"The message is already there that we are moving from the accommodative policy. I cannot say when this will happen," RBI deputy governor KC Chakrabarty said
The Reserve Bank of India (RBI) today said that high inflation is a cause of worry for the central bank and it is willing to take policy actions as per the changing economic environment, reports PTI.
"Double-digit inflation is a cause of worry more than the external factors...it is not out of our estimates. If things change fast, there will be more measures depending upon the environment...
"The message is already there that we are moving from the accommodative policy. I cannot say when this will happen," RBI deputy governor K C Chakrabarty told reporters on the sidelines of a seminar in Mumbai.
Wholesale prices based inflation provisionally rose to 10.16% in May, entering double digits for the first time in nearly 20 months, and put pressure on the central bank to hike its policy rates.
Earlier this week, finance minister Pranab Mukherjee said food inflation-which is fuelling overall inflation-has started coming down a little bit and expected it to ease with a good monsoon and crop.
Food inflation stood at 16.12% as of 5th June.
"So far as the monetary part is concerned, the Reserve Bank will look into it, will consider it," Mukherjee had said, indicating that RBI may tighten money supply even before its scheduled 27th July review of the monetary policy.
The central bank has already twice this year raised key policy rates to check food inflation from spreading to manufactured goods.
Asked whether the European financial crisis will weigh on RBI's policy decisions, Mr Chakrabarty said while external shocks can claim some adverse impact on the economy, the RBI is more focused on containing high inflation in the economy.
"International situation is not that volatile. Something has happened in Europe, it has not happened in US. It has some adverse implications. But I think more than that the domestic inflation will definitely be a matter of worry," he said.
The RBI, which started exiting its accommodative stance in October last year, is set to announce its quarterly review of the annual monetary policy on 27th July and is widely expected to hike its repo, and reverse repo rates on or before policy to check inflation.
Moving ahead, the apex bank's policy measures will depend on the economic environment and buying back of G-Secs, announced last evening, was a part of the apex bank's efforts to ensure adequate cash flow in the market, he said.
RBI, on Wednesday, said that the government will prematurely buy back three types of bonds worth up to Rs20,000 crore beginning Friday, as liquidity has come under pressure due to much higher third generation (3G) and broadband spectrum licence fees, and the first quarter advance tax.
On deregulation of savings rates, Mr Chakrabarty said RBI, as stated in its policy, is in favour of deregulating interest rates in the system and leave the market to arrive at more competitive rates.
"We are initiating a debate. The direction is very clear.
We are in favour of deregulating all interest rates but a decision will be taken after debating this," Mr Chakrabarty said, adding, highly competitive market prices do not vary much and will depend on the market conditions.
Earlier, RBI had asked all banks to calculate savings rate on a daily basis from 1st April with a view to improve the returns on such deposits.
Mr Chakrabarty said that RBI has asked banks to prepare a three year roadmap for financial inclusion in a bid to take the banking services to all households in the country.
To achieve this, banks have to make effective use of technology and business correspondent model, he added.
In the last one year, customs authorities of Europe—especially the Netherlands—seized 19 drug consignments belonging to Indian companies while they were en route to their export destinations
At the instance of the World Trade Organisation (WTO), India and the European Union (EU) will try to resolve a dispute, relating to seizure of Indian drugs by some European countries for alleged patent violations, next month, reports PTI.
Negotiators from the two sides will meet in July either at Brussels or Geneva, additional secretary in the commerce ministry DK Mittal told PTI.
India had dragged the EU to the WTO, protesting against the seizure of its off-patent drugs by some European countries while they were en route to export destinations in Africa and Latin America.
In accordance with a WTO rule, both the parties were asked to engage in formal bilateral consultations as part of a last-ditch effort to resolve the problem.
If the issue still remains unresolved, it would be referred to the dispute settlement panel of the WTO.
Mr Mittal said that the Indian team of officials, to be led by a joint secretary, has done enough spade work for the meeting. "We have prepared 40-50 questions (for EU)," he said, adding that the consultation process may take a month or two.
In the last one year, customs authorities of Europe-especially Netherlands-seized 19 drug consignments belonging to Indian companies while they were en route to their export destinations.
The Dutch authorities had alleged violation of their patent laws, even though the Indian government maintained that they were off-patent drugs.
India also received the support of several global non-governmental organisations (NGOs), which claimed that cheaper Indian medicine had improved access to healthcare for the poor in developing countries.
India's $20-billion pharmaceutical industry gets 45% of its revenue from the export of generic drugs.
The housing department of the Maharashtra government is initiating various rules to create more transparency in the real-estate industry. Sitaram Kunte, secretary, housing department, government of Maharashtra, explains to Pallabika Ganguly on how he plans to usher in these steps
Pallabika Ganguly (ML): What is your view on the increasing prices of residential properties? Do you feel the market sentiment has improved? Who is pushing up the prices?
Sitaram Kunte (SK): We foresee recession withering away from the real-estate industry. Prices of properties are rising. This shows that the demand is increasing in the real-estate sector and in the next six months the industry would see a positive trend.
