Money & Banking
Gokarn hints at rate cuts in next RBI policy review

According to the RBI deputy governor, rising food inflation and depreciating rupee are the conflicting factors the central bank would consider while deciding on policy rates on 18 June

Mumbai: With the economic growth slipping to nine-year low levels, Reserve Bank of India (RBI) deputy governor, Subir Gokarn on Monday said below trend growth and falling crude oil prices offer the central bank a window to ease policy stance, reports PTI.

"(For one,) the growth is somewhat lower than expectations and that may have positive, moderating impact on core inflation. Two, oil prices have come off somewhat more than expected. Those are the two factors that suggest more room (for monetary policy)," Gokarn told reporters on the sidelines of an event.

The economic growth for the three months to March stood at 5.3%, its lowest in nine years, leading to calls for some urgent measures to get it back to track and achieve the targeted 7.3%.

For the financial year 2011-12, GDP growth came down to 6.5%, lower than the 6.7% recorded during the peak of the post-Lehman credit crisis and 8.4% in FY11.

One of factors being blamed for the dip in growth is the Reserve Bank's rate stance, which resulted in elevated interest rates for nearly 20 months as headline inflation continued to remain uncomfortable.

Preliminary indicators on the growth front, coupled with a fall in inflation, led the RBI to announce a surprising 0.50% cut in its key rates in its annual policy announcement in April.

In the announcement, RBI had made it clear that its room for further cuts was very limited given the high current account and fiscal deficits. The mid-quarter policy announcement is scheduled for 18th June.

Gokarn, however, pointed out that rising food inflation and depreciating rupee are the conflicting factors the RBI would consider while deciding on policy rates.

"... some factors suggest room, some factors suggest that inflationary pressure may still remain. I think we'll have to take a balanced view of these factors," he said.

Gokarn also said there has been a slight fall in the rupee price of crude, which came down to below $100 a barrel for the first time in eight months, as the rate of its fall is more than the depreciation of the rupee.

The rupee has lost over 20% in the past 12 months due to factors like widening current account deficit and concerns over the rising fiscal deficit, which have led to a fall in fund flows into the country.

On liquidity, Gokarn said the situation is "comfortable" right now going by the bank borrowings. "If we do see stress re-emerging, particularly with persistence, we clearly have the option of doing more open market operations (OMOs)," Gokarn said.

The liquidity deficit has been above the RBI's comfort mark for the past many months, forcing the central bank to infuse money into the system through bond buybacks also called as open market operations. It has infused over Rs1.25 lakh crore into the system since last November through OMOs.


China reacts to Indian warning; Cautions citizens from travelling to India

The travel advisory came as a surprise to Indian officials in Beijing as it was very rare for China to put out such advisories against India in the past on Chinese Foreign Ministry's website

Beijing: In what is seen as a tit-for-tat move, China has cautioned its citizens against travelling to India following protests over the increase in petroleum prices, after New Delhi issued advisories warning its traders against doing business in the Chinese commodity hub of Yiwu, reports PTI.

An advisory has been posted on the Chinese Foreign Ministry website as well as Chinese Embassy in New Delhi dated 1st June, which warned about travel disruptions due to protests.

"According to Indian media reports, many places in India are witnessing protests and strikes due to the recent hike in oil prices. Railways and highway transport have either come to a halt due to strikes or have been impacted to different degrees," the advisory said.

"Some shops have closed. Presently, impacted areas include: Delhi, Bangalore, Mumbai, Patna in Bihar, Allahabad and Varanasi in UP, West Bengal, Himachal Pradesh, Orissa etc," it said.

"The Chinese Embassy in India would like to alert the Chinese citizens about this and request them to confirm their itinerary with related agencies to avoid delays.

"At the same time, during this period, they should be careful about personal safety and safeguard their personal belongings," it said.

The travel advisory came as a surprise to Indian officials here as it was very rare for China to put out such advisories against India in the past on Chinese Foreign Ministry's website.

