank turned net seller of the United States (US) currency in June 2022 after it sold USD 3.719 billion on a net basis.
- In June 2022, RBI purchased USD 18.96 billion from the spot market and sold USD 22.679 billion.
Composition of Bulletin
The Bulletin includes Monetary Policy Statement, 2022-23, Resolution of the Monetary Policy Committee (MPC) August 3-5, 2022, two Speeches, six Articles and Current Statistics. The six articles are:
I.State of the Economy
II.Privatization of Public Sector Banks: An Alternate Perspective
III. A Steady Ship in Choppy Waters: An Analysis of the NBFC Sector in Recent Times
IV.Real-Time Monitoring of the Indian Economy
V.Private Corporate Investment: Growth in 2021-22 and Outlook for 2022-23
VI.Exchange Rate Volatility in Emerging Market Economies
i.In June 2021, RBI was net buyer of the greenback after it purchased USD 18.633 billion on a net basis from the spot market.
ii.In May 2022, the central bank net bought USD 2.001 billion. It had purchased USD 10.143 billion and sold USD 8.142 billion during the month.
iii.During the fiscal 2022, RBI had net purchased USD 17.312 billion. It had bought USD 113.991 billion and sold USD 96.679 billion in the spot market in FY22.
iv.In the forward dollar market, the outstanding net purchase at the end of June 2022stood at USD 30.856 billion as compared to USD 49.191 billion in May 2022.
v.There is decline in forex reserves of around $70 billion during the GFC (Global Financial Crisis), which came down to $17 billion during the Covid-19 outbreak.
vi.As of July 29, 2022, the decline in reserves stands at $56 billion.
- The size of the dip in forex reserves as a percent to total forex reserves has come down from around 22% during the GFC to 6% during the Russia-Ukraine conflict.
Inflation peaked in April 2022
As per the August bulletin, inflation has peaked in April 2022, and the momentum is expected to come down as per projection. This information was provided in an article ‘State of the Economy’.
- RBI has been increasing policy rates since May 2022, with a cumulative rate hike of 140 basis points being done so far. The impact of these consecutive rate hikes is visible in the July inflation number which fell to 6.71% in July 2022 from 9.1% in June 2022.
i.The monetary policy committee of the RBI has the target to maintain CPI inflation at 4%, with a range of 2% on both sides.
ii.There is easing of inflation in July 2022 by 30 basis points from June 2022 and an appreciable 60 basis points from the average of 7.3% for Q1:2022-23.
Rajasthan accounted for highest share in cost of projects sanctioned by banks in FY22
Rajasthan accounted for the highest share in the total cost of projects sanctioned by banks and financial institutions in 2021-22, retaining the top place for two consecutive years.
- It was followed by Uttar Pradesh and Gujarat.
i.As per the article title ‘Private Corporate Investment: Growth in 2021-22 and Outlook for 2022-23’ in bulletin, during 2021-22, more than half (56.4%) of the projects were taken up in five states, viz., Rajasthan, Uttar Pradesh, Gujarat, Maharashtra and Tamil Nadu (TN).
- The share of these five states increased significantly from an average share of 40.7% during the period between 2012-13 and 2019-20 to more than 50 per cent during the last two years.
ii.Infrastructure sector continued to attract maximum capex (Capital Expenditure) projects, led by ‘power’ and ‘road and bridges’ sectors.
iii.The views expressed in the article are those of the authors and are not necessarily shared by RBI.
RBI paper on payments poses Questions, offers no answers
RBI also released a ‘Discussion Paper on Charges in Payment Systems’ referring to how some payment mechanisms charge consumers while others do not. However, it has disappointed the industry and analysts alike, as it raises multiple questions but does not offer solutions or take any stance on them.
- It was a much-awaited paper. It has posed 40 questions on charges related to digital payment modes and sought feedback by October 3, 2022. The topics include real time gross settlement (RTGS), immediate payment service (IMPS), unified payments interface (UPI), debit cards and credit cards.
Click Here for Discussion Paper
Click Here for RBI Bulletin- August 2022
Recent Related News:
i.RBI’s composite Digital Payments Index (RBI-DPI) has risen to 349.30 in March 2022 against 270.59 in March 2021, which states rapid utilization and deepening of digital payments across India.
ii.On July 4, 2022, the Reserve Bank of India (RBI) launched the 58th round of OBICUS i.e. Order Books, Inventories and Capacity Utilization Survey of the manufacturing sector for April-June 2022 (Q1:2022-23).
About Reserve Bank of India (RBI):
Establishment– 1st April 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors– Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar