by Ashok Handoo*
By not reducing any of the key rates in its third-quarter review of the monetary policy, the Reserve Bank has sent a clear signal to commercial banks that they need to reduce their lending rates and make cheaper credit available to the customers. RBI is clearly of the view that banks have yet to pass on the benefits of the previous cuts in interest rates announced by it. Obviously, the Reserve Bank is not happy with the response of the banks, particularly private and foreign banks, to the initiatives taken by it so far. It feels there is enough scope for banks to do more.
As it is, the Reserve Bank in a space of just one quarter brought down the repo rate (the rate at which RBI lends overnight funds to banks) from 9 to 5.5 percent. The reverse repot rate (the rate at which RBI accepts deposits from banks) was brought down to 4 percent, what the RBI Governor Dr. D. Subbarao described as “historically lowest level”. But as he pointed out it’s “transmission in the credit market has so far been subdued”. RBI firmly believes that it’s policy easing had allowed banks considerable room to respond more actively which has not happened. It has thus adopted a wait and watch policy for the time being, to monitor the response from the banks and give them more time.
The bankers, on the other hand, feel that they have responded to the extent possible. They argue that the average cost of funds to them is still high and lending and borrowing rates can come down only when the fund costs come down. Some even expressed disappointment at the RBI “holding back it’s activism” in reducing the key rates to make cheaper funds available to them. But by and large, bankers agree that the RBI policy is on expected lines.
Through its earlier initiatives the RBI has infused liquidity of over Rs. 4 lakh crore into the system improving the liquidity situation, significantly.
It is not that the doors for further reduction in key rates have been closed. On the contrary, the RBI has made it clear that it will respond to any adverse development. So, more cuts outside the policy can happen anytime. The current pause could only be a temporary thing.
Another message that the RBI has given is that there is a clear evidence of deeper consequences of the global downturn on the Indian economy which can lead to its further slowdown. Industrial activity, particularly in the manufacturing and the infrastructural sectors, is decelerating. The services sector too, which has been the prime engine of growth for the last several years, will slowdown mainly in construction, transport, hotels, tourism and trade sectors. . The consequences have been more pronounced after October 2008 which has led the RBI to revise its GDP growth projection for the current financial year to 7 percent against the earlier 7.7 percent. In fact the Survey conducted by the 13 professional forecasters has put it at 6.8 percent.
That is all the more reason for the banks to respond more vigorously to the rate cuts already effected.
At the same time , there are two positive factors at play. One, the inflation rate has been falling sharply for the last 10 months to 5.6 % with only a small aberration in the latest figure which is attributed to the Truckers strike during that period. The current projections are that the rate will fall further to about 3 percent by March end, though it is reflected more in the Wholesale Price Index (WPI) than in the Consumer Price Index (CPI).That is primarily because of the fall in international crude oil prices, steel and select food items. A fall in demand has also played some role in this.
The second positive factor is the expected increase in consumption demand in the days ahead, reflecting rise in basic exemption limits in tax and tax slabs, the 6th pay commission award, debt waiver to farmers, and the expenditure that would be incurred in the run up to elections in a few months from now.
All this will allow an elbow room to the government to cut the key rates further, if the situation so demands.
The RBI has also warned that the fiscal measures to boost growth and lower revenue receipts could sharply widen the fiscal deficit from the earlier estimate of 2.5 percent to 5.9 % .The combined shortfall of the centre and the state governments could come to 8.5 %, or even more.
As the Prime Minister’s Economic Advisory Council pointed out the other day, both the saving and investment rates are likely to be lower in the current fiscal. The saving rates may fall due to larger negative savings of the Government. The investment rate will be less by 2.5 percentage points compared to the previous year, due to financing constraints facing Indian enterprises.
The widening trade deficit is a matter of concern as is the moderation in capital inflows. Though the Foreign Direct Investment (FDI) has shown an increase in the current financial year the portfolio investment has recorded a substantial outflow. The institutional investors have sold about $10 billion of their investment in Indian companies to cover losses in their home markets.
With Indian economy getting more and more integrated with the world economy and the US, Europe and Japan already experiencing recession, India can not remain totally insulated. A less than optimistic sentiment in the economy is therefore quite natural. As the Prime Minster pointed out India’s economic problems would not be over in the current year and could spill over into 2009-10, but the “Government will continue its efforts for a supporting environment next year also. Both monetary and fiscal policy will have to be tailored.” The Deputy Charmin of the Planning Commission Shri Montek Singh Ahluwalia has also spoken of innovative interim measures. These include floating of tax- free bonds ‘to provide refinancing facilities to banks to encourage them to offer long term debts” to companies investing in infrastructure sectors which have long gestation periods.
It is a matter of satisfaction that everybody agrees that the Indian economy will recover earlier than the world economy, once things begin to improve. (PIB Features)
*Disclaimer : The views expressed by the author in this feature are entirely his own and do not necessarily reflect the views of PIB.
Saturday, January 31, 2009
Friday, January 23, 2009
IDBI Fortis secures Title Sponsorship for India-Sri Lanka series
IDBI Fortis also signs on as co-presenting broadcast sponsor on NEO Cricket
MUMBAI, January 23, 2009: Nimbus Sport has entered into an agreement with IDBI Fortis for Title Sponsorship of the India - Sri Lanka Cricket Series 2009 consisting of 5 One Day Internationals and 1 Twenty20 match.
