The Fiscal Sops Would Result In Revenue Loss - Feb 26, 2009

The Lok Sabha has approved the Interim Budget, including the Finance Bill 2009 by voice vote despite a walkout by the Opposition National Democratic Alliance and the Left parties.

Pranab Mukherjee, the acting Finance Minister said "The government is keen on restoring business confidence in the services sector. It is also our objective that the dispersal between CENVAT rate and the service tax rate is reduced with a view to moving towards the Uniform Goods and Service Tax."

The announced fiscal sops will be effective from midnight and will have revenue loss of Rs. 29,000 crore to the government. The fiscal sops would result in revenue loss of Rs. 14,000 crore in service tax, Rs 8,500 crore in excise duty and Rs 6,600 crore in customs duty. Mr. Mukherjee said that the full impact of the recession in other parts of the world, especially Europe and Asia, was yet to unfold. Due to the strong export linkages with these economies, it was likely that the Indian economy might feel further impact in the coming months. To counter any such effect, the United Progressive Alliance had taken these decision, he said adding that the Union Budget was just one of the instruments for addressing economic policy concerns and the government would take necessary measures as and when required, until the next regime took over.

He also said that the irregularities faced by suppliers to Special Economic Zones with regard to treatment of export profits will be addressed in the regular budget. As regards the States, Mr. Mukherjee said that as part of the stimulus package they had been allowed to borrow an additional 0.5% of the Gross State Domestic Product (GSDP). The exemption, he added, would continue in 2009-2010 with the possibility of further review.

Gold Prices Are Expected To Touch Rs 17,000 - Feb 26, 2009

Gold prices are expected to touch Rs 17,000 per 10 grams by August, an industry body said on Feb 25. In the same way, silver prices would also climb to Rs 24,000 a kg by the same time, as assessment study by industry body Assocham said. Since global financial crises has diminished investment opportunities in stocks, mutual funds, government securities and bonds, investments in gold and silver would continue to grow and restrict at Rs 17,000 per 10 grams and Rs 24,000 a kg, respectively by August 2009, it said.

Nevertheless, gold and silver would subside to fall to realistic levels of Rs 12,000 per 10 gram and less than Rs 17,000 a kg by January 2010 onwards, it pointed out. The assessment on ''Prospects of Bullion Trade'' for the next six months, carried out by Bullion Trade Committee headed by bullion expert S K Jindal, anticipated that peak crisis in stocks, realty and other secured markets would gradually start fading away by August and until then, gold and silver will continue to lure investors for their surpluses. In March, the average gold price would go up to Rs 15,750 per 10 gram, while silver would stray at around Rs 23,000 a kg, it said.

Local Corporates And Banks Are Realizing Rise In Cost - Feb 26, 2009

Global financial crises is also affecting India Inc as some local corporates and banks are realizing rise in cost of servicing their overseas loans has temporarily by 1-3%. First time lenders have invoked the ''market disruption clause''. The market disruption clause was invoked, after beginning of crisis in global credit markets following the collapse of investment bank Lehman Brothers in September last year. Internationally, bank-borrowing costs have gone up considerably, from Libor-plus 10-15 bps to around Libor-plus 50-60 bps currently.

Borrowing costs for Indian public sector banks have increased even more sharply. A one-year loan, which was pegged at 20 bps above Libor prior to the credit crisis, would now be available for not less than Libor-plus 150 bps.

Besides, overseas lenders, including foreign and Indian banks with offshore branches, are also in the process of increasing interest rates. They are asking for more security from Indian corporates, which have broken their financial agreement due to the downturn.

Delhi-based infrastructure corporate, a group company of a large private sector conglomerate and a couple of major public sector institutions are among the companies, which have broken financial covenants. Bankers are awaiting audited results of FY09 before taking a final decision in some cases.

The ''market disruption clause'' is found in most of the overseas loan agreements. It gets triggered, usually for a quarter, if banks find it very hard to raise funds, or when their cost of borrowing increases significantly. Most of the hikes in rates came after a host of banks invoked the clause during the quarter-ended December 2008. For most overseas loans, banks charge a premium over the benchmark London Inter-Bank Offered Rate (Libor).

Finance Minister Announces The Third Stimulus Package - Feb 25, 2009

The Finance Minister Pranab Mukherjee announced the much-awaited third stimulus package. The stimulus has offered across-the-board cut in excise and service tax rates to save and support the domestic economy. He said the general reduction in excise duty rates by 4 percentage points, from December 7, 2008 would extend beyond March 31, 2009.

