Inflation figure not in comfort zone: Kaushik Basu

The chief economic advisor to the Union finance ministry said while RBI action usually takes six to nine months to have an effect on the system, it is three months before the impact of steps taken by the government are felt

Kolkata: Chief economic advisor to the Union finance ministry, Kaushik Basu, has said although inflation has not gone out of hand, it is still not in the government's comfort zone, reports PTI.

"WPI inflation figure is 8% compared to 11% this time last year. It is not going out of hand, but not in the comfort zone," Mr Basu said at an interactive session here last night.

In April and May this year, it was expected that inflation would be below 8% and 7%, respectively, after which it would stabilise at around 5%, Mr Basu said.

While the Reserve Bank of India (RBI) had been following a tight monetary policy to control inflation, the government is also doing its best, he said.

He said while RBI action usually takes six to nine months to have an effect on the system, it is three months before the impact of steps taken by the government are felt.

Although India was on a high growth trajectory, inflation and corruption were the two big clouds looming over the country, he said.

While the government was trying to bring down inflation, corruption needed to be attacked frontally, for which certain changes in bribery laws are needed.

Asked about freeing diesel prices, Mr Basu said that it should have been done a long time ago.

He said that it would increase prices due to its cascading effect in the short run, but would ultimately bring down prices.

"We should decontrol diesel prices. Whether it should be done immediately or at a later date is a question of time and a government decision," he said.

It was likely that diesel prices would be freed once inflation came down, he said.

To a query, he said it was a well-thought decision of the government not to issue oil bonds in view of under-recoveries by the oil companies, as had been done in the past.

The decision was taken to impart transparency, he said.

On the issue of subsidies, he said they should be given directly to the beneficiaries in order to plug leakages.

Mr Basu also said recent data had shown that income of the bottom 20% of the people was growing, but it should grow as a faster rate.

He called for coordination among various central banks of the world for proper management of inflation.

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Govt sets aside Rs617 crore tax demand on Satyam

Attorney General Goolam E Vahanvati, appearing for the CBDT, told the apex court that it would recall its 10 March order, demanding Rs617 crore in tax and decide afresh on the actual tax liability of Satyam Computer. The bench, however, refused Satyam's plea to defreeze its bank account worth Rs1,300 crore

New Delhi: The government today informed the Supreme Court that it will set aside its order directing scam-hit information technology (IT) firm Satyam Computer to pay Rs617 crore as income tax and will give a fresh hearing to the firm's plea challenging the tax demand, reports PTI.

Attorney General Goolam E Vahanvati, appearing for the Central Board of Direct Taxes (CBDT), told the apex court that it would recall its 10 March 2011 order, demanding Rs617 crore in tax and decide afresh on the actual tax liability of Satyam Computer, now known as Mahindra Satyam.

"We would set aside the 10 March 2011 order. We would give them a hearing and pass a well-reasoned order," Mr Vahanvati told a three-judge bench headed by Chief Justice SH Kapadia.

The bench, however, refused Satyam Computer's plea to defreeze its bank account worth Rs1,300 crore.

Counsel appearing for Satyam Computer submitted that the company urgently needs some money because as per a negotiation it has to pay a huge amount to the US Securities Exchange Commission.

Mr Vahanvati, however, opposed the plea, saying the company already has cash reserves of Rs1,800 crore. "Let the money remain with us. If after that revised process if they are entitled, we will refund them," said Mr Vahanvati.

Based on this position, Satyam's counsel requested the apex court to put the money in an escrow account.

In response, the bench assured the IT firm saying its interest would be protected. "You would be protected. Right now your main grievance is that you were not heard by the CBDT. It is over," the bench said while directing the matter of defreezing Satyam Computer's account for listing on Monday.

The apex court was hearing a petition filed by Satyam Computers challenging Andhra Pradesh High Court's order directing it to deposit Rs350 crore along with a bank guarantee of Rs267 crore to the tax authorities.

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Dollar falls against euro, oil at 2-year high

The euro rose to a near 15-month high against the dollar on Friday on the single currency's widening yield advantage.

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