The ODI series will be called the IDBI Fortis Wealthsurance Cup and will be followed by the IDBI Fortis Wealthsurance Twenty20.
As previously announced the television coverage of the entire Series is being produced by Nimbus Sport and in India will be broadcast on the No. 1 sports channel NEO Cricket. The event will also be broadcast worldwide and Nimbus Sport expects to make a separate announcement on Saturday January 24, 2009 revealing the broadcast partners across the world.
Announcing the sponsorship, Yannick Colaco, Executive Vice President, Nimbus Sport said, “We are delighted at the opportunity of bringing one of India’s fastest growing life insurance companies, IDBI Fortis Life Insurance into the world of cricket.”
IDBI Fortis will also be a co-presenting sponsor on NEO Cricket during the live broadcast of the Series.
G. V. Nageswara Rao, Managing Director and CEO, IDBI Fortis Life Insurance Co. Ltd. added, “Wealthsurance is an innovative and novel concept in bundling the power of investments with the protection of insurance. We hope to bring its message to the masses by associating with this Series as the Title Sponsor. With the event being broadcast on India’s No.1 sports channel, NEO Cricket, we are confident that the IDBI Fortis Wealthsurance Cup will have all of India glued to their TV screens to what will surely be a thrilling contest.”
The sporting spirit and never-say-die attitude of the most committed sportspersons is as inspiring as IDBI Fortis’ flagship product, Wealthsurance, which tirelessly strives to achieve your investment goals while staying unaffected by bad kismet that life may throw at you. This Series will showcase the spirit of two very committed and competitive teams that will aim to acquire the coveted IDBI Fortis Wealthsurance Cup.
Raju Udupa, Executive Vice President, NEO Cricket added, “IDBI Fortis is an exciting addition to NEO Cricket’s long list of high pedigree advertisers and we expect that the platform of the No. 1 sports channel combined with this high profile Series will catapult IDBI Fortis to market leadership.”
About IDBI Fortis Life Insurance Co. Ltd.
IDBI Fortis Life Insurance Co. Ltd is a joint-venture of IDBI Bank, India’s premier development and commercial bank, Federal Bank, one of India’s leading private sector banks and Fortis Insurance International, a multinational insurance giant based out of Europe.
It is one of the fastest growing new life insurance companies in the country, having launched operations in March 2008 with their innovative product ‘Wealthsurance’. The company has already launched 31 branches and plans to have a pan-India presence with a total of a 100 branches. It also sells through the more than 1000 branches of its promoter banks, IDBI Bank and Federal Bank.
About Nimbus Sport International Pte. Ltd.
Singapore headquartered, Nimbus Sport International Pte. Ltd. (100% subsidiary of Nimbus Communications Limited) is a leading full service sports management company providing end to end solutions including rights management, television production, sponsorship sales, event management and sponsor services.
Nimbus Sport currently manages various commercial rights (on long term contracts) for a number of global sports federations including the BCCI (Indian Cricket Board), Bangladesh Cricket Board, Cricket Kenya, ACC and the English Premier League (digital/new media rights).
Nimbus Sport has in the past managed the media and sponsorship rights of the ICC Cricket World Cup and other ICC events. As a globally reputed production company for live match coverage, Nimbus Sport has produced live coverage and / or managed rights in 9 of the 10 Test Cricket Playing Nations.
MUMBAI, January 23, 2009: Nimbus Sport has entered into an agreement with IDBI Fortis for Title Sponsorship of the India - Sri Lanka Cricket Series 2009 consisting of 5 One Day Internationals and 1 Twenty20 match.
The ODI series will be called the IDBI Fortis Wealthsurance Cup and will be followed by the IDBI Fortis Wealthsurance Twenty20.
As previously announced the television coverage of the entire Series is being produced by Nimbus Sport and in India will be broadcast on the No. 1 sports channel NEO Cricket. The event will also be broadcast worldwide and Nimbus Sport expects to make a separate announcement on Saturday January 24, 2009 revealing the broadcast partners across the world.
Announcing the sponsorship, Yannick Colaco, Executive Vice President, Nimbus Sport said, “We are delighted at the opportunity of bringing one of India’s fastest growing life insurance companies, IDBI Fortis Life Insurance into the world of cricket.”
IDBI Fortis will also be a co-presenting sponsor on NEO Cricket during the live broadcast of the Series.
G. V. Nageswara Rao, Managing Director and CEO, IDBI Fortis Life Insurance Co. Ltd. added, “Wealthsurance is an innovative and novel concept in bundling the power of investments with the protection of insurance. We hope to bring its message to the masses by associating with this Series as the Title Sponsor. With the event being broadcast on India’s No.1 sports channel, NEO Cricket, we are confident that the IDBI Fortis Wealthsurance Cup will have all of India glued to their TV screens to what will surely be a thrilling contest.”
The sporting spirit and never-say-die attitude of the most committed sportspersons is as inspiring as IDBI Fortis’ flagship product, Wealthsurance, which tirelessly strives to achieve your investment goals while staying unaffected by bad kismet that life may throw at you. This Series will showcase the spirit of two very committed and competitive teams that will aim to acquire the coveted IDBI Fortis Wealthsurance Cup.
Raju Udupa, Executive Vice President, NEO Cricket added, “IDBI Fortis is an exciting addition to NEO Cricket’s long list of high pedigree advertisers and we expect that the platform of the No. 1 sports channel combined with this high profile Series will catapult IDBI Fortis to market leadership.”