The stimulus includes 2% cut in service tax rates to 10%. The minister announced that on goods that attract 10% excise duty will now be charged at 8%. However, excise rates on items that attract 8% and 4% excise duty will not be changed. Further the rate of excise duty on bulk cement has also been reduced from 10 per cent or Rs. 290 per tonne to 8 per cent or Rs. 230, whichever is higher. The customs duty on Naphtha will continue beyond March 31, 2009.

The government is keen on restoring business confidence in the services sector. It is also our objective that the dispersal between CENVAT rate and the service tax rate is reduced with a view to moving towards the Uniform Goods and Service Tax, the Minister said.The Lok Sabha later approved the Interim Budget, including the Finance Bill, 2009 and related Appropriation Bills, by voice vote, with walkout by the Opposition National Democratic Alliance and the Left parties. The fiscal sops given to provide stimulus to the slowing down economy will be effective from midnight and will have revenue implications of over Rs. 29,000 crore.

There Is No Sign Of Slowing Down Of Financial Crisis - Feb 25, 2009

There is no sign of slowing down of financial crisis in India''s economy, with government spending likely to continue. Finance Minister Pranab Mukherjee''s interim budget has confirmed the worst fears of economists that India''s fiscal deficit is expanding.

According to financial firm, Goldman Sachs, India''s combined fiscal deficit at around 11 per cent of GDP is now among the highest in the world. The deficit is unlikely to come down in the next few years. Also, global rating agencies like Moody''s, Fitch and S&P have warned that India''s rating may be downgraded.

In the meantime, policymakers insist the rising deficit is expected, given the government''s increased spending. Montek Singh Ahluwalia, Deputy Chairperson of Planning Commission, said, "I should say it''s a cause of congratulations. All of you who have been asking for a fiscal stimulus should congratulate the government that you have been given a fiscal stimulus. It''s impossible to have a fiscal stimulus and not increase in deficit."

Gold Prices Broke Its Increasing Trend - Feb 25, 2009

On Feb 24, gold prices broke its increasing trend and dropped slightly by Rs 40 per ten grams to Rs 15,705 on account of selling pressure from stockists in view of weak overseas advices. However, silver prices, went up amrginally on mild industrial demand.

According to the dealers, prices of gold affected by the lack of buying interest at higher levels coupled with lower global advices. On Feb 23, gold futures fell in New York on profit- taking after its recent rally that had sent prices above $1,000 an ounce. Gold for February ended down by $7.20 an ounce to $994.60 an ounce on the Comex Division of the New York Mercantile Exchange. Silver March delivery ended lower at $14.45 an ounce. Turning to the local market, standard gold (99.5 purity) fell by Rs 40 per ten grams to Rs 15,705 from the last weekend''s level of Rs 15,745. Pure gold (99.9 purity) also moved down to Rs 15,780 from Rs 15,810. However, silver ready (.999 fineness) edged up to Rs 23,235 per kilo from Rs 23,230 previously.

Amid Demands Of More Rate Cuts - Feb 24, 2009

Amid demands of more rate cuts, RBI Governor D Subbarao has met Finance Minister Pranab Mukherjee and assured him of monitoring the ongoing situation and taking appropriate policy action, if necessary.The Governor assured the Finance Minister that the Reserve Bank is constantly monitoring the situation and will take appropriate policy action, as may be necessary, the central bank said in a statement in Mumbai on Feb 23.

The Governor briefed the Minister last night on the evolution of the global financial crisis, the outlook for the global economy and the response of the advanced and the emerging economies, the statement said.In January and February, Subbarao had met other central bank governors in Basel, Switzerland, Kuala Lumpur and Malaysia to discuss the measures taken by the developed and developing countries to counter the global financial crisis.The bank has injected over Rs 4,00,000 crore of liquidity into the system since Lehman Brothers declared bankruptcy. However, the central bank refrained from cutting rates at its quarterly monetary review announced in late January.The industry is pitching for more rate cuts as industrial growth turned negative for the second time this fiscal, a rarity in independent India.

India Inc''s M&A Value Dips 53% In 4 yrs - Feb 24, 2009

Continuous downfall in the stock market has led the current market valuation of corporate India''s mergers and acquisitions losing behind by a whopping $24.04 billion, in just four years time. During 2005-08, listed Indian companies have been involved in M&A activities worth $45 billion, but the current mark-to-market value of such M&As is down to $20.96 billion, with a loss of 53 per cent, SMC Capital said in a report. Though M&As are meant more for long-term strategic reasons, a loss of $24.04 billion is lot of money to totally ignore. However, the overall M&A experience by Indian corporates turning sour, raising questions about the very rationality of such aggressive M&As, SMC Capitals CEO Jagannadham Thunuguntla said.

