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Economy
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Country\'s largest lender State Bank of India on Wednesday said interest rates have almost peaked, which is unlikely to change unless RBI took any further action.
\"It (interest rate) has peaked or near peaked unless there is any further cause of action by external factors or RBI,\" SBI\'s Chairman O P Bhatt said in New Delhi.
Oil prices are softening, monsoons are good, commodity prices especially of steel seem to have peaked and demand pull because of Olympics also seems to be over, he said.
Global economy is slowing down and there seems to be enough reasons that interest rates have peaked or near peaked.
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India\'s economy is expected to grow 7.7 percent in the fiscal year ending March 2009, and a tight monetary stance is necessary to bring down inflation to 8-9 percent by March 2009, a government report said on Wednesday.
The Prime Minister\'s Economic Advisory Council has downgraded GDP growth for year 08-09 to 7.7% and has said that inflation is expected to come down only by March 09 to 8-9%.
The council expects dip in industry and Service growth by about 1% in FY 08-09. As per the EAC agricultural growth is expected to slip to 2% from 4.5% in 07-08, industrial growth could move down to 7.5% in 08=09 from 8.5% in 07-08 and services growth could go down to 9.6% in 08-09 from 10.8%
A majority of forecasts expect expansion in Asia\'s third-largest economy to slow as policymakers struggle to fight rising prices by raising interest rates, tightening liquidity and cutting import duties.
The panel said fiscal deficit targets for 2008/09 would \"overreach\" while revenue deficits would persist. It added that serious fiscal risks were arising from growing off-budget liabilities estimated at 5 percent of GDP.
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Measures taken by Govt. for curbing use of Fertilisers in Chemical industries as Raw Material have failed and thus lot of revenue is lost by way of Excise and subsidy.The Govt.should bring Ntn.that all fertilisers should be brownish in colour and purityshoud vary between 95%-97%...
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Govt to pay subsidy on time & in cash: Fert Secy
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MMB Messenger
Atul Chaturvedi, Secretary of the Fertiliser Department, said the urea price accounts for gas pricing, capital investment cost and rate of return. He said he has reassured fertiliser companies on subsidy payment as budgeted. Government has committed to pay subsidy and it will be paid on time and in cash. 
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Atul Chaturvedi, Secretary of the Fertiliser Department, said the urea price accounts for gas pricing, capital investment cost and rate of return. He said he has reassured fertiliser companies on subsidy payment as budgeted. Government has committed to pay subsidy and it will be paid on time and in cash....
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Terming the current global economic crisis as a creation of investment bankers, NRI business tycoon Lord Swraj Paul on Monday said the magnitude of the problem could be far bigger than what meets the eye.
“It is a man-made crisis and the investment bankers are responsible for it,” he said at an interactive session organised by the FICCI Ladies Organisation here.
Major banks across the world have written off over $120 billion in bad debts since last year, connected to the sub-prime crisis in the U.S. Banking sector analysts have predicted close to another $200 billion write-downs.
Lord Paul said bankers have gone overboard by giving loans to people, which were more than their repaying capacity and have resulted in the current crisis. He cautioned that India was not shielded from the global downturn and the country’s soaring inflation should be a matter of concern.
“Some people got into the exuberance of growth that India witnessed but they failed to understand the problem of tackling inflation,” he said, adding that countries such as Britain were more focussed on controlling inflation than achieving growth. He said although India had managed to ‘shine’ far better than it was 50 years ago, it had left a lot to be desired. “...80-85 per cent of the people are being neglected, no country can be proud of such a figure,” he said. Lord Paul said it was a shame that over 300 million people live on an earning of $1 a day and nearly 600 million on $2 a day.
Asking women of India to take up leadership role, he said: “A corporate leader does not have to be a visionary, yet he needs to have a vision. The vision may not always remain the same; it can change or evolve, but he must know where he wants to go at any time and keep going towards it.” — PTI
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I think Indian economy is right on the track. & those IIP numbers are of June where market pessimism was quite higher compared to Jan-March. I think 8% growth is surely to come. Coming months will be seen more growth. July will be again slow but better than June. August will be much better....
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June IIP at 5.4%; Experts see FY09 GDP growth at 7.5%
Posted by : MMB Messenger
June industrial growth stand at 5.4% versus 8.9% (YoY), while infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier. A CNBC-TV18 poll saw the Index for Industrial Production, or IIP, number at 5.4% for June as against 3.8% for May and 8.9% a year ago.