ML: According to various reports by different agencies, real-estate sales (in the quarter ended March 2010) are down by 35% compared to the last quarter (ended in December 2009) in various categories. Do you still feel recession has withered away?
SK: There is an imbalance between the luxury segment (above Rs1 crore) and the affordable segment. There is an oversupply in the luxury segment and undersupply in the affordable segment. In the luxury segment the prices were high and will remain high. Sales are not taking place in this segment.
There is a great demand in the affordable segment, which we can see by the Maharashtra Housing and Development Authority (MHADA) affordable house lottery (held on 19 May 2010). We had 4,000 flats but we got 4.33 lakh applicants for the lottery. We are trying to equalise the imbalance by persuading the Maharashtra Chamber of Housing Industry (MCHI) to increase the supply of affordable housing.
ML: How are you planning to ensure five lakh affordable homes in the Mumbai Metropolitan Region (MMR), as a memorandum of understanding (MoU) with MCHI for affordable housing?
SK: We are initiating the process for affordable houses by bringing in more private land. All the five lakh homes won't necessarily be constructed on government land. We are encouraging private developers to actively participate in it. We are incentivising the developers who are bringing in private land by regulatory concession-granting them 2.5 FSI. We foresee through this process we will be able to increase the supply of affordable homes.
ML: Does the Maharashtra housing department have the data of how many under-construction and new projects are initiated every quarter? Can you share the current statistics?
SK: Data in the housing sector has always been an issue. At the State level, we are very close to setting up a statistical cell in Maharashtra. MHADA is compiling a huge statistical database on prices, number of completed projects and number of projects which have received permissions, among other details. It will be a four-member team headed by the joint director and an officer from the statistics department. The team would compile data from different authorities who are closely monitoring this sector. For example-the number of building that have received the Brihanmumbai Municipal Corporation (BMC) permissions, the number of buildings ready for occupation, how is the housing start up index moving, etc.
We are planning comprehensive data collection and utilisation through this cell. In the next six to eight months the cell would be operational. We would also like to incorporate data from the private players.
Most of the data would be collected from different regulatory bodies-like data on the number of buildings being granted development permission. Banks would provide data on home loan offtakes, the registration department will provide the figure for sales taking place during certain tenure, the price trend and the number of leave-and-license agreements signed during a period. The cell will have authentic data.
ML: Conveyance is an issue and not more than 5% of the buildings in Maharashtra have got conveyance. How do you plan to solve this problem?
SK: Conveyance has to be given because all property buyers have paid their share of money. The buyers are entitled to receive full property rights on whatever they have paid. There is a statutory obligation of developers as per the Maharashtra Ownership Flats Act (MOFA).
We have come up with the concept of deemed conveyance and we are in the process of finalising the rules for the same. After the rules are finalised, we are going to submit it for approval to the government and as soon as they permit, the authority will be armed with the power to grant deemed conveyance.
According to MOFA, after 60% of the flats are sold, the developers have to form a legal entity-a cooperative society. Once the cooperative society is formed, within four months it is obligatory for the developer to give conveyance of property. But this procedure is not followed by most of the developers.
If the developer does not give conveyance after four months, the society can approach the district deputy registrar of cooperative societies for deemed conveyance. Deemed conveyance is as good as normal conveyance. It won't have any title issue.
ML: What action has been taken by you on developers selling properties on super built-up area? In November 2008, it was proposed in the housing policy that all properties would be sold on carpet area, why is it still not a law?
SK: There is no standard definition of carpet area. Every developmental control regulation has a different definition of carpet area. We are going to standardise the definition of carpet area by including it in MOFA itself.
The Municipal Corporation of Greater Mumbai (MCGM) commissioner is also actively participating to curb the problem of super built-up area. The MCGM will soon implement a regulation according to which developers are supposed to mention the actual carpet area and useable area separately while approaching the authority for approvals of their project plans.
Developers are supposed to mention the actual carpet area while getting all the three certificates-the Intimation of Disapproval (IOD), occupation certificate and building completion certificate. The authority will also scrutinise the actual sale agreements of the buyers (which have to mention the actual carpet area and super built-up area separately) before issuing occupation certificates to developers.
ML: What is the logic behind charging service tax? The house is sold as any other product sold in the market. Developers are not delivering any service, the consumers are already paying stamp duty, why a service tax?
SK: There are too many taxes on the buyers. Consumers have to pay service tax, stamp duty, value-added tax (VAT) and even labour welfare tax. Already prices of properties are sky high and on top of that the consumers have to pay 11% tax.
Consumers are getting crushed between high prices of the properties, heavy loading from the developers and a number of taxes from the government. We are in talks with the government to rationalise the taxes.
ML: When can we see a regulator for this industry?
SK: Enforcement is an issue in this industry. We are trying to bring in a regulator for this industry. We are in the final stage of completion of a Bill for a regulator. In the next fortnight, the drafting of the Bill will be completed. Then, it all depends on the legislature and political executive to decide when to place the Bill.
Earlier, only the State government was taking the initiative to bring in the regulator. Now, the government of India is actively participating to speed up the process. We should soon see the regulator.
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