Fast and aggressive M&As by Indian corporates on unprecedented bull market, was also one of the key reason for fall in its valuations, as during the four-year time (2005-08) the equity market went through a rough patch. A yearly comparison shows that the listed M&As of 2005 are performing relatively better with current mark-to-market return of negative 6.68 per cent. However, the listed M&As of 2006, 2007 and 2008 are bleeding severely with losses as high as 62.84 per cent, the report said.

Nearly 85 per cent of the listed M&As during 2005-08 are posting losses. There were 54 deals in the period under review, out of which as many as 46 are in losses. Only eight deals representing 15 per cent have been able to post profits and these deals were from sectors like energy, manufacturing, oil and gas and telecom. Deals that reported profits were NTPC-Ratnagiri Gas, GAIL-Ratnagiri Gas, Vodafone-Bharti, Tata Power-Arutmin, Holcim-HCC, Bharat Petroleum-Encana, Indian Oil-IBP Company.

All the other sectors under review, barring telecom, that posted negative returns are aviation (69.94 per cent), Banking, Financial Services and Insurance (44.09 per cent), energy (37.07 per cent), hospitality (75.72 per cent), IT and ITeS (57.87 per cent), manufacturing (62.71 per cent), media and entertainment (78.66 per cent), oil and gas (16.81 per cent), pharma and healthcare (67.10 per cent).

Board Of Approval For Special Economic Zones - Feb 24, 2009

The Board of Approval for Special Economic Zones (SEZs), which was chaired by the Commerce Secretary, Mr G.K. Pillai, on Monday allowed the merger of three stand-alone SEZs, promoted by the Adani Group at Mundra in Gujarat. The combined zone will create India''s largest SEZ with an area of 6,100 hectares in Mundra making it the first zone to exceed the 5,000-hectare limit. However the nod was given to such a proposal by the empowered group of Ministers (eGoM) on SEZs headed by the Union Finance and External Affairs Minister, Mr Pranab Mukherjee

These three zones were situated next to each other include the two multi-product SEZs and a power-based zone. "The amalgamated zone is likely to see investments of over Rs 1,00,000 crore and employ over 500,000 people in the next 10 years," said a government official.

Mr Pillai while addressing the BoA meeting said that 560 formal approvals so far have been granted for setting up of SEZs out of which 286 have been notified as on date. The Board, which will meet again only in June after a new government is elected, also formally approved nine SEZs, including one being developed by a company promoted by Anand Jain, a close associate of Mukesh Ambani, chairman and managing director of India''s largest private sector firm Reliance Industries Ltd.

RBI Likely To Respond On The Sliding Inflation - Feb 21, 2009

As the inflation numbers are diving to low levels every week there is mounting pressure on RBI to reduce the interest rates. The inflation numbers have fallen to a year-ago level of below 4% has increased expectations that the RBI may further cut in interest rates soon, with the government on Thursday saying that the apex bank may take more monetary measures.

RBI is looking into the monetary policy and will perhaps respond to it (sliding inflation), Commerce and Industry Minister Kamal Nath said in New Delhi

Inflation fell by 47bps to 3.92% from 4.39% a week ago. ICICI Bank CEO K V Kamath also said, when inflation is going towards 2%, there is scope for interest rates to go down.
Crisil Principal Economist D K Joshi said that inflation is on a downward trend due to a strong base effect and low demand and it prompts the RBI to cut interest rates.

Gold Remains Unchanged - Feb 21, 2009

Gold remained unchanged at Rs 15,700 per 10 gram as retailers and stockists renounced buying at record high levels with the reports that metal remain high on the abroad. However, silver coins went up in New Delhi on sustained buying by stockists on the marriage season. Marketmen said there people postponed their decision of buying for the current marriage season.

In the overseas markets, gold recorded a moderate fall last evening before recovering to unchanged levels of 984 dollar an ounce. While gold in overseas markets jumped to its highest in seven months at 988.40 dollar an ounce, the metal rose to a record of Rs 15,800, a level never seen before.

Traders said there was some token buying of silver coins in this marriage season for gifting purpose, which kept prices rising. Silver coins rose further by Rs 100 to Rs 28,700 for buying and Rs 28,800 for selling of 100 pieces.Silver ready edged up Rs 20 to Rs 22,520 per kg. However, silver weekly-based delivery fell by Rs 80 to Rs 22,920 per kg on lack of support from speculators. Standard gold and ornaments were unchanged at Rs 15,700 and Rs 15,550 per 10 gram, respectively. Sovereign also remained at Rs 12,300 per piece of eight gram.

