RBI Is Expected To Put A Hold On The Policy Rates - April 18, 2009

India''s Central bank i.e. Reserve Bank of India (RBI) is expected to put a hold on the key policy rates at its annual monetary policy review scheduled next Tuesday, Securities Trading Corporation of India (STCI) said in a note on Friday.

The RBI has cut its main lending rate by 400 basis points to 5 percent since mid-October while the reverse repo by 250 basis points to 3.5 percent since early December. Moreover, a 4 percentage point cut since early October, the CRR is currently stood at 5 percent and the SLR stood at 24 percent, after it was slashed by 1 percentage point effective Nov 8.

RBI Sees Slowdown In Economy - Jan 27, 2009

The Reserve Bank of India has indicated that further measures to stimulate growth could be in the offing, with the domestic economic activities slowing down in recent months. The Reserve Bank''s macroeconomic review for the third quarter said that the slowing down of economy and easing of inflation, which hinting at some more steps by the apex bank in its monetary policy today to stimulate demand and push growth.

"The global economic outlook has deteriorated sharply since September 2008... In India too, there is evidence of a slowing down of economic activity", the RBI said in its Macro Economic and Monetary Developments Third Quarter Review, 2008.

The central bank said that the expenditure is slated to increase on account of the fiscal stimulus measures taken by the government to tackle the economic slowdown. RBI since October has cut the cash reserve ratio to 5.5 per cent, repo rate to 4.5 and reverse repo rate to 4 per cent as part of coordinated efforts with the Finance Ministry to support the sagging growth.

However, the apex bank also said that the consumption demand is expected to rise in the period ahead on the back of a slew of fiscal measures taken by the Government and RBI to stimulate demand.

India, Canada Sign MoU - Jan 14, 2009

India and Canada have signed a memorandum of understanding here to extend the co-operation in agriculture that includes the sharing of knowledge on technology as well as the marketing of farm products and animal development.

The MoU was signed by Sharad Pawar, Food and Agriculture Minister and Canada''a Minister of Agriculture Gerry Ritz.

“The cooperation envisaged in the MoU is expected to lead to increase in bilateral trade by creating new marketing opportunities benefitting farmers of both the countries,” an official statement said. It also added that the MoU provides for the representation of all stakeholders, including the private sector.

Auto Fuels And Cooking Gas Prices Could Be Reduced - Jan 12, 2009

The auto fuels and cooking gas prices could be reduced by the Government in a fortnight. The government is considering reducing the prices of petrol by Rs 5 a litre in line with diesel by Rs 3 a litre and Rs 25 on the domestic LPG cylinder.

The Government earlier had cut prices. The retail selling price of petrol was slashed by Rs 5 a litre and diesel by Rs 2 a litre.

Mr Murli Deora, the Union Petroleum Minister while addressing a press conference on Saturday said that he has spoken to the Prime Minister about the issue. "We want to further decrease the prices, give us 10-15 days.

The National oil companies can now afford to reduce the prices as the crude oil price.
Mr Deora said that from the current quarter, the oil marketing companies could start making the profits provided the crude price remains below $40 per barrel, If the crude oil price increases beyond $40, then the profits will not happen, he said.

Gold Rates Grew In American Market - Jan 8, 2009

The gold prices on Wednesday recovered by Rs 155 to Rs 13,465 per 10 gram in the bullion market here by snapping a four-day losing streak, as the traders and investors shifted their funds to bullion from the melting stock markets.

Gold, which had lost Rs 340 per 10 gram in the last four sessions, bounced back on revival of buying in line with a firm trend in the US markets last night. The gold in American markets grew to 865 dollar an ounce from 844 dollar.

The Sensex on Wednesday lost 749 points on panic selling after Satyam Computer said profit had been inflated for years, raising the concerns of dim third-quarter earnings by blue-chip companies.

The Standard gold and ornaments grew by Rs 155 each to Rs 13,465 and Rs 13,315 per 10 gram, respectively. On the other hand, the sovereign gained Rs 25 to Rs 10,750 per piece of eight gram. Similarly, the silver recorded a gain of Rs 210 at Rs 18,400 per kg and weekly-based delivery by Rs 260 to Rs 18,410 per kg. In line with this, the silver coins also traded higher by Rs 100 to Rs 27,000 for buying and Rs 27,100 for selling of 100 pieces.