About IDBI Fortis Life Insurance Co. Ltd.
IDBI Fortis Life Insurance Co. Ltd is a joint-venture of IDBI Bank, India’s premier development and commercial bank, Federal Bank, one of India’s leading private sector banks and Fortis Insurance International, a multinational insurance giant based out of Europe.
It is one of the fastest growing new life insurance companies in the country, having launched operations in March 2008 with their innovative product ‘Wealthsurance’. The company has already launched 31 branches and plans to have a pan-India presence with a total of a 100 branches. It also sells through the more than 1000 branches of its promoter banks, IDBI Bank and Federal Bank.
About Nimbus Sport International Pte. Ltd.
Singapore headquartered, Nimbus Sport International Pte. Ltd. (100% subsidiary of Nimbus Communications Limited) is a leading full service sports management company providing end to end solutions including rights management, television production, sponsorship sales, event management and sponsor services.
Nimbus Sport currently manages various commercial rights (on long term contracts) for a number of global sports federations including the BCCI (Indian Cricket Board), Bangladesh Cricket Board, Cricket Kenya, ACC and the English Premier League (digital/new media rights).
Nimbus Sport has in the past managed the media and sponsorship rights of the ICC Cricket World Cup and other ICC events. As a globally reputed production company for live match coverage, Nimbus Sport has produced live coverage and / or managed rights in 9 of the 10 Test Cricket Playing Nations.
Thursday, January 22, 2009
Oil, truck strikes fuel inflation rise
The annual (year-on-year) rate of inflation in Indian economy increased to 5.6 per cent for the week ending January 10, 2009 compared to 5.2 per cent reported last week, showing a rise of 36 basis points, largely attributable to the impact of the oil and transport sector strikes.
A Finance Ministry communique points out that the increase in the inflation rate has temporarily reversed the 11-week declining trend which had set in since the last week of October 2008.
Year-on-year Inflation by Commodity groups
Commodity group-wise examination shows that inflation in the groups of primary articles and manufactured products have mirrored the rising trend seen in overall inflation in the current week.
i.In ‘primary articles’, the rate of inflation increased to 11.6 per cent, compared to 10.9 per cent reported last week. In the sub-group of ‘food articles’, inflation, which had declined to single digit in the last fortnight, rose to 11.6 per cent in the week ended January 10, 2009 as against 9.5 per cent in the previous week, largely due to higher inflation in vegetables and milk. In ‘non-food articles’, inflation continued to decline to 7.1 per cent compared to 9.6 per cent in the previous week, while inflation in ‘minerals’ rose to 41 per cent versus 40 per cent last week due to higher inflation in non-metallic minerals as limestone and felspar.
ii.In ‘fuel and power’, the rate of inflation remained steady at (-) 1.3.
iii.In ‘manufactured products’, the inflation rate increased to 5.9 per cent, compared to 5.6 per cent last week. While most sub-groups recorded stable or declining rates of inflation, the sub-groups of sugar, khandsari and gur, textiles and canned/processed fish showed increase.
For the combined food index (weight = 25.43 per cent), the year-on-year inflation in the week ended January 10, 2009 was higher at 9.5 per cent compared to 7.9 per cent last week. Inflation in cereals, pulses and fruits continue to register inflation rates ranging from 9 to 20 per cent.
Contribution of Commodity groups
Contribution of primary articles to the year-on-year inflation rate for the week ending January 10, 2009 show that this group accounted for 46.9 per cent, as against their share of 22 per cent to the WPI basket. While the contribution of the fuel and power group was (-) 5.1 per cent vis-à-vis share of 14 per cent, that of manufactured products was 58.5 per cent against a share of 64 per cent in the commodity basket.
Inflation measured by CPI
Inflation recorded by the Consumer Price Index for Agricultural Labour (CPI AL) and for Rural Labour (CPI RL) has remained steady at 11 per cent during September – December 2008.
A Finance Ministry communique points out that the increase in the inflation rate has temporarily reversed the 11-week declining trend which had set in since the last week of October 2008.
Year-on-year Inflation by Commodity groups
Commodity group-wise examination shows that inflation in the groups of primary articles and manufactured products have mirrored the rising trend seen in overall inflation in the current week.
i.In ‘primary articles’, the rate of inflation increased to 11.6 per cent, compared to 10.9 per cent reported last week. In the sub-group of ‘food articles’, inflation, which had declined to single digit in the last fortnight, rose to 11.6 per cent in the week ended January 10, 2009 as against 9.5 per cent in the previous week, largely due to higher inflation in vegetables and milk. In ‘non-food articles’, inflation continued to decline to 7.1 per cent compared to 9.6 per cent in the previous week, while inflation in ‘minerals’ rose to 41 per cent versus 40 per cent last week due to higher inflation in non-metallic minerals as limestone and felspar.
ii.In ‘fuel and power’, the rate of inflation remained steady at (-) 1.3.
iii.In ‘manufactured products’, the inflation rate increased to 5.9 per cent, compared to 5.6 per cent last week. While most sub-groups recorded stable or declining rates of inflation, the sub-groups of sugar, khandsari and gur, textiles and canned/processed fish showed increase.
For the combined food index (weight = 25.43 per cent), the year-on-year inflation in the week ended January 10, 2009 was higher at 9.5 per cent compared to 7.9 per cent last week. Inflation in cereals, pulses and fruits continue to register inflation rates ranging from 9 to 20 per cent.