Forex Reserves Slip $1.84 Billion - Feb 21, 2009

Foreign exchange reserves of the country dropped by $1.84 billion to $249.692 billion for the week ended 13th February. The reserves have declined after registering an increase for the past two weeks. For the week ended February 6, the reserves had increased by $2.92 billion to $251.532 billion.

Foreign currency assets decreased by $1.839 billion to $239.977 billion, according to the RBI''s weekly statistical supplement. The decrease in the reserves was due to the revaluation of the reserves, as the dollar gained against other currencies in the overseas markets, said a dealer with a private bank. Gold reserves remained unchanged at $8.88 billion. However, SDRs decreased by $2 million to $1 million. The reserve position in the IMF went up by $1 million to $830 million.

RBI Employees To Strike Today - Feb 20, 2009

The employees at the Reserve Bank of India (RBI) have called a one-day strike on Friday to protest against the pension policy. Therefore the normal operations, including the payment and settlement activities in the Reserve Bank, are likely to be affected today. The unions are going on a ''mass casual leave'' demanding the restoration of the updated pension scheme, which was withdrawn earlier to pre-November 1997 retirees, a union official said today.

"The Government and the RBI have been very rigid to our demands. We have decided to strike work," told Ajit Subedar, All India Reserve Bank Employees Association''s Vice-President. He also said that the central bank had recently issued an internal circular to withdraw the updated pension scheme at the behest of the Finance Ministry.

The circular announced a drastic reduction of pension to retired employees of RBI in comparison to that drawn by the government retirees of the comparable levels.

The central bank due to this strike conducted its daily liquidity adjustment facility auctions yesterday for five days.

Kerala To Offer A Package For PSU - Feb 20, 2009

In the backdrop of slowdown in economy, Kerala is proposing to offer a package for the public sector undertakings in the state, Elamaram Kareem, industry minister informed the state assembly on Thursday. He pointed out that there was a need for the capital investment in the public sector undertakings. For this, the government would seek the co-operation of the banking sector to ensure that the PSUs investment requirements were adequately met. However, the industry minister said that most of the public sector undertakings under the industry department were making profits.

Duty Cuts Impact Govt Indirect Tax - Feb 20, 2009

The government on Feb 19 said the indirect tax collections in this financial year was affected by the excise duty cuts announced in the last year''s Budget along with the slowdown in some sectors. According to S S Palanimanickam, Minister of State for Finance, "The Central excise duty rates were reduced in the Budget 2008 ... These reductions along with some slowdown in specific sectors affected the revenue (indirect tax) collections".

He also added that central excise duty rates on motor spirit as well as the high-speed diesel oil were also reduced subsequent to the Budget. He pointed out that that government has taken a number of administrative steps to plug the loopholes in law procedures and improve the revenue position as well as the data collection and analysis, audit and anti-evasion measures. Regarding the duty evasion in the export-oriented units, he said that persuasive action is being taken by the government to receive duties along with initiation of penal proceedings.

Fiscal Deficit Of India Would Grew - Feb 19, 2009

The fiscal deficit of India would grew to about 7.8 per cent if off-budget items like bonds issued to oil companies are included, said Planning Commission Deputy Chairman Montek Singh Ahluwalia.

The Budget shows that the number is going to be 6 per cent as a fiscal deficit and this does not include about 1.7 per cent, which is the bonds etc, which are not counted, Ahluwalia said in an interview to private television channel. He also said that the year 2008-09, we started off with fiscal deficit which we thought should be 2.5 percent and then another half a percent for pay commission to be 3 per cent, he said. However, the government has been reacting to that crisis through multiple channels and a lot of action has been taken.

Call Rate Closed Flat - Feb 19, 2009

The inter-bank call rate closed at 4.10-4.20 per cent as against the previous close of 4-4.15 per cent. In the one-day repo auction under the first liquidity adjustment facility (LAF), there were no bids. While in the reverse repo auction, the RBI received and accepted 9 bids for Rs 11,215 crore. However, under the second LAF, there were no bids in the repo auction. Whereas there were 23 bids for Rs 29,170 crore, in the one-day reverse repo auction. In the 14-day special repo auction scheme for mutual funds and NBFCs under the LAF, there were no bids.