Call Rates Closed At Lower - Jan 7, 2009

The call rates closed a tad lower at 4.15-4.30 per cent as compared to the close of 4.25-4.35 per cent. Despite the RBI slashing reverse repo rates by 100 basis points, the banks continued to park their funds in the reverse repo window. Under the first and second liquidity adjustment facility, there were no bids in the one-day repo auctions. However in the one-day reverse repo auction, RBI received and accepted 9 bids for Rs 5,375 crore. Under the second LAF, the RBI received and accepted 20 bids for Rs 53,985 crore. In the 14-day special repo auction scheme for mutual funds and NBFCs under the LAF, there were no bids.

Economy Are Getting Stronger - Aug 13 , 2008

The signs of slowdown in the economy are getting stronger. After car sales fell 1.7% in July, the first quarter figure of industry''s performance revealed another gloomy picture. In April-June 2008, industrial growth crashed to 5.2%, against 10.3% in the same period last year.

In June, industrial growth slowed down to 5.4% from 8.9% in the same month last year as manufacturing decelerated to 5.9% from 9.7% and electricity generation to 5.4% from 8.9%. However, the June figure is an improvement over 3.8% registered in May.But, the slowdown in the industrial growth will have a direct impact on GDP growth. Industry chamber Assocham''s president Sajjan Jindal who is also MD of Jindal Vijaynagar Steel, said, it is now a matter of serious concern. We would be lucky if India achieves a GDP growth of 8% in the current fiscal as industrial production has suffered heavily.

Citigroup Global Markets, said slowdown in industrial growth in Q1 is similar to trends seen during late 1990s and given the impact of monetary tightening, GDP growth estimates will be revised downwards to 7.7% for 2008-09 and 7.9% for 2009-10. Goldman Sachs also said the June data suggests weaker industrial production has set in.A worrying factor is the slowdown in capital goods growth, which is crucial for future industrial growth. Capital goods production growth in June 2008 has declined to 5.6% from 23.1% in the same period last year. In April-June, the growth came down to 6.5% from 19.1% in the same period last year. This clearly suggests a slowdown in the investment in the industrial sector.

The growth in consumer goods sector is encouraging, considering the rise in interest rates. As RBI tightened the monetary policy to contain inflation, which pushed up the interest rates, the demand for consumer goods are likely to be affected very badly. But, the trend in June has belied that apprehension as the growth in these sectors has revived.Economists feel the revival in consumer goods'' demand is mainly on account of good monsoon and high procurement prices fixed by the government for wheat and rice. But, the high interest rate has affected investment in the infrastructure sector, which is clearly visible by the substantial decline in the production of capital goods. Growth in six core infrastructure industries, which account for 26.68% of industrial production expanded at a sluggish pace of 3.5% in April-June against 6.4% last year. Among infrastructure industries, crude production fell by 0.2% in Q1 against 0.7% a year ago.

World Economy Between Recession And Inflation: IMF - July 12, 2008

YALTA (UKRAINE): The world's economy is teetering between "the ice of recession and the fire of inflation", but may see some recovery by early next year, IMF Managing Director Dominique Strauss-Kahn said on Friday.

Addressing a conference in the Ukrainian Black Sea resort of Yalta, Strauss-Kahn characterised the economic situation as the "first crisis of the 21st century" made up of soaring inflation and a financial market crisis. But the crisis was receding.

"No one can say that the world economy is at a good temperature," he said.

"We are just between the ice of recession and the fire of inflation," he said, adding that soaring energy and food costs had topped the agenda of a meeting of leaders of G8 industrialised countries in Japan.

Strauss-Kahn said U.S. growth in the first quarter was better than expected at 0.9 percent, but anticipated a global economic recovery only in the first or second quarter of 2009.

The world economic order, he said, was rendered more unpredictable by the fact that the financial crisis originated in the United States amid doubts over low standard mortgages.
"It was the strongest economy and it was on the top of the pyramid of power," he said. "What happened now is that the pyramid is a bit upside down. It is no longer a pyramid of risk."