Contribution of Commodity groups
Contribution of primary articles to the year-on-year inflation rate for the week ending January 10, 2009 show that this group accounted for 46.9 per cent, as against their share of 22 per cent to the WPI basket. While the contribution of the fuel and power group was (-) 5.1 per cent vis-à-vis share of 14 per cent, that of manufactured products was 58.5 per cent against a share of 64 per cent in the commodity basket.
Inflation measured by CPI
Inflation recorded by the Consumer Price Index for Agricultural Labour (CPI AL) and for Rural Labour (CPI RL) has remained steady at 11 per cent during September – December 2008.
Tuesday, January 20, 2009
Birla Sun Life Insurance bags micro insurance mandate from global project
• BSLI to offer micro Insurance solutions to over 100,000 people
• Part of a DFID funded Asian project
• To be implemented in UP, Bihar & MP
MUMBAI: In a major development that will see Birla Sun Life Insurance making inroads into micro insurance, the company has been selected to partner a prestigious international development project for promoting a sustainable livelihood program in three states of India – Bihar, Uttar Pradesh and Madhya Pradesh.
This 4.6 million pound development project has been initiated by the UK-based Research Into Use (RIU) project and funded by Department for International Development (DFID) and spans across the next three years.
GY Associates Ltd, UK is the lead partner for this project with RIU. For the project, G Y Associates has a contractual agreement with Centre for Promoting Sustainable Livelihood (CPSL), a Patna based NGO to form 10,000 Self Help Groups (SHGs) and ICAR (Indian Council of Agricultural Research) to provide technical support to the project. CPSL has identified BSLI as a coalition partner to provide micro insurance to the SHG members.
The project will directly benefit 2,000 villages and around 10,000 Self Help Groups and over 100,000 group members. It will cover a total of 500,000 direct beneficiaries in the rural areas.
"We are extremely delighted at this unique opportunity to partner a prestigious international project and to work at the grass root level. With this New Year gift, we are positioned to begin a new era in our service. As a partner, BSLI will create awareness of the need of life insurance among the Self Help Group Members formed under the project and thus generate demand for Micro Insurance Products and make the insurance plan accessible and affordable to that segment. Our objective is to provide social and financial security to the SHG members," said Ajay Srinivasan Chief Executive, Financial Services, Aditya Birla Group.
• Part of a DFID funded Asian project
• To be implemented in UP, Bihar & MP
MUMBAI: In a major development that will see Birla Sun Life Insurance making inroads into micro insurance, the company has been selected to partner a prestigious international development project for promoting a sustainable livelihood program in three states of India – Bihar, Uttar Pradesh and Madhya Pradesh.
This 4.6 million pound development project has been initiated by the UK-based Research Into Use (RIU) project and funded by Department for International Development (DFID) and spans across the next three years.
GY Associates Ltd, UK is the lead partner for this project with RIU. For the project, G Y Associates has a contractual agreement with Centre for Promoting Sustainable Livelihood (CPSL), a Patna based NGO to form 10,000 Self Help Groups (SHGs) and ICAR (Indian Council of Agricultural Research) to provide technical support to the project. CPSL has identified BSLI as a coalition partner to provide micro insurance to the SHG members.
The project will directly benefit 2,000 villages and around 10,000 Self Help Groups and over 100,000 group members. It will cover a total of 500,000 direct beneficiaries in the rural areas.
"We are extremely delighted at this unique opportunity to partner a prestigious international project and to work at the grass root level. With this New Year gift, we are positioned to begin a new era in our service. As a partner, BSLI will create awareness of the need of life insurance among the Self Help Group Members formed under the project and thus generate demand for Micro Insurance Products and make the insurance plan accessible and affordable to that segment. Our objective is to provide social and financial security to the SHG members," said Ajay Srinivasan Chief Executive, Financial Services, Aditya Birla Group.
Friday, January 9, 2009
Inflation decines to 5.9%
Indian Annual rate of inflation, year-on-year, declined to 5.9 per cent for the week ending December 27, 2008 compared to 6.4 per cent reported in the previous week, showing a decline of 47 basis points, says a Finance Ministry communique.
Inflation has consistently been on the decline for three months now and stands slightly above the rate of 5.7 per cent in the week ended February 23, 2008.
Inflation by Commodity groups
Commodity group-wise examination of year-on-year inflation shows that inflation in all groups has recorded decline.
i.In ‘primary articles’, the rate of inflation decreased to 11.6 per cent, compared to 12.1 per cent reported last week. Within primary articles, inflation rate in all its three sub-groups of food and non-food articles and minerals have declined together for the first time in the current week. Inflation rate in food articles at about 10% represents a decline after 5 consecutive weeks of increase in the rate, while the inflation rate in minerals have gradually decelerated to 40 % in the current week from its peak rate of 54.5 % in October.
ii.In ‘fuel and power’, the rate of inflation has remained unchanged at (-) 0.7 per cent.
iii.In “manufactured products”, the inflation rate decreased to 6.2 per cent, compared to 6.8 per cent in the last week.
For the combined food index (weight = 25.43 per cent), the year-on-year inflation in the week ended December 27, 2008 was lower at 8.5 per cent compared to 8.8 per cent last week.
Contribution of Commodity groups
Contribution of primary articles to the year-on-year inflation rate for the week ending December 27, 2008 show that this group accounted for 44.2 per cent, as against their share of 22 per cent to the WPI basket.