Indian Rupee Reported The Biggest Fall - Feb 18, 2009

The Indian rupee on Feb 17 reported the biggest fall in more than three months, to close at nearly two-and a half month low of 49.70/72 against the US currency. The forex dealers attributed the steep fall to the extremely sluggish global equity markets, which they said may lead to increased capital outflows. Besides this, the strong dollar buying by banks to sell in the offshore non-deliverable forwards market also put pressure.

The rupee in a one-way trade at the Interbank Foreign Exchange (Forex) market, opened sharply lower at 49.00/01 a dollar and fell further to settle at 49.70/72 a dollar. The domestic currency tumbled by 119 paise or 2.47 per cent on November 12, 2008.

Bond Prices Fell By 90 Paise - Feb 18, 2009

On the uncertainty over the open market operations to be conducted by the Reserve Bank of India, the bond prices fell by 90 paise on February 17. The prices are under pressure as the borrowing programme is going to lead to excess supply in the market, the source said. Along with this, the uncertainty on how the Government will finance the additional Rs 45,000-crore deficit also put pressure. The 6.05 per cent 10-year 2019 paper opened at Rs 100.2 (6.02 per cent YTM) and touched an intra-day low of Rs 99 (6.18 per cent YTM). It recovered marginally to close at Rs 99.30 (6.14 per cent YTM) as compared to the previous close of Rs 100.2 (6.02 per cent YTM). On the order matching system, the total traded volumes were at Rs 6.975 crore (Rs 7,030 crore).

Inter Bank Call Rate Closed Almost Flat - Feb 18, 2009

The inter-bank call rate closed almost flat at 4-4.15 per cent. In the one-day repo auction under the first liquidity adjustment facility (LAF), there were no bids. While in the reverse repo auction, the RBI received and accepted 8 bids for Rs 11,670 crore. In line with this, there were no bids in the repo auction under the second LAF. In the one-day reverse repo auction, there were 18 bids for Rs 29,255 crore. There were no bids in the 14-day special repo auction scheme for mutual funds and NBFCs under the LAF.

India Inc Gives Thumbs Down To Budget - Feb 17, 2009

The players from India Inc expected something more from the interim budget. Some showed displeasures while some a little more diplomatic in this season of elections.

According to Ajai Chowdhry, Chairman and CEO of HCL Info systems It was completely (a) non-event. It was (more a) political statement than (an) interim budget. There was nothing for any sector, forget about real estate.

On the other hand Sajjan Jindal, VC & MD of JSW Steel said, There was nothing for realty and auto sector where there were lots of expectations. From that point of view it is a very drab budget. There''s no excitement.

Malvinder Mohan Singh, CEO and MD of Ranbaxy Laboratories, said, It is very much on expected lines. It''s the right thing what the FM has done-pushing infra, job creation, focusing on the social sector are very critical.

Govt To Review Tax Exemptions - Feb 17, 2009

The government on Monday said it will review continuation of various tax concessions and duty cuts, which was announced earlier, before March 31 said the Finance Ministry.

It (Cenvat cut) runs out of time on March 31. Lets wait for March 31... government can always take a view on exemption, Revenue Secretary P V Bhide said at the customary post-budget interaction when asked whether the tax concessions would be extended beyond March 31.Noting that duty exemptions were neither given as a part of an interim budget nor budget, he said, I am not in a position to say what decision will be taken on March 31. He also said that the government to deal with the impact of global financial meltdown has been taking specific measures.

Indian Rupee Fell - Feb 17, 2009

The Indian rupee on Feb 16 fell 15 paise to close at 48.82/83 as compared to the greenback. At the Interbank Foreign Exchange (Forex) market, the domestic unit opened lower at 48.78/79 a dollar and slipped further to close at 48.82/83. Besides the weak equity markets, the closing of markets in for observing President Day Holiday, weighed on the domestic currency.

Meanwhile, the benchmark Sensex on the Bombay Stock Exchange fell over 320 points as interim budget presented today in Parliament turned out to be a non-event.

Budget By The Government Is Likely To Step Up The Expenditure - Feb 16, 2009

The interim budget by the UPA government is likely to step up the expenditure on its flagship programmes along with rural development and housing that doubling the fiscal deficit to 5% in 2009-10. The interim budget is to be presented by External Affairs Minister Pranab Mukherjee who is currently holding the charge of Finance Ministry. The government in the last Budget has fixed the fiscal deficit for the current fiscal at 2.5 per cent of GDP, which is likely to be raised to 5 per cent for the next fiscal, primarily on the back of higher allocations towards the government''s flagship schemes like the Bharat Nirman and the National Rural Employment Guarantee Scheme.