It came ahead of Tuesday's visit of India's External Affairs Minister SM Krishna to take part on the Shanghai Cooperation Organisation (SCO) summit scheduled to be held here on 6th and 7th May.

It was rare to see such an advisory in the Chinese Foreign Ministry website," Indian officials said, wondering whether it was in a way connected to two advisories put out by the Indian Embassy here warning its traders in doing business with Yiwu, in view of three incidents of kidnappings of Indian traders by the local suppliers to settle trade disputes.

While one Indian trader Danish Qureshi was released and sent home two weeks ago, two others -- Shyam Sunder Agrawal and Deepak Raheja -- who was released from illegal custody of Chinese traders in January are stranded in Shanghai fighting their case in a Chinese court.

Their issue is expected to figure during Krishna's visit here.

Also state-run China Daily today carried a feature on Yiwu saying, "No one profits when business is bad" outlining the problems for Indian and businessmen from all the world who are based there doing business for long.

Yiwu is regarded as world's biggest commodity hub where over 100 Indian businessmen still reside there despite advisories.

Indian businessmen reported to have transacted about $2 billion last year, buying massive supplies of Chinese goods for Indian markets.


Sonia Gandhi says opposition, civil society levelling baseless allegations

Sonia Gandhi said opposition parties and some anti-Congress elements are levelling allegations against the party, government and the Prime Minister, as part of a conspiracy

New Delhi: Congress President Sonia Gandhi on Monday made a scathing attack on the opposition parties and civil society groups for levelling "baseless" allegations against the Indian Prime Minister and the party, saying it was part of a conspiracy and told party men to fight back, reports PTI.

"In a democracy, it is the job of the opposition to oppose but the manner in which opposition and some anti- Congress elements are, as part of a conspiracy, levelling baseless allegations against the Prime Minister, the UPA government, the party and some of our colleagues, is a matter of regret," she said in her opening remarks at the meeting of the Congress Working Committee (CWC).

"We will have to fight fiercely against such allegations at the party and the government levels," Gandhi said with Prime Minister Manmohan Singh by her side.

Without referring to the petrol price hike, she said there have been economic challenges too that are impacting the common man. "The whole world was passing through a difficult phase and we have to face it and we are facing it".

She said the report to the people brought out on the third anniversary on the United Progressive Alliance government was a "document of success in-spite of the difficulties."

Without directly referring to any particular issue, she utilised the occasion to criticise non-Congress governments in the states alleging that they are not cooperating as is expected in a democracy in implementing the policies made by the Centre.

Gandhi said that the party has to be strengthened at all levels ahead of a series of state elections as also the Lok Sabha (Lower house of Parliament) polls in 2014.

"And for this, the most important thing is that we all work unitedly," she said.

While Gandhi did not take the name of civil society, the reference to "some anti-Congress elements" was obviously aimed at it.

The CWC deliberations took place a day after Anna Hazare and yoga guru Ramdev sat on a day-long fast protesting against corruption and attacking the government and threatening a fight to the finish by August on the black money issue.

Telling party men that unity is the need of the hour, she said that the strength of the organisation would grow doubly if party men use half the energy that they waste on factionalism and petty issues.

"People will behave with the party in the same manner as its image would emerge in their mind based on the opinion they form about us," she said, adding that when a political evaluation takes place, it is always based on the organisation and not an individual.

"This is a test for us as a Congress worker. Not to understand this will be a big mistake. It is a matter of caution, warning and challenge for all," Gandhi said.

The Congress President said she was confident that party men could take on any challenge, "provided we do not demoralise them in their politics."

She said the Congress has created history in the last 126 years due to the inner strength of the party workers. "If we step ahead by realising this potential as our asset, then we can achieve any objective. We will get the support of people. We have to win," she said.

It is the first formal meeting of the CWC after the party debacle in Uttar Pradesh as well its poor show in Punjab and loss of power in Goa.

There is no fixed agenda set for the CWC meeting, which is an extended affair as PCC presidents and CLP leaders including party chief ministers have been invited for the deliberations.


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