| Reserve BankmightcutCRR, hold policy rate, shows poll |
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Mumbai, 25 October The Reserve Bank of India (RBI) is largely expected to announce liquidity easing measures in the second quarter review of monetary and credit policy on Tuesday, a poll of 21 market participants conducted shows. High inflation continues to be an obstacle in lowering policy rates as of now. About 70 per cent of the respondents were concerned about the rising liquidity deficit and expected RBI to react with a 25 basis points (bps) cut in cash reserve ratio (CRR). With bank borrowings from RBI's Liquidity Adjustment Facility (LAF) window back to above ~1 lakh crore levels, some respondents also felt the central bank could resort to a higher cut of 50 bps in CRR. Indranil Sen Gupta, India Economist at Bank of America Merrill Lynch, said 50 bps cut in CRR would pull down lending rates 25 bps. Most respondents also expect RBI to inject liquidity through bond purchases under open market operations. At present, CRR is 4.5 per cent. RBI had reduced it by 25 bps in the mid-quarter monetary policy review held in September, citing concerns over liquidity at the onset of the festive season. "In light of the seasonal pickup in credit demand, the cental bank may consider a further reduction in the cash reserve ratio by 25-50 bps to support economic activity," said analysts at Icra Ratings. Sticky headline and core inflation might not allow RBI to alter policy rates, they added. At present, the policy rate or the repo rate is at eight per cent. An economist from a large private bank felt only political pressure might lead to RBI easing policy rates at this juncture. "If we go by economic facts, the case for a policy rate cut looks difficult," the official said. RBI has kept policy rate unchanged since April, citing upward risks to inflation. Leif Eskesen, chief economist for India and Asean at Hongkong and Shanghai Banking Corporation, noted inflation risks were still to the upside and cutting the policy rate under these circumstances runs the risk of unhinging inflation expectations. "Moreover, the central bank could in this case also be perceived as turning softer on inflation or caving in to political pressures to cut, therefore not being driven solely by what it thinks is the right thing to do," said Eskesen. Economists at Nomura were of the view that there was a possibility of RBI cutting CRR by 25 bps as a positive response to the government initiating reform process. |
| MCAprobes Vadra, Gadkari firms' deals |
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New Delhi, 25 October Yielding to pressure from the Opposition and social activists, a top corporate affairs ministry official today said the offices of the Registrar of Companies (RoC) had begun a probe into the recent allegations pertaining to business dealings of Robert Vadra, sonin-law of Congress President Sonia Gandhi, as also those against Bharatiya Janata Party head, Nitin Gadkari. MCA Secretary Naved Masood told Business Standard :"Everything is being looked into... all the matters are being looked into." He would not specify the nature of violations the offices of RoC were probing. "My lips are sealed beyond this," he said. Earlier, Corporate Affairs Minister MVeerappa Moily said the department had verified all the six companies associated with Vadra and there was "no question of investigation, as there is no violation of the Companies Act". Members of the India Against Corruption (IAC) group recently alleged companies run by Vadra had acquired property worth ~300 crore, aided by interest free loans of ~65 crore given by realty major DLF. IAC member Arvind Kejriwal had argued DLF seemed to have showered favours on Vadra to influence the Congress-ruled governments of Haryana, Rajasthan and Delhi. Vadra, DLF and the three governments have denied these allegations and any wrongdoing. The secretary's remarks came two days after Moily told the media he'd instructed the RoCs to investigate the financial dealings of the Gadkari companies, kicking off a row, with opposition parties alleging double standards and kid-gloved treatment of Vadra. Senior officials in the ministry confirmed an RoC had started investigations on the allegations made against Gadkari. The income tax department's offices in Mumbai and Pune have also started investigation into Gadkari's Purti Group of companies, on the source of funds and of 18 companies that had invested in Gadkari's. The BJP chief is facing charges of allowing investments from companies that had given false addresses. He has also been accused of awarding contracts to Ideal Road Builders Pvt Ltd as public works department minister of Maharashtra in 1995-99; the company is said to have invested money in the equity of companies run by Gadkari. IRB became a subsidiary of IRB Infrastructure in 200607. In a detailed response, IRB has denied the charges and said the investments were made when Gadkari was not in office. I-T offices are also looking at source of funding of the BJP chief's companies Robert Vadra Nitin Gadkari Khemka had on October 12, a Land Records-cum-Inspector General of Registration to head the Haryana Seeds Development Corporation, ordered a probe to check if any undervaluation of sale deeds was done by Vadra or his companies. The inquiry was marked to the deputy commissioners of four districts — Gurgaon, Faridabad, Palwal and Mewat. |
| Eyeing domestic manufacturing, Cabinet clears electronics policy |
