Fight against inflation hurting corporate investment: FM

The finance minister’s comment assumes significance as all eyes are now on the RBI policy review which has hiked key rates 13 times since March 2010 in its bid to tame inflation, thereby making borrowings by corporates and other loans costlier

New Delhi: Ahead of the monetary policy review by the Reserve Bank of India (RBI) on Friday, finance minister Pranab Mukherjee on Wednesday said the fight against inflation is hurting the corporate investment, reports PTI.

The comment assumes significance as all eyes are now on the RBI policy review which has hiked key rates 13 times since March 2010 in its bid to tame inflation, thereby making borrowings by corporates and other loans costlier.

On slowdown in industrial growth, Mr Mukherjee told the Delhi Economics Conclave here that “this is partly a reflection of global trends, but our own fight against inflation has also taken a toll on investments by our corporations”.

“Sustained high inflation that has been a major policy concern for us over the past two years is now beginning to moderate... Growth, however, has slowed in 2011-12...We must turn our attention now to reviving growth as quickly as possible,” the finance minister added.

The RBI is scheduled to unveil the mid-quarter review of monetary policy on Friday.

India Inc has been complaining that the tight monetary policy stance of RBI is hurting investments. Industrial production contracted by 5.1% in October.

As the food inflation is on decline and the overall inflation too has eased marginally month-on-month, the industry has urged the RBI to soften its monetary stance.

On the falling value of rupee, he said, “While the Indian economy experienced excessive capital inflows in the aftermath of global crisis leading to appreciation of the domestic currency, with the unfolding of the Eurozone crisis, the matter of concern at present is reversal in such flows leading to increased currency volatility.”

The rupee yesterday touched a fresh all-time low of 53.71/72 against the US dollar.

Stressing that the Indian economy is, in some ways, better placed than many other nations, Mr Mukherjee said the country’s fiscal challenges in the form of public debt or size of fiscal deficit, are nowhere as large as the ones faced by many European nations.

“I say this not to encourage complacency in India but to place the issue in perspective. I am expecting that the present downturn will be temporary and our economy will soon revert back to high growth,” he said.

Last week, the government reduced the gross domestic product (GDP) forecast for the current fiscal to about 7.5% from the earlier projection of around 9%.

On the global scenario, he said the current build-up of concerns has been incremental in nature with a series of local intermittent shocks getting transferred to the world economy.

“All this has happened despite the aggressive use of both fiscal and monetary policy tools and our collective resolve to keep markets open. This poses some serious problems for the policy makers. Going forward it limits our options in dealing with emerging situation,” Mr Mukherjee said.

Expressing concerns that the even tepid economic recovery in advance economies is being stalled, Mr Mukherjee called for sound economic policies.

“While new opportunities await us in the near future, we must recognise that sound economic policy making is must for realising them,” Mr Mukherjee added.

User

CCI with Parliamentary panel view to keep bank M&As out of its purview

The Standing Committee on Finance, in its report on the Banking Laws (Amendment) Bill, 2011 tabled in the Lok Sabha earlier this week, has supported the government’s proposal to keep bank mergers outside the purview of the Competition Commission of India temporarily but with certain caveats

New Delhi: Competition watchdog Competition Commission of India (CCI) has welcomed the parliamentary panel’s recommendation to keep bank mergers outside its purview temporarily and said that it will pitch in wherever there is “an element of urgency” in decision making.

“What the Standing Committee on Finance has recommended is that they accept the proposal in the bill (The Banking Laws (Amendment) Bill 2011), to exempt bank mergers but what they have said is this should be an exception and this should not be for all time,” CCI chairman Ashok Chawla said.

“They should revisit it and see the experience what is happening and then decide after some time,” Mr Chawla told reporters on the sidelines a function organised by the Standing Conference of Public Enterprises (SCOPE).

The committee, in its report on the Banking Laws (Amendment) Bill, 2011 tabled in the Lok Sabha earlier this week, has supported the government’s proposal to keep bank mergers outside the purview of the Competition Commission of India temporarily but with certain caveats.

While it supports the government’s proposal to keep bank mergers outside CCI’s purview, it recommended that this exception should be considered as a special case.

It suggested the expedient measure be revisited in “due course in the light of experience gained by” regulators RBI (Reserve Bank of India) and CCI.

“Where some weak bank or failing bank is going to be acquired by a healthy bank where there is an element of urgency, where there is some dispatch required in the decision-making, we will intervene, but not across the board in respect of all mergers,” Mr Chawla said.

Sections 5 and 6 of the Competition Act, 2002 empower CCI to approve high voltage mergers and acquisitions.

User

SBI expects Rs3,000-Rs4,000 crore capital infusion this fiscal

Talking to reporters on the sidelines of Delhi Economics Conclave, SBI chairman Pratip Chaudhuri that “if they (government) put in Rs3,000 crore (in SBI), so this will mean another 3% increase in government holding”. Currently, the Government of India holds 59.4% in the bank

New Delhi: The country’s largest lender State Bank of India (SBI) on Wednesday expressed hope it would get capital infusion of Rs3,000-Rs4,000 crore from the government this fiscal, reports PTI.

“It (infusion) is round the corner. It could happen any day now. I think (the mode) is not decided, but whatever we are getting we will be getting in cash. We are expecting Rs3,000-Rs4,000 crore either in December or by March,” SBI chairman Pratip Chaudhuri said.

Talking to reporters on the sidelines of Delhi Economics Conclave, he said that “if they (government) put in Rs3,000 crore (in SBI), so this will mean another 3% increase in government holding”. Currently, the Government of India holds 59.4% in the bank.

The government has earmarked Rs6,000 crore for the fiscal for capital infusion in public sector banks to ensure that they meet the regulatory requirements. In 2010-11, the government had provided capital support to the tune of Rs20,157 crore to public sector banks.

The Centre is committed to providing adequate capital to public sector banks so as to maintain their Tier-I capital at 8%.

When asked if the Reserve Bank of India (RBI) will cut interest rates in its Friday monetary policy review, the SBI chief said, “I don't think so because food inflation has come down significantly and steadily. RBI has said 7% is the level they are targeting”.

Food inflation has started easing over the past few weeks and declined to 6.6% in the week ended 26th November.

On the bank’s liquidity condition, Mr Chaudhuri said it was “all right ... (but) systemic liquidity I believe is little tight”.

However, he does not expect RBI to slash the Cash Reserve Ratio (CRR) as it would be contradictory to the monetary stance of targeting inflation.

Mr Chaudhuri further said that SBI has revised its Net Interest Margin (NIM) upward for the current fiscal.

“I am encouraged to revise the (NIM) guidance upward. We had given a guidance of 3.5% at the start of the year... now I am inclined to revise it upwards to 3.7%-3.75% on aggregate basis,” the SBI chief said.

He also said that non-performing assets of the bank stood at 2.04% of the total advances and “we would like to continue at that”.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)