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Oil prices tumbled to a 14-week low near USD 113 per barrel on signs that the US economic slump will extend into 2009, paring fuel demand. In after hours access trading, crude is at USD 113.95 per barrel.
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How can Indian economy move fast.It takes 2 hours on an average to all workers,executives and ceos to reach their office from home.By the time they reach office they are so damn frustrated and drained physically that they want to rest a while.then in the evening the tension of going back into that traffice mess builds up and I am sure a few minutes are lost there.The no. of man hours lost and people neglecting to do work thinking what a mess they will get into once in the traffic jam is costing this country very dearly.I am surprised how the foreign people like to operate in this country.Even though they don\...
In reply to:
June IIP at 5.4%; Experts see FY09 GDP growth at 7.5%
Posted by : MMB Messenger
June industrial growth stand at 5.4% versus 8.9% (YoY), while infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier. A CNBC-TV18 poll saw the Index for Industrial Production, or IIP, number at 5.4% for June as against 3.8% for May and 8.9% a year ago.
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How can Indian economy move fast.It takes 2 hours on an average to all workers,executives and ceos to reach their office from home.By the time they reach office they are so damn frustrated and drained physically that they want to rest a while.then in the evening the tension of going back into that traffice mess builds up and I am sure a few minutes are lost there.The no. of man hours lost and people neglecting to do work thinking what a mess they will get into once in the traffic jam is costing this country very dearly.I am surprised how the foreign people like to operate in this country.Even though they don\...
In reply to:
June IIP at 5.4%; Experts see FY09 GDP growth at 7.5%
Posted by : MMB Messenger
June industrial growth stand at 5.4% versus 8.9% (YoY), while infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier. A CNBC-TV18 poll saw the Index for Industrial Production, or IIP, number at 5.4% for June as against 3.8% for May and 8.9% a year ago.
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June industrial growth stand at 5.4% versus 8.9% (YoY), while infrastructure output number stands at 3.4% versus 5.2% (YoY). May industrial growth has been revised to 4.1% versus 3.8% earlier. A CNBC-TV18 poll saw the Index for Industrial Production, or IIP, number at 5.4% for June as against 3.8% for May and 8.9% a year ago....
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As it reels under the mounting terror menace with the fundamentalist outfits bombing cities to kill and maim innocents, India may also be faced with a grim threat of economic subversion.
A spate of seizures of fake currency notes across Uttar Pradesh with the trail leading towards Nepal has confirmed the fears of what the authorities call \'economic terror\'.
While Indian agencies have for long been aware of ISI\'s plan to bleed India economically, having been engaged in a cat-and-mouse game with the the plotters, the scale and sophistication of the operation has come as a shock to them. After the initial recovery of Rs 5 lakh from one Abid in Doomariaganj in UP, seizures have been reported from all over the state — Aligarh, Lucknow, Gonda and places neighbouring Bihar — leading the authorities to suspect that counterfeit currency adding up to Rs 40 crore may have been in circulation in Uttar Pradesh alone.
But what has stung security agencies this time is not only the quantum of the seizure but the fine printing and high quality currency paper that has been used to print the currency notes and strong evidence of collusion between banks and those working at ISI\'s instance.
The serial numbers on the money lying in the State Bank of India chest in Doomariaganj were the same as that on the genuine notes kept there. \"This explains that the gang members here would first confirm the serial number of the currency notes in the chest and then inform those printing the currency to put the same serial number on the FICN,\" pointed out an officer of a central agency dealing in economic offences.
A worried UP government on Saturday handed over the probe to the Central Bureau of Investigation, putting aside its grievances against the agency for the moment.
While it may have acquired serious proportions, use of counterfeit money to attack India\'s economy is not a new addition to the ISI inventory. Authorities have long had evidence that fake currency notes are printed at facilities set up for the purpose at Quetta in Baluchistan and Bangkok, with Aftab Batki, a known aide of ISI-protected Dawood Ibrahim, handling the operations in the Thai capital.
An official panel had estimated that fake Indian currency equalling Rs 1,69,000 crore has been put in circulation as part of the design to deal a blow to the Indian economy. While serious enough a threat by itself, fake currency is also being used by the terror groups to finance their anti-India activities.
The issue figured prominently in the meeting of state police chiefs and chief secretaries called here on Friday to review the security scenario in the aftermath of last month\'s attacks on Ahmedabad and Bangalore.