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New Delhi,25 October To boost indigenous manufacturing of electronic goods, the Cabinet today cleared the National Policy on Electronics 2012, which would offer fiscal incentives for setting up electronic manufacturing clusters. The idea is to fill a gap between domestic demand and supply in electronics goods which is slated to rise to $300 billion by 2020 and lead to huge imports, higher than even petroleum products. "The Union Cabinet approved the Policy. The draft National Policy on Electronics was released for public consultation and it has now been finalised based on comments from various stakeholders," an official statement said. Through the policy, the government targets to attract about $100 billion of investment in the electronic equipment manufacturing industry. The policy would also give preferential market access to domestically manufactured electronic products and setting up of semiconductor wafer fabrication facilities. Based on the Cabinet approval, a high level empowered committee has been constituted to identify and shortlist technology and investors for setting up two semiconductor wafer manufacturing fabrication facilities. The government expects that the new policy would generate fresh employment for about two million people. The government would also set up an Electronic Development Fund, the statement said. The policy stated that indigenous availability of electronic components as raw material is estimated to increase to more than 60 per cent of the requirements by 2020 from 20-25 per cent at present. Demand for electronics products has been rapidly growing in the country. However, the domestic production in 2008-09 was worth about $20 billion. In the absence of a government initiative, it was estimated that at the current rate of growth, domestic production can cater to a demand of $100 billion by 2020 as against the total demand of $400 billion. The rest would have to be met by imports. "This aggregates to a demand supply gap of nearly $300 billion by 2020. Unless the situation is corrected, it is likely that by 2020, electronics import may far exceed oil imports," the statement said. The policy emphasised on creating a globally competitive Electronic System Design and Manufacturing (ESDM) industry, besides building the chip designing and embedded software industry. The government targets to increase exports of ESDM to $80 billion by 2020 from $5.5 billion at present. The policy also said the government should give special focus on enhancing skilled manpower. It aims to have about 2,500 PhD holders on electronics and related subjects annually by 2020. The government would also increase fund flow for research & development (R&D) seed capital and venture capital for start-ups in the ESDM and nano electronics sectors. Based on another Cabinet approval, a policy for providing preference to domestically manufactured electronic goods has been announced. To secure talent pool, the government would seek involvement of private sector universities and institutions for scaling up capacities. The policy also called for setting up aspecialised Institute for semiconductor chip design. Aims to generate two million new jobs and attract $100-billion investment in equipment making, encouraging R&D and seed funding To secure talent pool, the government would seek involvement of private sector universities |
| GST:Centre, states find common ground |
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New Delhi, 25 October The stalemate between the Centre and the states over the proposed goods and services tax (GST) might soon end, with the Union finance ministry showing some flexibility. The two sides are hopeful of resolving their differences in the next two or three meetings. After a meeting with Finance Minister PChidambaram today, Sushil Modi, chairman of the Empowered Committee of State Finance Ministers, said that the former was very flexible over the contentious issues of compensation to states for loss in revenue, flexibility to alter the rates in GST, and fiscal autonomy. Modi told reporters: "He seemed to agree with the issues of the states. We are moving forward in the right direction. There is convergence on many of the issues on which there was confrontation between the Centre and states. In the next two or three meetings, we will able to sort out all the differences." He said there was an agreement among states that there should be a floor tax rate with anarrow band, and that a package be considered for rewarding states participating in GST. The states have also told the Centre there is no need for a dispute settlement authority in GST. Chidambaram will meet the full empowered committee on November 8 to resolve all the issues. So far, the Centre was proposing fixed rates for GST across the country. A band giving leeway to the states for some manoeuvring in times of emergency could pave the way for amendments to the Constitution by next year. However, even after these amendments, GST bills will have to be framed and passed by Parliament and the respective state assemblies. A huge deterrent in the way of GST is compensation to states for the loss of revenue on account of central sales tax (CST). States, which pegged their CST losses at ~19,000 crore for 2010-11, had threatened to derail the GST, if the government did not agree to compensate them. "We are trying to find ways to compensate states for loss of revenue, which occurred to states due to reduction in CST from four to two per cent. I hope the finance minister, in his next meeting with the empowered committee, will be able to find a solution," Modi added. Modi says all issues would be resolved in 2-3 meetings as Chidambaram was flexible over contentious issues |
Company Secretary, Chennai
email csarengarajan@gmail.com
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