Experts say RBI may hike repo, reverse repo rates by 25 bps

Besides inflation, the RBI will also take into account the sluggish industrial performance and impact of political unrest in the West Asia and North African region on crude oil prices while reviewing its monetary policy

New Delhi: The Reserve Bank of India (RBI) may go in for yet another hike of key interest rates by 25 basis points (bps) at its policy review on Thursday to prevent food inflation from spreading to the manufacturing sector, reports PTI quoting economists.

With inflation rising marginally to 8.31% in February, experts feel the RBI could announce 25 bps hike in its short-term lending (repo) and borrowing (reverse-repo) rates.

"RBI may raise key policy rates by 25 bps to arrest food inflation spreading to manufacturing sector," Crisil chief economist DK Joshi said.

Expressing similar views, ICRA economist Aditi Nayar said, "We continue to expect that the RBI may increase repo and reverse repo rates by 25 bps in the upcoming mid-quarter policy review."

Since March 2010, the central bank has raised repo and reverse-repo rates seven times to check inflation.

"The RBI will release its next Mid-Quarter Review of Monetary Policy 2010-11 at 12 noon on 17 March 2011," said a central bank release.

Inflation, which inched up from 8.23% in January to 8.31% in February, was much above the comfort level of 5%-6%.

During February, food inflation, which accounts for over 14% of overall wholesale price index (WPI) inflation, stood at 10.65% on a year-on-year basis.

Besides inflation, RBI will also take into account the sluggish industrial performance and impact of political unrest in the West Asia and North African region on crude oil prices while reviewing its monetary policy.

Industrial growth slowed to 3.7% in January this year, compared to 16.8% expansion in the year-ago period, dragged down by the poor performance of the manufacturing sector, particularly capital goods.

Since March 2010, central bank hiked repo rate by 175 basis points and reverse repo rate by 225 basis points.

In its last review of the monetary policy on 25 January 2011, RBI had hiked short-term lending and borrowing rates by 0.25% each.

The repo and reverse repo rates now stand at 6.5% and 5.5%, respectively.

In a tacit admission that the RBI is struggling to balance its dual objectives of taming inflation and encouraging growth, governor D Subbarao had recently said, "For inflation management we have to raise policy interest rates.

For protecting, promoting, and preserving recovery we need to keep interest rates low, so there is tension between raising policy interest rates and keeping them low."


Mahindra completes acquisition majority stake in SsangYong

M&M, which emerged as the preferred bidder for SsangYong in August last year, now holds a 70% stake in SMC, for a consideration of $463 million, or around Rs2,105 crore

New Delhi: Auto major Mahindra & Mahindra (M&M) today said it has completed the acquisition of a majority stake in South Korea's SsangYong Motor Company (SMC), reports PTI.

M&M, which emerged as the preferred bidder for SsangYong in August 2010, will now hold a 70% stake in SMC, for which it has shelled out $463 million (about Rs2,105 crore).

With the new management taking control, SMC will invest over 240 KRW (nearly Rs960 crore) this calendar year on product development and brand building. The firm will increase investment in product development by 70% in 2011, as compared to last year, at over KRW 200 billion (over Rs800 crore).

It will also invest over 40 billion KRW (about Rs160 crore) for brand building in Korea-a 60% increase over 2010-and increase overseas brand investment by over four times in 2011.

"These investments will be funded by SMC's internal accruals. After the debt restructuring SMC's balance sheet is clean. Although it is unlikely that it will need debt for this investment, but if needed, it can raise," M&M president, Automotive and Farm Sector, Pawan Goenka told PTI from Seoul.

He said Yoo-il Lee has been appointed as the new CEO of SMC, while Dilip Sundaram from Mahindra will be the new CFO. Also a new board of directors with six members has been formed.

"There are three independent directors, along with one member from SMC and two from M&M," Mr Goenka said.

From M&M, it will be Mr Goenka himself and M&M executive director & group CFO Bharat Doshi. The Korean firm will be represented by new SMC CEO Lee.

Asked if there will be a change of name of SMC, Mr Goenka said: "No decision has been taken yet on the name change of the SMC and also on the branding side of products."

He said strategic plans such as the India project, which involves launching the Rexton and Korando-C in India, have already been kicked off.

Earlier, he had said that the two vehicles would be launched in India by the end of 2011.

Mr Goenka also said discussions are on to explore opportunities for joint product and technology development and synergy in global operations and purchase.

"On the R&D front, SMC and M&M will remain independent but whenever there are possibilities of sharing platforms, it could be explored," he said.

Moreover, M&M is also reviewing utilisation if its IT systems for SsangYong, besides considering the possibility of Mahindra Finance setting up operations in Korea to enhance the sales of SsangYong vehicles.


Virgin Mobile: Thinking hatke!

The mobile phone service company’s new number portability campaign is insightful and perfectly targets the youngsters who are its core customer base

I have always thought if there's one mobile phone service brand that's got it right in terms of communicating with the Indian youth, it is Virgin Mobile. The brand's advertising is always whacky, funny and irreverent. And it's the same case with Virgin Mobile's new number portability campaign.

The core theme involves a 'break-up'. Using the example of break-ups between young partners, the brand asks mobile phone consumers to break up with their current service provider.

In one commercial, a dude is lying on a hospital bed with his gal by his side. He tells her about an injury on the testicles he suffered while playing cricket, which now means he can't have sex again. The girl immediately vanishes from the scene. The voice over says: "Does your mobile phone operator leave you when you really need it?"

In another ad, a boy arrives at a girl's house and tells her his dad asked him to choose between his 'will' and the girl's 'dil'. And that he chose the latter. The girlfriend is furious and slams the door on him. The boy is elated at having got rid of a gold digger. This ad points to service operators who are only interested in billing their customers.

Likewise, in the third commercial, a girl catches a chap cheating on her with another girl. She feigns pregnancy, and thus gets rid of the other girl, who slaps the cad and walks off. And then our smart, revengeful gal dumps the cheater.
Given Virgin's wicked brand personality, this is a perfect campaign for its number portability effort. And it's insightful too. Kids today are commitment phobic, and jump from one partner to another quite rapidly. They like to experiment a lot, with technology and with dates. So the marriage of the two works out quite nicely. Young India will enjoy these commercials. Because they are not just entertaining, they are born out of a strong insight.
Compare this with IDEA's rather sedate approach on number portability, which is targeted at almost everyone, and you get the picture. Because most service providers are generic in their advertising, Virgin's best bet to remaining unique and hatke is to create and package communication that purely targets the youngsters. This strategy may never make them the market leader, but allows the brand to sit pretty on an assured, solid market segment. Smart thinking.




7 years ago

The ones about being hit at an awckward place and the pregnancy one is aired at prime time. small kids watch it too. Is that acceptable? The will dil is fine.


7 years ago

it will help if we could track the number of subscribers they are adding on

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