The wood-and-metal phone, as the label on it says, was manufactured by Bombay Telephone Company Ltd in 1889. Surprisingly, the first telephone in the city arrived in 1905. The phone doesn’t have a dial, as the earlier phones used operator assistance. After asking for the number, the caller had to wait for a particular beep which signalled that the line was connected. It has a separate mouthpiece and earpiece, and if the latter is dropped, the line is automatically disconnected. Mr Jayakar got it from chor bazaar, and the details of its ownership are not known. The phone is still functional; but, since it does not have a dial, it can be used only as a parallel line. While the phone is extremely rare, the telephone directory that he got from a Parsi gentleman, Mr Jayakar claims, is one of a kind in the world. It is a common directory for Bombay, Karachi and Ahmedabad and came out in July 1942. At that time, one could get a new directory only in exchange of an old one so, probably, all the other editions had been exchanged for new ones.
The RBI raised its key interest rates by higher-than-expected 50 bps in a bid to control inflation
The following are the highlights of the Reserve Bank of India's (RBI) Monetary Policy statement for 2011-12:
* Short term lending rate (repo) hiked by 50 basis points (bps) to 7.25%
* Repo rate to be only effective policy rate to better signal monetary policy stance from now on
* Reverse repo to be fixed 100 bps lower than the repo rate
* Short-term borrowing rate (reverse repo) up by 50 bps to 6.25%
* Cash reserve ratio (CRR) and bank rate left unchanged at 6% each
* Interest rates on savings bank deposits hiked to 4% from 3.5%
* Economic growth projected lower at 8% for FY11-12
* WPI inflation projection lowered to 6%
* Objective is to contain inflation by curbing demand-side pressures
* Favours aligning of fuel prices with international crude prices to avert widening of fiscal deficit
* Banks to get a new overnight borrowing window under Marginal Standing Facility at 8.25%
* Likelihood of oil prices moderating significantly is low
* Malegam Committee recommendations on MFI sector broadly accepted
* Bank loan to MFIs on or after 1 April 2011, will be treated as priority sector loans
Central bank pegs GDP growth rate for current fiscal at 8% against government’s projection of 9%
The Reserve Bank of India (RBI) in its monetary policy for 2011-12 today raised its short-term lending (repo) rate by 50 basis points (bps) to 7.25% and the short-term borrowing rate (reverse repo) by 50 basis points to 6.25%. This is the ninth time that the central bank has increased its key interest rates since March 2010.
The apex bank has also increased the savings bank rate by 50 basis points to 4% from the current rate of 3.5%, a move that will give higher returns to depositors in the wake of continuing high inflation. The last time the savings rate was raised in April 1992 and since March 2003 it has been unchanged at 3.5%.
However, the RBI has lowered the economic growth projection to 8% for the current fiscal compared to 9% estimated by finance ministry. The economy grew by 8.6% in 2010-11.
RBI governor D Subbarao announced these measures as part of the annual credit policy to contain inflation, which is hovering around 9% and sustain economic growth in the medium-term.
Factoring in the many headwinds such as high inflation, which stood at 8.98% in March and rising crude and commodity prices, the governor pegged the gross domestic product (GDP) growth lower by over 1% between 7.4% and 8.5% for the current fiscal.
"High oil and other commodity prices and the impact of the RBI's anti-inflationary monetary stance will help moderate growth," Mr Subbarao said.
"Based on the assumption of a normal monsoon, and crude oil prices averaging $110 a barrel over the fiscal 2011-12, our baseline projection of real GDP growth for 2011-12, for policy purposes is around 8%," he added.
Making a highly ambitious inflation management objective, the policy aims at bringing down inflation to 4% to 4.5% for the full fiscal, with a medium-term objective of 3%.
The governor, however, said, "RBI's baseline inflation projections are that inflation will remain elevated, close to the March 2011 level (8.98%) over the first half of FY11-12 before declining."
To contain volatility in the overnight inter-bank rates, RBI has decided to open a new borrowing facility for banks under the marginal standing facility (MSF) to be effective from 7th May. The rate of interest on this facility will be 100 bps above the repo. The banks can borrow up to 1% of their net demand and time liabilities (NDTL) from this facility.
As per the above norms, the difference between the reverse repo and MSF will be 200 bps. While the repo rate will be in the middle, the reverse repo rate will be 100 basis points below it, and the MSF rate 100 bps above it, the governor said, adding the MSF rate gets calibrated at 8.25%.
On the expected policy outcome, the governor said, the policy actions are aimed at "first containing inflation by reining the demand side pressures, anchoring inflation expectations and sustaining growth in the medium term by containing inflation...going forward, the RBI will continue with its anti-inflationary stance."
The Planning Commission has endorsed RBI's hawkish policy of hiking key rates by half a percentage point saying this would contain inflation.
"Both (raising key and saving interest rates) are very good decisions. All over the world the resurgence of inflation is a matter of concern," Planning Commission deputy chairman Montek Singh Ahluwalia said.
"When inflation goes up, it is sensible to take steps early to contain inflation. I am very glad that RBI has given a clear signal going beyond the usual 25 bps (revision) to something more substantial," he added.
Mr Ahluwalia also applauded the central bank's decision to raise saving interest rate from 3.5% to 4% and said that it could also be decontrolled.
Most bankers felt there was no option but to increase interest rates as the cost of borrowing funds has also gone up, with the RBI hiking the short-term lending rates.
"For a bank like ours, it (hike in interest rate on savings deposits) does (augurs well)... (People are) keeping Rs9.5 lakh crore at home in cash because of the low interest rate (on savings deposits). They are not comfortable in committing money in long-term deposit," SBI chairman Pratip Chaudhuri told reporters after the post-policy meet with the RBI governor.
Describing the annual monetary policy announced by RBI governor D Subbarao as a progressive one, Ernst & Young India's Ashvin Parekh said, "We have almost reached a point where inflation has become unmanageable and RBI has clearly indicated that bringing down inflation to a comfortable level is its top priority."
Fitch Ratings India's DK Pant opined that as inflation has been adamantly high all these months, the RBI has taken a right step to yank it down by compromising on growth, which is already visible from recent months' factory output data.
Crisil chief economist DK Joshi said: "The policy basically reflects that inflation is a much larger problem as RBI's efforts in controlling it have not had the desired effect.
We have come to a stage where managing inflation is more important, even at the cost of sacrificing growth."
The next quarterly review of the monetary policy will take place on 26th July.