Deseasonalised monthly WPI inflation
The deseasonalised overall WPI inflation show a continuing decline which began from July 2008. It has turned negative since September 2008 at (-) 3.2 per cent, (-) 9.6 per cent in October, (-) 18.1 per cent in November and (-) 13.5 per cent in December 2008. An identical pattern of decline from July 2008 and negative from September is manifest in the deseasonalised rate of inflation for manufactured products.
Inflation has consistently been on the decline for three months now and stands slightly above the rate of 5.7 per cent in the week ended February 23, 2008.
Inflation by Commodity groups
Commodity group-wise examination of year-on-year inflation shows that inflation in all groups has recorded decline.
i.In ‘primary articles’, the rate of inflation decreased to 11.6 per cent, compared to 12.1 per cent reported last week. Within primary articles, inflation rate in all its three sub-groups of food and non-food articles and minerals have declined together for the first time in the current week. Inflation rate in food articles at about 10% represents a decline after 5 consecutive weeks of increase in the rate, while the inflation rate in minerals have gradually decelerated to 40 % in the current week from its peak rate of 54.5 % in October.
ii.In ‘fuel and power’, the rate of inflation has remained unchanged at (-) 0.7 per cent.
iii.In “manufactured products”, the inflation rate decreased to 6.2 per cent, compared to 6.8 per cent in the last week.
For the combined food index (weight = 25.43 per cent), the year-on-year inflation in the week ended December 27, 2008 was lower at 8.5 per cent compared to 8.8 per cent last week.
Contribution of Commodity groups
Contribution of primary articles to the year-on-year inflation rate for the week ending December 27, 2008 show that this group accounted for 44.2 per cent, as against their share of 22 per cent to the WPI basket.
Deseasonalised monthly WPI inflation
The deseasonalised overall WPI inflation show a continuing decline which began from July 2008. It has turned negative since September 2008 at (-) 3.2 per cent, (-) 9.6 per cent in October, (-) 18.1 per cent in November and (-) 13.5 per cent in December 2008. An identical pattern of decline from July 2008 and negative from September is manifest in the deseasonalised rate of inflation for manufactured products.
Friday, January 2, 2009
RBI signals another rate cut; slashes repo, CRR
Signaling a further drop in interest rates, the Reserve Bank of India has announced the reduction of the repo rate under the liquidity adjustment facility (LAF) by 100 basis points from 6.5 per cent to 5.5 per cent with immediate effect.
The reverse repo rate under the LAF will also be slashed by 100 basis points from 5.0 per cent to 4.0 per cent with immediate effect.
The apex bank also announced that the cash reserve ratio (CRR) of scheduled banks will reduced by 50 basis points from 5.5 per cent to 5.0 per cent from the fortnight beginning January 17, 2009.
The RBI announcement said that the reduction in the CRR will inject additional liquidity of around Rs. 20,000 crore to the financial system.
It is expected that the reduction in the policy interest rates and the CRR will further enable banks to provide credit for productive purposes at appropriate interest rates. The Reserve Bank on its part would continue to maintain a comfortable liquidity position in the system.
Even as some public sector and private sector banks have cut lending rates in response to the Reserve Bank’s monetary policy stance, concerns over rising credit risk together with the slowing of economic activity appear to have moderated credit growth.
The Reserve Bank continues to urge banks to monitor their loan portfolio and take early action, including debt restructuring where warranted, to prevent the rise of bad assets down the road and safeguard the gains of the last several years in improving asset quality. At the same time, banks should price risk appropriately and ensure that quality enterprises continue to get funding.
The Reserve Bank appreciates that risk management is difficult even in normal circumstances; it is even more difficult in an environment of uncertainty and downturn.
The fundamentals of the indian economy continue to be strong. Once the crisis is behind us, and calm and confidence are restored in the global markets, economic activity in India would recover sharply. But a period of painful adjustment is inevitable, the Bank pointed out.
The reverse repo rate under the LAF will also be slashed by 100 basis points from 5.0 per cent to 4.0 per cent with immediate effect.
The apex bank also announced that the cash reserve ratio (CRR) of scheduled banks will reduced by 50 basis points from 5.5 per cent to 5.0 per cent from the fortnight beginning January 17, 2009.
The RBI announcement said that the reduction in the CRR will inject additional liquidity of around Rs. 20,000 crore to the financial system.
It is expected that the reduction in the policy interest rates and the CRR will further enable banks to provide credit for productive purposes at appropriate interest rates. The Reserve Bank on its part would continue to maintain a comfortable liquidity position in the system.
Even as some public sector and private sector banks have cut lending rates in response to the Reserve Bank’s monetary policy stance, concerns over rising credit risk together with the slowing of economic activity appear to have moderated credit growth.
The Reserve Bank continues to urge banks to monitor their loan portfolio and take early action, including debt restructuring where warranted, to prevent the rise of bad assets down the road and safeguard the gains of the last several years in improving asset quality. At the same time, banks should price risk appropriately and ensure that quality enterprises continue to get funding.
The Reserve Bank appreciates that risk management is difficult even in normal circumstances; it is even more difficult in an environment of uncertainty and downturn.
The fundamentals of the indian economy continue to be strong. Once the crisis is behind us, and calm and confidence are restored in the global markets, economic activity in India would recover sharply. But a period of painful adjustment is inevitable, the Bank pointed out.