Although the worst of the financial market crisis was over, more challenges lay ahead.

"The answer has been global and broadly adequate. The central banks collaborated well together and they finally solved the question that avoided a crisis," he said.

"The biggest part is behind us ... The economic consequences of the crisis are obviously in front of us."
EMERGING MARKETS

Strauss-Kahn said emerging market countries were "really emerging" on the basis of high growth rates in both celebrity economies like India and China and "B-list" regions such as West Africa.

But markets should not subscribe to "decoupling" theories that suggest emerging economies are unaffected by the West's performance. The impact, he said, was merely delayed.

And inflation remained a global problem -- deeply felt among poor emerging countries -- requiring a global solution.

"The good news is after decades of stop-and-go cycles emerging economies are really emerging," he said. "But in developing countries, inflation is a huge problem. It's a case of life and death."

Price rises in Ukraine, for example, were "unsustainable" at about an annual 30 percent over the past three months.

But most developing countries were importing inflation -- the soaring price of oil, and in Ukraine's case gas imports, and rocketing food prices after droughts.

"They have almost no tools to deal with this," he said.

Strauss-Kahn said it was difficult to forecast when inflation might start coming down as there was no clear idea when oil prices might fall or when food supply and demand balances might correct themselves.

He said current oil prices of about $130-140 per barrel knocked one percentage point off global economic growth.

Weak Markets Sees Big Drop In Ipos - July 2, 2008

The figures suggest the number of companies going public in the first half of 2008 have fallen by 44 per cent as compared with 2007. And of the 30 companies that listed, almost 85 per cent of them are trading well below their issue price. Once the euphoria goes away, most of the public issues will fall flat on their tracks. Small and retail investors are advised to look into the track record, management and merchant bankers before subscribing to a public issue, said Subramanium Pisupati, President, Ventura Securities. Some players like Emaar MGF, Wockhardt Hospitals withdrew their issues because despite revising the offer price they didn''t get enough investors.Now Birla Cotsyn is launching its IPO and the response so far is slow but the management is keeping an eye on the market. With the current market conditions for me to have the present subscription is great news, said Yash Birla, Co-Chairman, Birla Cotsyn Ltd.

Inflation: It Hurts The Most At The Bottom - June 21, 2008

NEW DELHI: Inflation, at first glance, might seem like something that hits everybody. That’s misleading. The truth is that inflation typically hits the poor much worse than anybody else.

Applying a little common sense should make it clear why this is the case. When prices are generally rising, whether you gain or lose from it depends on whether the prices of things you sell are rising more than prices of things you buy.

For a trader, therefore, if his selling prices are rising faster than those at which he buys, his profit margins are increasing, not shrinking. A similar logic would apply to industrialists.

But what of those who only sell their labour and buy all that they need to subsist ? You might say, wages rise too in an inflationary period. But wages are typically the last to go up in response to the increasing cost of living. There is thus a lag in which incomes are struggling to catch up with expenditure.

In India, it might seem inaccurate to describe the poor as those who have nothing but their labour to sell. After all, there are hundreds of millions in the peasantry who are quite poor. Don’t they gain when prices of what they produce — wheat, rice and the like — go up? Unfortunately, not quite. The fact is that the majority of India’s rural population is either landless labourers or small and marginal farmers with tiny tracts of land to cultivate. The bulk of them are net buyers even of agricultural produce. Thus rising farm output prices do not help them.

The situation is made worse by the fact that such farmers would tend to do the bulk of their selling at harvest time, when prices of their produce are relatively low and buy the same thing later in the year when prices are higher.

Another reason why the poor are worst hit by inflation is the fact that they obviously have little or no savings. They also have little or no consumption that is dispensable . The only way they can cope with higher prices, therefore, is to cut back on essential consumption. When the inflation is driven by food prices — as is currently the case, at least partly — the impact on them is particularly bad since food forms a much larger part of their consumption basket than for the relatively better off.

In effect, thus, inflation acts as a sort of invisible hand that takes incomes away from the pockets of the poor and deposits them in those of some of the rich.

