Little growth sacrifice inevitable to rein in prices: Subbarao

Responding to criticism over high inflation, the RBI governor said some sacrifice of growth in inevitable, a necessary price we have to pay to bring down inflation

New York: As India seeks to control high inflation, Reserve Bank of India (RBI) Governor D Subbarao has said a little sacrifice in growth is "inevitable" amid efforts to bring down prices to acceptable levels, reports PTI.
Subbarao said criticism is often directed towards the central bank that even though it has raised interest rates and runs a tight monetary policy, inflation is still "high and persistent" and growth has been hurt.
The RBI's response to the criticism is that "some sacrifice of growth in inevitable, a necessary price we have to pay to bring down inflation. But that sacrifice of growth is only in the short term.
"In the medium term, a low and stable inflation is a necessary precondition for securing India's growth prospects," Subbarao said during a lecture at Asia Society on 'India in a Globalizing World - Some Policy Dilemmas', here on Wednesday.
Inflation based on the Wholesale Price Index stood at 6.87% in July, declining from 7.25% in June.
It is still however much above RBI's comfort level of 5-6%.
Noting that inflation was down from 11% in 2010 to below 7% in July this year, Subbarao said inflation could have been much higher if RBI had not run a tight policy.
The challenge for the RBI is to ensure inflation is reined in without hurting growth, he said.
"In order to support growth, we need to keep interest rates low but in order to rein in inflation we have to keep interest rates high. The challenge is how do we manage growth-inflation trade off," he said.
The Reserve Bank had cut rate in April by 50 basis points to 8 percent but the central bank left the benchmark interest rates unchanged in its first quarter credit policy review in July despite pressure from the industry, which wants reduction in interest rates to spur growth.
Subbarao refused to comment when asked if there will be a change in interest rates when the central bank reviews its policy on 17th September.
"Inflation hurts the poor the most. We have to listen to the silent voice of the poor. They do not have a mechanism for articulating their demand for bringing down inflation.
"So even as we listen to demand of potential investors for low interest rate regime, we also need to be sensitive to the burden of the poor because of high inflation," he said.
He said the structural food inflation is a "problem of success". "As India grew, benefits of growth are going to lower income groups," which are eating better.
While oil and commodity prices have softened in the recent months worldwide, India has not had the full benefit of this softening because of the rupee depreciation, he added.
The Prime Minister's Economic Advisory Council had pegged GDP growth for the current financial year at 6.7%.
Industrial production recorded a dismal growth of 2.4% in May and the overall economic growth slowed to nine-year low of 6.5% in 2011-12.
Subbarao said while part of the growth moderation is because of the global slowdown, domestic factors like the tight monetary policy, high interest rate regime, infrastructure bottlenecks, slow clearances of projects, host of governance issues and decline in sentiment of potential
He said fiscal deficit in India is also high and that is putting pressure on demand and inflation.
The Current Account Deficit was 4.2% of GDP last year, which was a quite high.
"One of the dilemmas in managing capital account is that we have to run a fairly stable regime. We cannot be fickle- minded in terms of policy. It cannot be that we allow capital today and disallow it tomorrow," he said.
Potential foreign investors have to have confidence that India has a stable, predictable, transparent capital sector regime," he said.
Subbarao sought to allay concerns that the investment climate in India is losing its attractiveness among foreign investors, saying the country still has an investor friendly environment with the central and state governments anxious to attract investments.
"India has to run a stable policy regime and have a stable taxation and investment regime," he said in response to a question on what India should be doing to inspire trust and confidence of investors.
"We need to streamline our foreign investment policy and procedures, improve infrastructure, improve our governance," to make the system more friendly for investors, he added.
He said his recommendation to the government will be to "embark on credible fiscal consolidation, as fiscal deficits are bad since they exacerbate inflationary pressures".