India's exports zoom to $ 163 billion -26.4% annual growth
Demonstrating signs of a robust Indian economy, India’s merchandise exports increased from US $ 63.8 billion in 2003-04 to US $ 162.9billion in 2007-08 recording average annual growth rate of 26.4% during the last four years.
(Values in US $ billion)
Year Exports %Growth Imports %Growth
2003-2004 63.8 -- 78.1 --
2004-2005 83.5 30.8 111.5 42.7
2005-2006 103.1 23.4 149.2 33.8
2006-2007 126.3 22.5 185.6 24.4
2007-2008 162.9 29.0 251.4 35.5
2007-08(Apr-Nov.) (P) 99.9 153.1
2008-09(Apr-Nov.) (P) 119.3 19.4 203.6 33
Provisional
Data Source: DGCI&S, Kolkata
Steps taken by the Government to arrest deceleration of export -- (1) Excise duty reduced across the board by 4% for all products except petroleum products and those products where current rate was less than 4%; (2) Interest subvention of 2% has been provided till 31.3.2009, to the following labour intensive sectors for exports: Textiles (including Handlooms), Handicrafts, Leather, Gems & Jewellery, Marine Products and SMEs; (3) Additional funds of Rs.350 crore provided for export incentive Schemes; (4) All items of handicrafts included in Vishesh Krishi and Gram Udyog Yojana; (5) Back-up guarantee to ECGC for up to Rs.350 crore; (6) Rs1,100 crore provided to ensure full refund of claims of CST/Terminal Excise duty/ Duty drawback on deemed exports; (7) Additional funds of Rs.1400 crore provided for textile sector to clear the backlog claims of TUF; (8) Export duty on iron ore fines eliminated, and for lumps, reduced to 5%; (9) Import duty on naphtha for power sector eliminated; (10) Some pending issues relating to Service Tax refund on exports – resolved.
Special Economic Zones
SEZs have created employment for large number of unemployed rural youth. Even in the services sector, 12.5 million sq meters space is expected in the IT/ITES SEZs which as per the NASSCOM standards translates into 12.5 lakh jobs. It is, therefore, expected that establishment of SEZs would lead to fast growth of labour intensive manufacturing and services in the country. The total investment in the SEZs, as on 30th September 2008, were Rs.93507.23 crore and the total employment generated so far to 3,62,650 persons.
Out of the 531 formal approvals given till date, 174 approvals are for sector specific and multi product SEZs for manufacture of Textiles & Apparels, Leather Footwear, Automobile components, Engineering etc. which would involve labour intensive manufacturing. Exports from SEZs during the year 2007-08 was to the tune of Rs.66,638 crore with a growth of 92% over 2006-07 (overall growth of exports of 381% over past four years (2003-04). The export projection for 2008-09 is Rs.1, 25,950 crore.
Gems & Jewellery
During the year 2007-08, exports in gems & Jewellery sector were worth US $ 19,657.36 million dollars and registered growth of 23.13% as compared to the year 2006-07. During the period April-July of the current fiscal exports worth US $ 6296.14 million were effected as against US $ 6141.92 million during the corresponding period previous year.
Marine Products
Marine Products Export Development Authority had initiated following measures to sustain the export of marine products during the current year: 1. Launched a comprehensive programme to tap deep sea resources of Tuna and finalised an action plan for development of tuna fishery in the Andamans. 2. Increased thrust on diversification of culture practices and launched a new scheme for providing financial assistance for value addition. 3. Introduced for the first time in the world Organic fresh water shrimp in the international market. 4. Promoted ornamental fish breeding for export. 5. Took steps to set up six more screening laboratories in Andhra Pradesh to improve the quality of shrimp exported. 6. Undertook R&D activities for new aquaculture technologies / innovative methods for increasing the production of fin/shell fish varieties. 7. Taken steps to introduce a brand promotion scheme to promote the image of Indian Seafoods at abroad.
Anti-dumping Investigations during 2008
During the year 2008, the Directorate General of Anti Dumping has so far initiated 18 fresh anti-dumping investigations (till 8.12.2008). The products involved are Cable Ties, All Fully Drawn or Fully Oriented Yarn/Spin Draw Yarn/Flat Yarn of Polyester, Plain Medium Density Fibre Board, Power Steering Gear System, Thyionyl Chloride, Plastic Processing Machinery, Cathode ray Television Picture Tube – III, Nylon Tyre Cord Fabrics, Flax Fabrics, Ceramic tiles, Tyres Curing Presses, Radial Tyres, Pencillin – G, Phosphoric Acid, Diethyl Thio Phosphoryl Chloride, Cold Rolled Products of Stainless Steel, Hot Rolled Steel Products and Axle Beam and Steering Knuckles. The countries involved in these investigations are China PR, Thailand, Vietnam, Malaysia, New Zealand, Sri Lanka, European Union, Indonesia, Belarus, Hong Kong, Korea RP, Japan, South Africa, Taiwan, USA, Iran, Kazakhstan, Saudi Arabia, Russia, Romania, Turkey and Ukraine.
Performance of Plantation Sector
COFFEE – The Government of India has approved the Development Support Scheme for coffee sector with a total financial outlay of Rs.310 crore during the month of March 2008. An area of 47776 hectares has been brought under plantation from January to November 2008. A new scheme on Export Promotion of Coffee and the scheme on Support for Coffee Processing have been approved by the Government of India with a total financial outlay of Rs.45 crore on April 10, 2008. The total export for the period from January to November 2008 was 2,08,023 tonnes earning a foreign exchange of Rs.2,271.81 crore against 2,04,538 tonnes earning a foreign exchange of Rs.1,773.50 crore during the same period last year.