The government to provide focus on the urban infrastructure may expand the ambit of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) to include more districts. Besides this, the other focus of the Budget is likely to be on rural development which may witness some more allocations. The interim Budget may also provide a token allocation for kick starting the Unique Identification (UID) scheme to provide a specific number to every citizen.

In line with this, the infrastructure finance company IIFCL may be authorized to raise money through tax-free bonds. With the last two-stimulus package announced by the government due to slowdown, the fiscal deficit has already crossed four per cent till December. The total gross budgetary support (GBS), which represents the expenditure towards Plan schemes and transfer of resources to states, may be increased.

Manufacturing Sector Reported A Negative Growth - Feb 13, 2009

India Inc on Thursday while expressing disappointment over the weak industrial growth asked for more measures to boost the slowing demand, besides implementation of already announced stimulus packages and further interest rates cuts.

Ficci said the several measures was taken by the government and these should be implemented timely. "After the review of the situation we may need further package," it said.

However, Sajjan Jindal, the Assocham President said that in the recent past such a negative growth was never recorded in the manufacturing sector. So huge fiscal along with excise and other duty concessions are immediately required to give a support to the industry fall back on growth momentum.

Manufacturing sector reported a negative growth of 2.5 per cent as compared to 8.6 per cent in December 2007. The IIP had contracted for the first time in 15 years in October 2008.

India Does Not Allow FDI - Feb 13, 2009

The government on Feb 12 said the FDI policy changes will not allow back door entry for foreign investment into the retail sector or circumventing the rules.

In multi-brand retail, India does not allow FDI but permits up to 51 per cent in single brand retail and 100 per cent in cash and carry wholesale trading. Though there is a ban on FDI in the big multi-brand retail stores, there is no restriction on companies like the Reliance and Tatas to access the foreign equity market through American and the global depository receipts.

In line with this, there is also no bar on the Indian companies who are retail sector, accessing the money from private equity players. With the FDI policy changes, the indirect foreign equity in an Indian investing company would not be counted as foreign stake allowing the caps (direct and indirect) to be circumvented.

However, Nath described "At this point of time when there is a tightening in the global capital market we have to ensure that India becomes a good investment destination."

Need Third Package To Boost Consumer Confidence - Feb 13, 2009

FICCI on Feb 12 demanded a third stimulus package for the economy claiming that the previous two have not produced the desired result. Rajeev Chandrasekhar, FICCI President said that the next stimulus package should be aimed at giving a boost to the demand in the economy.

"The two stimulus packages announced have not worked. One more stimulus package is required. The third stimulus package should be aimed at restoring consumer confidence," he told reporters.

The government in the first package, which was announced on December 7 had brought down the CENVAT rate by 4 per cent in all sectors except in petroleum. Along with this, an additional expenditure plan of up to Rs 20,000 crore was also announced. Besides this, the government had authorized India Infrastructure Finance Company Ltd (IIFCL) to raise Rs 10,000 crore through tax-free bonds by March 2009 and said it would be permitted to raise further resources.

On the other hand, te government in the second package, which was announced on January 2 that includes higher public spending and easier credit especially for exports, housing and small industries, and special attention was paid to auto and infrastructure sectors.

Govt Infused Funds - Feb 12, 2009

The government on Wednesday infused funds of Rs 3,800-crore into state-run lenders - UCO Bank along with Central Bank of India and Vijaya Bank in order to soar up their capital adequacy over 12 per cent much above the Basel II norms of 9 per cent. Accordingly, Central Bank of India will get Rs 1,400 crore, while UCO Bank and Vijaya Bank will get Rs 1,200 crore each, Home Minister P Chidambaram told reporters after the cabinet meeting.

The capital infusion into these banks would be done in two tranches. The first tranche would be made available during the current fiscal while the rest in 2009-10. In the first tranche, UCO Bank will get Rs 450 crore while Central Bank of India and Vijaya Bank will get Rs 700 and Rs 500 crore, respectively. In the next tranche, UCO Bank will get Rs 750 crore, while Central Bank of India and Vijaya Bank to get Rs 700 crore each.

He also said that the fund infusion would result in increasing holdings of the government in the three state-run banks.

Indian Firm Out Of FDI Cap - Feb 12, 2009

The foreign investment through investing Indian company will not be taken into account in determining the sector FDI cap, the government said. As per the revised norms, the equity investments routed through companies in which the majority ownership and control is in the hands of Indians would be treated as fully domestic equity. These changes are approved by the Cabinet Committee on Economic Affairs (CCEA) in the guidelines for calculating the total foreign investment, direct and indirect in Indian companies. The objective of this move is to make it simple as well as transparent.