Environment Ministry asks two mines to shut operations in Goa

MoEF asked Gangadhar Narsinghdas Agrawal and Pandurang Timblo Industries, which were operating close to Bhagwan Mahaveer Wildlife Sanctuary, to shut their operations immediately 

Panaji: Union Ministry of Environment and Forest (MoEF) has directed two mines operating close to Bhagwan Mahaveer Wildlife Sanctuary in Goa to stop their operations, reports PTI.
The MOEF order has observed that both the mines -- Gangadhar Narsinghdas Agrawal and Pandurang Timblo Industries, had no clearance from the National Board for Wildlife as both these mining leases operate within 10 kms away from the wildlife sanctuary.
MoEF director PB Rastogi has asked both the mines to shut their operations for violating section 5 of Environment (Protection) Act, 1986.
Rastogi has asked the units to henceforth stop all the project activities with immediate effect and the compliance of the directions should be reported within 15 days from the date of issue of this direction.
The directions from MoEF came after its regional office, based at Bangalore, inspected the mining leases and found them not to be implementing various conditions and environmental safeguards.
The mining lease holders had even submitted their reply to the MoEF, but the ministry was not satisfied as the mine owners had not obtained the requisite clearance from the standing committee of the National Board for Wildlife as was required to be obtained pursuant to the order of the Supreme Court dated 4 December 2006.


SEBI clears rights issues of TV18 Broadcast, Network18, Bajaj Finserv and Bhushan Steel

The rights issues of Network 18 and TV 18 would together raise funds worth about Rs4,000 crore, while Bajaj Finserv and Bhushan Steel have offered to raise up to Rs1,000 crore and Rs474 crore, respectively


New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has given its go-ahead to four rights issues, totalling about Rs5,500 crore, proposed by TV 18 Broadcast, Network 18 Media & Investment, Bajaj Finserv and Bhushan Steel, reports PTI.


The rights issues of Network 18 and TV 18 would together raise funds worth about Rs4,000 crore, while Bajaj Finserv and Bhushan Steel have offered to raise up to Rs1,000 crore and Rs474 crore, respectively.


In rights issue, shares are issued to existing investors as per their holding at pre-determined price and ratio.


Out of these four issues, Bajaj Finserv had filed draft offer document with the SEBI last month itself, while other three companies had submitted their documents to the regulator earlier this year.


SEBI received the draft offer document for Bhushan Steel rights issue, through lead manager ICICI Securities, 22nd February and issued its 'observations' on 22nd August.


Issuance of 'observations' on offer documents by SEBI is considered as a clearance to the issuer to go ahead with the share issues through routes like initial public offerings (IPOs), follow-on public offerings (FPOs) and rights issue.


Further, SEBI received draft offer documents for Bajaj Finserv rights issue on 18th July and issued its observations on 17th August. JM Financial is the lead manager for this issue.


The draft offer documents for TV 18 and Network 18 rights issues were received by SEBI on 6th March and the observations were issued for both of them on 17th August. ICICI Securities is the lead manager for the rights issues of both TV 18 and Network 18, which are part of same group.


Bajaj Finserv in its draft offer had proposed to raise up to Rs1,000 crore through the rights issue.


The company further announced yesterday a rights issue of Rs650 per share in a ratio of one equity share for every ten held by its shareholders, aggregating to Rs941 crore. It has fixed 8th September as the record date for rights issue.


In case of Bhushan Steel, it announced in February to raise about Rs474 crore through issue of over 1.41 crore shares on rights basis at a price of Rs335 each, in the ratio of one equity share for every 15 held.


Network 18 and TV 18 had announced their rights issues, of up to Rs2,700 crore each, way back in January.


However, Network 18 being promoter and majority shareholder of TV 18 would subscribe to about Rs1,400 crore worth shares in the rights issue of TV 18 as well. As a result, the net aggregate from the two rights issues would result in fund raising of about Rs4,000 crore.


These issues were announced alongside a multi-layered deal reached by the media group with Mukesh Ambani-led RIL group. Under the deal, RIL group is selling part of its stake in Eenadu TV channels and an independent media trust set up it would provide funds to Network 18 group promoters in the form of 'optionally convertible debentures'.


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