RUBBER – India is the fourth largest producer of rubber with a share of 8.3% in the world production. The rubber sector accounts for 93% of the production and 89% of the area with an average holding size of 0.5 hectare. Natural rubber export and import is expected to reach 72,000 tonnes and 80,000 tonnes respectively in 2008. The Rubber Training Centre received ISO: 2000 certificate in June 2008.
SPICES – Indian spices industry recorded an export of 4,44,250 tonnes worth over US $ 1 billion during the year 2007- 2008. It marked a quantum leap of 19 per cent in volume and 24 per cent in rupee value. Mumbai is the major hub for export of spices and has alone accounted for 39% in volume of the total spice exports during the last financial year.
TOBACCO – India earned a foreign exchange of Rs.2,022.78 crore and Rs.10,271.55 crore as excise revenue in the year 2007- 2008. The exports of tobacco and tobacco products during 2007- 2008 were valued at Rs.2022.78 crore. During April-October 2008, exports of tobacco and tobacco products were valued at Rs.1952.43 crore. During April-October 2008, unmanufactured tobacco exports were valued at Rs.1623.10 crore and exports of tobacco products were valued at Rs.329.33 crore. Going by the current trend exports of tobacco and tobacco products are expected to cross US $ 600 million during 2008- 2009.
Prospects of the Doha Round
India continues to believe in strengthening the multilateral trade rules of the WTO. The full liberalisation through the WTO secures the economic and commercial gains necessary in the goods and services sectors and modes of supply of interest to developing countries. India has reiterated the need for a serious discussion on the expectations of WTO Members regarding other issues. The developing countries want to have progress in some of these issues such as the TRIPS-CBD issue. The WTO Ministers will raise issues that they consider important and it would therefore be prudent to prepare for this so that the discussions in the Ministerial Conference can be held in a constructive environment and lead us to a successful conclusion.
Further, progress needs to be made in other areas of negotiations as well, that are of great interest to the developing countries. Our focus is on the bankable commitments from our major trading partners in areas where we have relative strengths and which would provide certainty and value to trade in Services. India has made it known that without bankable commitments from the major developed countries in Services, it may be difficult for India to agree to the modalities on Agriculture and NAMA. India needs to have clear information on the important elements which are required for completion of Services’ negotiations too.
India has been engaging constructively and actively with other fellow Member countries of the WTO towards this end. For India, it is important that the Doha Round negotiations are brought to a successful conclusion. Such a conclusion can only be possible if we are faithful to the mandate and the outcome reflects a clear balance between market opening and the development needs of the majority of the membership. India is ready to show the necessary flexibility to achieve such an outcome but the onus for movement lies largely with the developed countries.
(Values in US $ billion)
Year Exports %Growth Imports %Growth
2003-2004 63.8 -- 78.1 --
2004-2005 83.5 30.8 111.5 42.7
2005-2006 103.1 23.4 149.2 33.8
2006-2007 126.3 22.5 185.6 24.4
2007-2008 162.9 29.0 251.4 35.5
2007-08(Apr-Nov.) (P) 99.9 153.1
2008-09(Apr-Nov.) (P) 119.3 19.4 203.6 33
Provisional
Data Source: DGCI&S, Kolkata
Steps taken by the Government to arrest deceleration of export -- (1) Excise duty reduced across the board by 4% for all products except petroleum products and those products where current rate was less than 4%; (2) Interest subvention of 2% has been provided till 31.3.2009, to the following labour intensive sectors for exports: Textiles (including Handlooms), Handicrafts, Leather, Gems & Jewellery, Marine Products and SMEs; (3) Additional funds of Rs.350 crore provided for export incentive Schemes; (4) All items of handicrafts included in Vishesh Krishi and Gram Udyog Yojana; (5) Back-up guarantee to ECGC for up to Rs.350 crore; (6) Rs1,100 crore provided to ensure full refund of claims of CST/Terminal Excise duty/ Duty drawback on deemed exports; (7) Additional funds of Rs.1400 crore provided for textile sector to clear the backlog claims of TUF; (8) Export duty on iron ore fines eliminated, and for lumps, reduced to 5%; (9) Import duty on naphtha for power sector eliminated; (10) Some pending issues relating to Service Tax refund on exports – resolved.
Special Economic Zones
SEZs have created employment for large number of unemployed rural youth. Even in the services sector, 12.5 million sq meters space is expected in the IT/ITES SEZs which as per the NASSCOM standards translates into 12.5 lakh jobs. It is, therefore, expected that establishment of SEZs would lead to fast growth of labour intensive manufacturing and services in the country. The total investment in the SEZs, as on 30th September 2008, were Rs.93507.23 crore and the total employment generated so far to 3,62,650 persons.
Out of the 531 formal approvals given till date, 174 approvals are for sector specific and multi product SEZs for manufacture of Textiles & Apparels, Leather Footwear, Automobile components, Engineering etc. which would involve labour intensive manufacturing. Exports from SEZs during the year 2007-08 was to the tune of Rs.66,638 crore with a growth of 92% over 2006-07 (overall growth of exports of 381% over past four years (2003-04). The export projection for 2008-09 is Rs.1, 25,950 crore.