Rupee Gains Four Paise - Feb 12, 2009

The Indian rupee also rebounded from its initial weakness and closed up by nearly four paise to 48.68/70 against the greenback. In the active trade at the Interbank Foreign Exchange (Forex) market, the local currency resumed sharply lower at 48.83/84 a dollar from previous close of 48.72/73. It touched a low of 48.88 per dollar. However, it recovered sharply in the later part of the day in line with the equity markets and closed at 48.68/70. The anticipation of the increased inflows of capital after the easing of foreign direct investment (FDI) norms by the government also helped the rupee recovery.

The Reserve Bank of India fixed the reference rate for the US dollar at Rs 48.82 and for the euro at Rs 63.07. The benchmark six-month forward dollar premium payable in July closed up at 50-52 paise as against 47-1/2-49-1/2 paise on Tuesday and along with this the far-forwards maturing in January closed up at 87-1/2-89-1/2 paise from 84-1/2-86-1/2 paise previously. In cross-currency trade, the rupee grew against the pound sterling and the euro while moved down further against the Japanese yen.

The dealers attributed the fall in the rupee to a firm dollar overseas against its major rivals after the US Senate passed the $838 bn economic stimulus plan. However, the fears over the effectiveness of the rescue plan weighed on the global equity markets.

Call Rates Closed Steady - Feb 11, 2009

Call money rate on Feb 10 closed steady as the fund supply was more than adequate for banks to meet their reserve needs, dealers said. The one-day call rate closed at 4.05-4.10 per cent as against the previous day close of 4.10-4.15 per cent. The CBLOs were dealt at a weighted average rate of 3.76 per cent as against 3.69 per cent the previous day closing on Feb 9. The dealers said that most public sector banks as well as some private banks were lending due to the surplus liquidity condition.

Bond Prices Fell - Feb 11, 2009

The bond prices fell after the government announced it would borrow an additional Rs 46,000 crore, which was more than market expectations of about Rs 25,000-30,000 crore. On the order matching system, the total traded volumes were to the tune of Rs 6,795 crore. The 6.05 per cent 10-year 2019 benchmark paper opened at Rs 101.4 (5.86 per cent YTM) and closed at Rs 110.4 (5.99 per cent YTM). In line with this, the 8.24 per cent 2018 paper opened at Rs 113.5 (6.28 per cent YTM) and closed at Rs 112 (6.48 per cent YTM) as compared to the previous close of Rs 113.15.

Growth Of Indian Economy To Slow Down - Feb 10, 2009

The government projected the growth of Indian economy to slow down to 7.1 per cent in the current fiscal as compared to 9 per cent in 2007-08.

The Central Statistical Organization (CSO) on 9 February 2009 said that the India''s projected GDP growth for the year ending March 2009 observed at 7.1%, which is the slowest in six years and below the previous year''s 9%. The CSO said manufacturing output growth was estimated at an annual 4.1%, half of the expansion in 2007/08 while farm output is seen at annual 2.6%, much lower than 14.9% growth in last year.

Along with this, the construction growth seen at 6.5% as compared to 10.1% of last year and mining growth at 4.7% as against 3.3% a year ago. However, the Financial along with the insurance, real estate and business services are set to grow by 8.6 per cent against 11.7 per cent. On the other hand, the category of trade as well as the hotels, transport and communication is projected to grow by 10.3 percent against 12.4 per cent and community, social and personal services by 9.3 per cent against 6.8 per cent.

Finmin To Meet RBI On Govt Borrowing Tomorrow - Feb 10, 2009

The finance ministry and RBI will meet on Feb 10 to decide on the requirement of government''s borrowing to bridge the revenue and expenditure, which was inflated due to the impact of financial crisis as well as two rounds of stimulus for the economy.

"We are having a meeting of cash and debt management team tomorrow. The deputy governor (of RBI Shyamala Gopinath) is coming. After that we will finalize whatever is the amount, whatever are the modalities," Ashok Chawla, Economic Affairs Secretary told reporters.

There has been stimulus of Rs 1,50,000 crore by way of excess expenditure and about Rs 50,000 crore by way of loss of revenue in direct as well as the indirect taxes, Chawla said. He also added that there is a need for borrowing which will be commensurate with the requirements. According to the revised borrowing schedule, the government would raise Rs 50,000 crore.