The racket was busted with the arrest of one Abid of Sidharth Nagar after Rs 5 lakh in FICN was recovered from him. Abid named Sudhakar Tripathi, a cashier at SBI\'s Dumariaganj branch, as his co-accused. Sudhakar was arrested after a total of Rs 7.2 lakh was seized from his residence out of which Rs 50,000 were in FICN.
On the basis of the details extracted by Sudhakar, STF requested the RBI to screen the currency notes available in the chest of the banks particularly in the districts bordering Nepal and some pockets of Western UP as well.
UP STF has confirmed that one of the two accused arrested in connection with the seizure, Abid, was in regular touch with his contacts in Nepal as well as Hong Kong apart from some other countries. \"But calls to these two places were much more frequent than others,\" confirmed a source in the STF who also said that arrested militants, during their interrogation, have frequently spoken of the use of fake currency by ISI.
Another important element of the racket is the money which the two arrested accused have pocketed while pumping in fake currency. \"If the gang had actually pumped in the amount which is being estimated at Rs 40 crore, then the profits incurred thereon must be traced on the ground to establish that they were major players in the racket,\" says a senior IPS officer.
The cops have so far seized fake currency from Shameem, Mehandi and Saleem in Aligarh. Another Rs 25 lakh in fake currency notes was found on Sohail of Gonda who was working with Sanjay Paswan, Vinod Kumar and Sanjay Patel of Bihar. Three persons — Momin, Anisuddin and Pramod — have been arrested in Aligarh.
Sleuths from the Enforcement Directorate (ED) and Central Bureau of Investigation (CBI) are now focussing on the assets of the arrested accused in order to trace the route of the money earned by them during the course of the racket which is believed to have been in place for at least over 1 year in Dumariaganj itself. The known assets of the two accused are estimated to be somewhere around Rs 10 lakh.
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Petrol and diesel prices will rise every month while subsidised domestic cooking gas to households will be gradually phased out if recommendations of the high-powered B K Chaturvedi Committee are implemented.
The panel headed by Planning Commission member B K Chaturvedi has asked Prime Minister Manmohan Singh to raise petrol prices by Rs 2.50 a litre per month till March 2009 and diesel prices by Rs 0.75 per litre till 2010 to eliminate subsidies on the two fuels.
The Committee suggested restricting LPG cylinders sold at subsidised rates to six per connection in a year and phasing it out over a three-year period.
The three-member panel, that was asked by the Prime Minister to go into the financial position of oil firms, also suggested levying a \'Metro Extra\' tax of Rs 2 per litre on diesel, in four instalments in large cities, as the fuel was being used in expensive cars.
The eleven cities where the \'Metro Extra\' tax would be levied are National Capital Territory of Delhi, Mumbai, Chennai, Kolkata, Bangalore, Hyderabad, Ahmedabad, Kanpur, Pune, Surat and Agra.
It also suggested temporary reduction in excise duty on petrol by Rs 10 a litre from Rs 13.75.
While suggesting a Special Oil Tax on crude produced from fields awarded prior to the advent of the New Exploration Licensing Policy (NELP) in 1999, the panel disfavoured any Super Profit or Windfall Profit Tax on private refiners like Reliance Industries.
\"It is appropriate in our view that the Indian refining industry, which has world-sized companies, be placed on par with the international refining business,\" the report said.
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Costlier credits due to increase in interest rate increases the cost of output, and also creates shortage of supply. It increases the price level further up. However the interest expended over deposits inflates the purchasing power of depositors which helps inflation growth. FICCI and the corporate sector have already disagreed with RBI recent announcement to increase the rate of interest.
With recent trend of increased capital inflow into India the aggregate deposits by Scheduled Commercial Banks (SCBs) has increased from 80.7% in 2005-06 (Rs. 21,09,049 crores) to 102% (Rs. 31,96,939 crores) of GDP at factor cost by 2007-08. With increased deposits, the bank credits has also increased from Rs. 15,07,077 crores in 2005-06 to Rs. 23,61,914 crores by 2007-08 reflecting 75.6% of GDP at factor cost in 2007-08 as credit against 57.7% in year 2005-06. This indeed is a point of time, when our economists, financial sector regulators and bankers need to review the policy and practices adopted by RBI as we use interest as a major tool to control liquidity; but we hardly evaluate the multi tier effects of interest in our economic process. On first tier increase in interest increases the cost of credits which increases capital cost; on second tier the costlier capital pushes the prices of output produced which results to inflation. With increase in inflation, the increase in wages and salaries are bound to increase the factor cost of production as third tier which ultimately further increases the price level at forth tier. Thus an increase in interest rate causes a multi tier effect in inflating the economy.
