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Improvement in rainfall since August has lifted water reservoir levels to above normal levels and this would benefit rabi or winter crop output, Morgan Stanley said
There has been significant improvement in rainfall in the second half of the monsoon season—but the cumulative rainfall has still been 7% below normal with about 91% of the monsoon season over. While this may affect the kharif or summer crop output in India, the revival in monsoon would help rabi or winter crops as late rains has lifted water reservoir levels to above normal levels, says Morgan Stanley Asia.
In a report, the securities, asset management and credit services provider, said, “...the cumulative rainfall has still been 7% below normal with about 91% of the monsoon season over. We believe this, coupled with poor distribution trends (temporal as well as spatial), will affect the summer (Kharif) crop output (harvesting for which will take place in September-October 2012). Summer crops are estimated to account for about 50% of full-year agricultural production. The impact of the weak summer crop will be reflected in agricultural production for the quarter ending September and December 2012.”
On an all-India area-weighted basis, cumulative rainfall improved to 7% below normal up to 14th September compared with 9% below normal as of the week ended 5th September. Rainfall for September so far (until 14th September) has been 28% above normal compared with 0.2% above normal for August, 13% below normal for July and 29% below normal for June. With regard to spatial distribution, on an unweighted basis, cumulative rainfall for the week ended 12th September was below normal in all the regions—North (-26%), West (-4%), South (-1%), and East (-3%).
“Based on cumulative seasonal rainfall deficiency (up to 13th September, we estimate that 23% of total area is affected by moderate drought (26%-50% rainfall deficiency), compared with 20% as of week ended 5th September. About 4% of total area is affected by severe drought (50% and more rainfall deficiency), compared with 7% as of the week ended 5th September,” the report said.
The regions affected by drought conditions are Punjab, Gujarat, central Maharashtra, West Uttar Pradesh, Haryana and Bihar amongst others, it added.
As of 14 September 2012, the overall crop area under cultivation for summer (kharif) crop dipped slightly to -5.4% year-on-year (YoY) compared with -5.2% YoY as of last week. By this time, 98% of the overall sowing was completed last year. Typically, volume growth in summer crop output tends to track the area under cultivation. The crop area under cultivation was lower for rice (-4.6% YoY), coarse cereals (-11.3%), pulses (-5.9%), oilseeds (-3.3%) and cotton (-4.7%), whereas it was higher for sugarcane (4.4%). Erratic pattern of rainfall, however, could affect crop yields.
According to Morgan Stanley, though the area under coverage is lower for rice, excess stock for rice will mean that the government will be able to prevent adverse impact on rice prices by offloading the inventory.
However, lower area under coverage for pulses and coarse cereals is a key concern from the perspective of food inflation, it said.
Total live storage in the 84 important reservoirs is at 71% of the storage capacity at full reservoir level (FRL) as of 13 September 2012 compared with 81% during the same period last year and the 10-year average of 67%. The improvement in water reservoir levels will benefit winter (rabi) crop output, Morgan Stanley added.
According to RBI deputy governor Chakrabarty reduction in policy rates will not serve any purpose unless banks bring down their spreads and pass on the benefits to borrowers
New Delhi: Banks are not passing on the benefit of cut in policy rates to the borrowers, Reserve Bank of India (RBI) Deputy Governor Dr KC Chakrabarty said while asking lenders to undertake reforms and bring down their operation costs, reports PTI.
"Within the interest rate structure, if banks increase their efficiency, interest rates will come down. What we call operational efficiency of the banks and that is one thing that should happen", he said, while talking to reporters on the sidelines of a function.
Reduction in policy rates, he said, will not serve any purpose unless the banks bring down their spreads and pass on the benefits to borrowers.
"It (interest rate cut) will not happen if you don't reduce your cost. If the spread does not come down people will not get the benefit. Unless within the institution there is reform, you will not be able to derive the benefit of policy reform", the RBI Deputy Chief said.
Reforms were not taking place at individual level, Chakrabarty said, adding "at one stage cash reserve ratio (CRR) was 25%, statutory liquidity ratio (SLR) was 40%. Now SLR has come down to 23%, CRR is 4.5%. People say that it should be abolished. But has this benefit of reduction gone to the people?"
He regretted that the lending rates of banks have not come down in tandem with reduction in the CRR and SLR. On the other hand they have gone up, he added.
"Today repo rate is 8%, CRR is 4.5%, inflation 9%, SLR 23% and prime lending rate (PLR) of banks on an average is 1% higher (than what it was in September 2008)", he added.