Manufacturing Sector Output Dips - Feb 10, 2009

The growth of the manufacturing sector, which is hit hard by the global financial meltdown, will fell to seven year low of 4.1% during the current fiscal ending March. The official advance estimates of the national income, which was released yesterday reveals that the growth rate of manufacturing sector will be halved to 4.1 per cent as against 8.2 per cent reported in the last fiscal. This will be the lowest manufacturing sector growth since 2001-02. The manufacturing sector, since September, has been hit hard by the financial meltdown along with the domestic demand slowdown and declining exports, leading to job loss in various sectors, especially textiles and other labour-intensive industries.

The index of industrial production in October 2008 entered the negative territory for the first time in 15 years. Since then the exports have been declining and the growth rate has remained in the negative zone. To deal with this, the government as well as the RBI have together taken a slew of measures that include four per cent cut in excise duty followed by raising the public expenditure and releasing about Rs 3.8 lakh crore into the system.

FDI Flow Reduced To Trickle - Feb 9, 2009

The foreign direct investment in India was just $1 bn in November. During April-November the FDI inflows of $19.7 bn have made it amply clear that the current year''s target is far too ambitious to be achieved, given the recession in US and several other developed economies.

The FDI in October slipped to $1.4 bn after maintaining robust inflows till September - with a monthly range of $2.5-3 bn and further it slipped to $1.08 in November, according to official figures. The total FDI inflow last year was $24.5 bn. However, no such thing seems likely this year because of the difficult global economic environment. The Commerce and Industry Minister Kamal Nath seeing the straw in the winds, had himself scaled down the $35 bn target last month.

Government Announces The Stimulus Package For Media - Feb 9, 2009

The government on Saturday said it will shortly announce a stimulus package for media sector. The Minister of State for Information and Broadcasting Anand Sharma told reporters that the representatives of the media industry had written to the government and met with me on Saturday about the adverse impact of the financial crisis on the media industry. We are going to give some stimulus package to the media industry and we do hope to mitigate the situation.

Sharma said that certain recommendations about the package has already been sent by I&B ministry to the Finance ministry and the government will announce it soon. When asked if the package would also cover the electronic media, Sharma said that though it is mostly concerning the print media, "some aspects" of it would also apply to the electronic media too.

The media industry, both print and electronic, is facing the impact of the global financial crisis in the form of decline in advertisement revenue.

Rupee Gains 4 Paise, Ends At 48.77 - Feb 6, 2009

The Indian rupee on Feb 5 shot up by nearly four paise to close at 48.77/79 against the US currency on dollar buying along with a weak dollar overseas. The domestic unit at the Inter-bank Foreign Exchange (Forex) market, resumed lower at 48.88/90 from the previous close of 48.81/82.

However, the expectations did not materialize and the rupee recovered smartly to 48.73 before concluding the day at 48.77/79.

The dollar was higher against the euro and British pound as markets awaited interest rate decisions in Europe. In Europe the Bank of England has reduced its lending rate to 1% from 1.50% later on Feb 5. The inflation fell to 5.07 per cent for the week ended January 24 After rising for two weeks, from 5.64 in the previous week, giving scope for the RBI to cut rates. The Reserve Bank of India, however, fixed the reference rate for the US dollar at Rs 48.82 and for the euro at Rs 62.69.

Inflation Fell To 5.07 Per Cent - Feb 6, 2009

Inflation fell to 5.07 per cent for the week ended January 24, 2008 as against 5.64% reported the week before and this decline was due to falling prices of fruit as well as the vegetables and manufactured goods, making the room for cuts in policy rates by the Reserve Bank to boost industry. In the primary articles group, the prices of fruit, vegetables and bajra declined by two per cent each, while coffee became cheaper by one per cent.

The inflation slipped by 0.57 percentage points for the week ended January 24 from 5.64 the previous week. It was 4.78 per cent a year ago.

Inter-Bank Call Rate Closed - Feb 6, 2009

Inter-bank call rate closed lower at 4.05-4.10 per cent as against the earlier close of 4.10-4.25 per cent. In the one-day repo auction under the first liquidity adjustment facility (LAF), there were no bids. The RBI received and accepted 13 bids for Rs 37,120 crore, in the reverse repo auction. Under the second LAF, there were 2 bids for Rs 1,125 crore in the repo auction. There were 23 bids for Rs 32,785 crore in the one-day reverse repo auction. In the 14-day special re po auction scheme for mutual funds and NBFCs under the LAF, there was one bid for Rs 500 crore.