India Slips Two Rank In Competitiveness Ranking

India has become a less competitive economy in the past one year, with the country slipping two ranks in the latest world''s competitiveness index. The United States, on the other hand, has retained its top position despite signs of an economic slowdown there. According to the annual World Competitiveness Yearbook 2008, released on May 15 by Switzerland-based IMD Business School, India has slipped to 29th position, from 27th in the previous year. While China has also seen its ranking dropping by two places to 17th, it is ranked higher than India and has still managed to keep its position among the top 20 competitive economies in the world.

The Overall Competitiveness Scoreboard is calculated by combining four factors of competitiveness: economic performance, government efficiency, business efficiency and infrastructure, IMD Business School said on its website. Some nations can be rich in assets - land, people, and natural resources - but are not necessarily competitive. This may be the case for Brazil, India and Russia, said Stephane Garelli, Professor at IMD and Director of the World Competitiveness Project.

Excise Duty On Two-Wheelers And Small Cars Reduced

The manufacturing sector is the backbone of any economy. It is consumption that drives production and it is production that drives investment. Having carefully studied current trends of production and consumption, I believe there is a need to give a stimulus to the manufacturing sector. Hence, I propose to reduce the general CENVAT rate on all goods from 16 per cent to 14 per cent.

I have looked at specific sectors where growth is flagging. These sectors are important because they are growth and employment drivers. Some of them also have large externalities. Therefore, I propose to:


Excise on all goods produced in the pharmaceutical sector reduced to 8 per cent.

• reduce the excise duty on all goods produced in the pharmaceutical sector from 16 per cent to 8 per cent;

• reduce the excise duty on buses and their chassis from 16 per cent to 12 per cent;

• reduce the excise duty on small cars from 16 per cent to 12 per cent and on hybrid cars from 24 per cent to the general revised rate of 14 per cent;

• reduce the excise duty on two wheelers and three wheelers from 16 per cent to 12 per cent; and

• reduce the excise duty on paper, paper board and articles made there from manufactured out of non-conventional raw materials by units not having an attached bamboo/wood pulp making plant from 12 per cent to 8 per cent with a further reduction on clearances up to 3,500 MT from 8 per cent to nil. Furthermore, excise duty on certain varieties of writing, printing and packing paper will be reduced from 12 per cent to 8 per cent.

There are a number of products which are goods of mass consumption. There is also the need to have tax parity on similar goods. Taking into account requests from a number of industries, I propose to reduce the excise duty from 16 per cent to nil on a few items including composting machines, wireless data cards, packaged coconut water, tea and coffee mixes, and puffed rice.

Further, I propose to reduce the excise duty from 16 per cent to 8 per cent on a few items including water purification devices, veneers and flush doors, sterile dressing pads, specified packaging material, and breakfast cereals.

I propose to totally exempt from excise duty the anti AIDS drug, Atazanavir, as well as bulk drugs for its manufacture. To further encourage cold chain facilities, I propose to exempt from excise duty, on end-use basis, refrigeration equipment (consisting of compressor, condenser units, evaporator etc) above 2 TR (tonne refrigeration) utilising power of 50 KW and above. I propose to bring parity in the excise duty rates on bulk cement and packaged cement. Accordingly, bulk cement will now attract excise duty of Rs 400 per tonne or 14 per cent ad valorem, whichever is higher. Cement clinkers will be liable to excise duty of Rs 450 per tonne.

Similarly, I propose to increase the excise duty on packaged software from 8 per cent to 12 per cent to bring it on par with customised software which will attract a service tax of 12 per cent.

Non-filter cigarettes are more toxic than filter cigarettes, yet they enjoy a favourable tax regime, which is iniquitous. I propose to tax both filter and non-filter cigarettes on par by applying - as Honourable Members may have guessed - the higher rates.

In order to remove a source of misinformation, I propose to abolish the ad valorem part of the excise duty on unbranded petrol and unbranded diesel and replace the same by an equivalent specific duty of Rs 1.35 per litre. Henceforth, there will be only a specific duty of Rs 14.35 per litre on unbranded petrol and Rs 4.60 per litre on unbranded diesel. There will be no impact on retail prices.

An excise duty of one per cent called NCCD is now imposed on polyester filament yarn, which is the only yarn suffering this excise duty. I propose to remove that duty and shift the levy to cellular mobile phones.