Gems & Jewellery
During the year 2007-08, exports in gems & Jewellery sector were worth US $ 19,657.36 million dollars and registered growth of 23.13% as compared to the year 2006-07. During the period April-July of the current fiscal exports worth US $ 6296.14 million were effected as against US $ 6141.92 million during the corresponding period previous year.
Marine Products
Marine Products Export Development Authority had initiated following measures to sustain the export of marine products during the current year: 1. Launched a comprehensive programme to tap deep sea resources of Tuna and finalised an action plan for development of tuna fishery in the Andamans. 2. Increased thrust on diversification of culture practices and launched a new scheme for providing financial assistance for value addition. 3. Introduced for the first time in the world Organic fresh water shrimp in the international market. 4. Promoted ornamental fish breeding for export. 5. Took steps to set up six more screening laboratories in Andhra Pradesh to improve the quality of shrimp exported. 6. Undertook R&D activities for new aquaculture technologies / innovative methods for increasing the production of fin/shell fish varieties. 7. Taken steps to introduce a brand promotion scheme to promote the image of Indian Seafoods at abroad.
Anti-dumping Investigations during 2008
During the year 2008, the Directorate General of Anti Dumping has so far initiated 18 fresh anti-dumping investigations (till 8.12.2008). The products involved are Cable Ties, All Fully Drawn or Fully Oriented Yarn/Spin Draw Yarn/Flat Yarn of Polyester, Plain Medium Density Fibre Board, Power Steering Gear System, Thyionyl Chloride, Plastic Processing Machinery, Cathode ray Television Picture Tube – III, Nylon Tyre Cord Fabrics, Flax Fabrics, Ceramic tiles, Tyres Curing Presses, Radial Tyres, Pencillin – G, Phosphoric Acid, Diethyl Thio Phosphoryl Chloride, Cold Rolled Products of Stainless Steel, Hot Rolled Steel Products and Axle Beam and Steering Knuckles. The countries involved in these investigations are China PR, Thailand, Vietnam, Malaysia, New Zealand, Sri Lanka, European Union, Indonesia, Belarus, Hong Kong, Korea RP, Japan, South Africa, Taiwan, USA, Iran, Kazakhstan, Saudi Arabia, Russia, Romania, Turkey and Ukraine.
Performance of Plantation Sector
COFFEE – The Government of India has approved the Development Support Scheme for coffee sector with a total financial outlay of Rs.310 crore during the month of March 2008. An area of 47776 hectares has been brought under plantation from January to November 2008. A new scheme on Export Promotion of Coffee and the scheme on Support for Coffee Processing have been approved by the Government of India with a total financial outlay of Rs.45 crore on April 10, 2008. The total export for the period from January to November 2008 was 2,08,023 tonnes earning a foreign exchange of Rs.2,271.81 crore against 2,04,538 tonnes earning a foreign exchange of Rs.1,773.50 crore during the same period last year.
RUBBER – India is the fourth largest producer of rubber with a share of 8.3% in the world production. The rubber sector accounts for 93% of the production and 89% of the area with an average holding size of 0.5 hectare. Natural rubber export and import is expected to reach 72,000 tonnes and 80,000 tonnes respectively in 2008. The Rubber Training Centre received ISO: 2000 certificate in June 2008.
SPICES – Indian spices industry recorded an export of 4,44,250 tonnes worth over US $ 1 billion during the year 2007- 2008. It marked a quantum leap of 19 per cent in volume and 24 per cent in rupee value. Mumbai is the major hub for export of spices and has alone accounted for 39% in volume of the total spice exports during the last financial year.
TOBACCO – India earned a foreign exchange of Rs.2,022.78 crore and Rs.10,271.55 crore as excise revenue in the year 2007- 2008. The exports of tobacco and tobacco products during 2007- 2008 were valued at Rs.2022.78 crore. During April-October 2008, exports of tobacco and tobacco products were valued at Rs.1952.43 crore. During April-October 2008, unmanufactured tobacco exports were valued at Rs.1623.10 crore and exports of tobacco products were valued at Rs.329.33 crore. Going by the current trend exports of tobacco and tobacco products are expected to cross US $ 600 million during 2008- 2009.
Prospects of the Doha Round
India continues to believe in strengthening the multilateral trade rules of the WTO. The full liberalisation through the WTO secures the economic and commercial gains necessary in the goods and services sectors and modes of supply of interest to developing countries. India has reiterated the need for a serious discussion on the expectations of WTO Members regarding other issues. The developing countries want to have progress in some of these issues such as the TRIPS-CBD issue. The WTO Ministers will raise issues that they consider important and it would therefore be prudent to prepare for this so that the discussions in the Ministerial Conference can be held in a constructive environment and lead us to a successful conclusion.
Further, progress needs to be made in other areas of negotiations as well, that are of great interest to the developing countries. Our focus is on the bankable commitments from our major trading partners in areas where we have relative strengths and which would provide certainty and value to trade in Services. India has made it known that without bankable commitments from the major developed countries in Services, it may be difficult for India to agree to the modalities on Agriculture and NAMA. India needs to have clear information on the important elements which are required for completion of Services’ negotiations too.
India has been engaging constructively and actively with other fellow Member countries of the WTO towards this end. For India, it is important that the Doha Round negotiations are brought to a successful conclusion. Such a conclusion can only be possible if we are faithful to the mandate and the outcome reflects a clear balance between market opening and the development needs of the majority of the membership. India is ready to show the necessary flexibility to achieve such an outcome but the onus for movement lies largely with the developed countries.
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