India must overcome barriers to sustain double-digit growth: FM

New Delhi: The government has exuded confidence that economic growth in the current and the next quarter will be as encouraging as 8.9% recorded in the previous two quarters, but said India must tackle barriers to ensure double-digit level growth, reports PTI.

"It is expected the...two quarters would be as encouraging, if not better... we assume that we will be able to reach 8.5%-8.7% of gross domestic product (GDP) growth this year and perhaps next year will be able to reach a higher level," finance minister Pranab Mukherjee said at the annual general meeting of the PHD Chamber.

However, the country will have to tackle host of national and international problems to register double-digit growth on a sustainable basis, he said.

"It (double digit growth) must be on a sustainable basis and for that we shall have to ensure that the challenges that we are facing today, one on the price front, another on fiscal consolidation and third certain developments which are taking place (internationally)," he said.

The Indian economy grew by 8.9% in the first two quarters this fiscal. The government's Mid-Year Analysis projects the economy to grow by up to over 9% this fiscal.

If this happens, Indian economy would expand at a pace registered three years before the global financial crisis hit the economy in 2008.

While India is charting a high growth path, Mr Mukherjee said there are "many barriers" which need to be crossed for achieving a sustainable double-digit GDP growth.

While the government is desperately trying to bring down rates of essential food items, the wholesale price based inflation for November was about 7.5%.

The recent spurt in onion prices has catapulted food inflation to double-digits level during the week ended 11th December. Besides, international oil prices could further push up the inflation.

The finance minister said the Reserve Bank of India's (RBI) decision to inject Rs48,000 crore into the system without hiking policy rates shows that the central bank is not only fully aware of the inflationary pressures but also mindful of the requirements for higher growth.

Mr Mukherjee exuded confidence that the government's fiscal policy and RBI's monetary actions are in tandem and will help the economy recover and achieve higher growth trajectory.

The RBI has decided to inject Rs48,000 crore into the system by buying government securities through open market operations, as the system faces cash crunch due to high credit needs and advance tax payments. Top 100 companies paid over Rs25,000 crore of advance tax in the third quarter of this fiscal.


Tighter interest rates expected in 2011: Assocham

New Delhi: Cash crunch in the system, coupled with high inflation, will keep interest rates at higher levels in 2011, reports PTI quoting the Associated Chambers of Commerce and Industry (Assocham).

With inflation likely to rise further, the Reserve Bank of India (RBI) may go in for another hike in the key policy rates in its fourth quarterly review, slated to be announced on 25th January.

Inflationary pressures are building up with commodity prices shooting up the world over as well as crude touching $90 per barrel, the chamber said.

High inflation would put pressure on the RBI to go in for tighter monetary policy-hiking rates at which it lends to and borrows from other banks-which, in turn, helps curbing consumer spending and taming the rate of price rise.

Inflation continues to be much higher than the tolerance level of 5.5% per annum, as projected for the end of the current fiscal.

Both, food as well as overall inflation have been much higher than this level for most of this year.

Food inflation surged back into the double-digit territory at 12.13% for the week ended 11th December as the prices of vegetables, particularly onions, rose for the third consecutive week.

Meanwhile, although overall inflation for November was at 7.48%, down from 8.58% in the previous month there are concerns that it may rise again.

"The days ahead are extremely dicey...The options with RBI are limited as the growth is not likely to be sacrificed for inflation. Hence there is every likelihood of policy rates to inch up in the next monitory policy," Assocham president Dilip Modi said.
The chamber also said that faster credit growth has put pressure on the liquidity and the crunch is likely to remain in 2011 because high inflation has dissuaded investors to park funds with banks, as reflected in low deposit growth.

RBI has partially blamed the sluggish growth in bank deposits for aggravating the shortage in money supply. This could partly be attributed to negative returns these deposits fetch for people, compared to inflation rate.

However, it said that the recent mid-quarter monetary policy of the RBI has supported the liquidity market which would sustain growth in credit offtake.


Central Bank of India mulls tapping UAE market

The Central Bank of India may soon foray into the UAE to tap business opportunities in the region, according to a media report.

The public sector bank, which is marking its centenary year celebrations in 2011, is exploring possibilities of setting up a representative office in the Emirates, and opening of a branch at Dubai International Financial Centre (DIFC), an offshore financial district, a Khaleej Times report has said.

"Foraying into the Gulf region is a part of the bank's overseas expansion plan that will see the sleeping giant embarking on an aggressive growth swing after a period of stagnation," Central Bank of India executive director Rajeev Kishore Dubey said.

Dubey had earlier told PTI that the bank plans to expand to Hong Kong, Bhutan, Nigeria, Tanzania and Mozambique.

On Friday, Central Bank of India ended 0.85% down at Rs175.30 on the Bombay Stock Exchange, while the benchmark Sensex closed 0.45% up at 20,073.66 points.


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