The practical approach of RBI to curb the rate of inflation by increasing the rate of interest may is failed to control inflation and leading towards stagflation as the prices are continue to increase with every increase in Repo rate and CRR by RBI since July 2006, but the expenditure and investment are falling due to costlier credit and increased price levels. With every north step movement of inflation due to interest rate increase, the wages and salaries need increments which further increase the price levels. The increase in raw materials increases the output costs and thus any interest rate increase marks multi level affects.
By increasing the rate of interest, liquidity might be controlled for shorter period, but with increased cost of credit, the GDP value will increase that leads to inflation. Interestingly the interest income to SCBs was Rs. 1,85,384.9 crores in 2005-06 which increased to Rs. 2,37,271.14 crores by 2006-07. It means by 2006-07 total interest income to SCBs was 7.1% of GDP at factor cost. It simply means that the interest income to SCBs has inflated the value of GDP at factor cost by 7.1%.
With increase in rate of interest, the aggregate deposits might increase and SCBs may need to pays more interest over increased deposits. Total Interest expended by SCBs over deposits was Rs. 89,742 crores in 2005-06 which increased to Rs. 1,20,261.08 crores by 2006-07 showing a net annual increase of 34%. This growth is inflationary as it increases the buying capacity of the depositors. By 2006-07, the interest expended over deposits was around 4.20% of GDP at factor cost.
If we add the interest income of SCBs to interest expended over deposits, it stands for around 12.5% of GDP at factor cost and 8.6% of GDP at market prices in 2006-07. Considering the impact of interest on inflation, we may need to add interest income of SCBs through investments / commercial credits with interest expended by SCBs over deposits. This amounts to approximately 9% of GDP at factor cost and 5% of GDP at market prices in the year 2006-07 while annual rate of inflation was 6.7%. It reflects that basically inflation is a result of interest charged on credits expanded by SCBs and interest expended over deposits. The interest charged by SCBs increases the cost of GDP and the price levels, while the interest paid by SCBs over deposits increases the purchasing power of the depositors. Both ways the interest is increasing the price level and causing inflation. Since RBI regulates the banking business in India, by increasing rate of interest it is increasing the inflation and decreasing the real term growth rates.
Further to note that RBI is increasing the rate of interest for over one year to control the inflation which ultimately increasing the cost of GDP showing higher GDP value and increasing inflation instead of controlling it. Our total final consumption expenditure as % of GDP at market prices is already declining from 67.8% in 2005-06 to 65.5% by 2007-08. This decline along with inflation cannot be controlled by increase in interest rate. This economic tendency may leads to stagflation which is more dangerous for economic stability and growth. RBI should review its policies and practices to monitor liquidity, credit and inflation, if we have to combat inflation and attain desirable growth rate.
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In reply to:
Inflation for week-ended July 26 at 12.01%
Posted by : MMB Messenger
The inflation for the week ended July 26 has come in at 12.01 percent. This is in-line with CNBC-TV18's inflation poll.
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is it practically possible to give subsidies on fuels only to those below proverty line? These people should think of something practical ...
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Raise fuel prices every month: Chaturvedi panel to PM
Posted by : MMB Messenger
The Prime Minister appointed B K Chaturvedi panel is learnt to have suggested raising fuel prices every month to bring them at par with production cost. CNBC-TV18 has learnt that B K Chaturvedi report has also sought imposition of a 'special oil tax' on oil fields awarded before 1999, when the NELP kicked in.
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There is no need to raise fuel prices further. & if there is need for extra funds to meet production costs, then there are other resources for raising funds through FPO, Bonds, VC, FIIs & more. I rule out the suggestion of raising fuel prices beyond current level to meet the production costs. This is poor decision making....
In reply to:
Raise fuel prices every month: Chaturvedi panel to PM
Posted by : MMB Messenger
The Prime Minister appointed B K Chaturvedi panel is learnt to have suggested raising fuel prices every month to bring them at par with production cost. CNBC-TV18 has learnt that B K Chaturvedi report has also sought imposition of a 'special oil tax' on oil fields awarded before 1999, when the NELP kicked in.
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