Policy rate alone not responsible for slowing growth says Subbarao

According to the RBI governor, interest cost is only one of the several factors that have dampened growth, and the increase in policy rate by the Reserve Bank alone cannot explain the investment slow down

Mumbai: Amid widespread demand for cut in interest rate in the forthcoming monetary review to boost growth, the Reserve Bank of India (RBI) on Tuesday said the policy rate is not the only reason for slowdown in investments and the economy, reports PTI.


"The Reserve Bank maintains that interest cost is only one of the several factors that have dampened growth, and the increase in policy rate by the Reserve Bank alone cannot explain the investment slow down," RBI Governor D Subbarao said at the sixth annual Statistics Day Conference in Mumbai.


"I have asked our economic research department to do a detailed study on the time-series relationship between real interest rate and investment activity. We expect to put out that report in the public domain in the next couple of months," he added.


His comments come two weeks ahead of the quarterly monetary policy review which is due on 31st July.


Subbarao's decision to keep interest rate unchanged at the policy review last month to contain inflation evoked criticism from industry and the government.


Ahead of the policy, industry has stepped up demand for interest rate cut to boost economic growth, which fell to nine-year low of 6.5% for 2011-12.


The RBI Governor also raised issues concerning data gaps with regard to computation of inflation, national income and growth and underlined the need for rectifying them.


He also questioned the linkage between deceleration in industrial growth to 6.5% in 2011-12 and the increase in policy rates by 3.75% by RBI during March 2010 and October 2011. "... it is necessary to look behind the data and explore what lies underneath," he added.


On the current situation, the RBI Governor said, "The uncertainty surrounding economic activity has heightened in the post-crisis period. India is no exception."


He added that assessing India's potential growth rate, consistent with our objective of low and stable inflation, remains a challenge.


In its annual report for 2009-10, Subbarao said, the Reserve Bank had reported that the potential output of the Indian economy may have dropped from 8.5% pre-crisis to 8.0% post-crisis.


"Latest assessment following the standard filtering technique suggests that potential output growth may have further fallen to around 7.5%," he said.


Meanwhile, for getting a clearer picture of the price rise trend, Subbarao proposed a producers price index saying that the present structure of measuring inflation does not capture the price movement of services.


The Producer Price Index (PPI) will be better able to measure the average change over time in the sale prices of domestic goods and services, he said.


"In its present structure, the Wholesale Price Index (WPI) does not capture the price movement of services. Also, it is a hybrid of consumer and producer price quotes," he said.


Sellers' and purchasers' prices differ due to government subsidies, sales and excise taxes, and distribution costs, Subbarao said.


"For these reasons, it is, therefore, desirable that we move towards developing a Producer Price Index (PPI) that measures the average change over time in the sale prices of domestic goods and services," he added.


Do not permit industries if norms not obeyed says High Court

The Bombay High Court has asked MIDC not to permit manufacturing units within 750 metres of a river from 1st September, if they do not maintain existing facilities for discharging effluents

Mumbai: The Bombay High Court has asked Maharashtra Industrial Development Corporation (MIDC) not to permit manufacturing units within 750 metres of a river from 1st September, if existing facilities are not maintained for discharge of effluents, reports PTI.


Under the rules, facilities such as pipelines or common effluent treatment plant (CETP) are required to be maintained to achieve the stipulated discharge standards.


The directive was given by Chief Justice Mohit Shah and Justice Nitin Jamdar who also asked the Maharashtra Pollution Control Board (MPCB) to constitute within a month a committee for five MIDC estates in the state to monitor functioning of CETPs and for industrial units within MIDC areas.


The bench was hearing a PIL filed by Nicholas Almeida who sought action against polluting units in the state.


The industrial estates whose reports were tabled in the Court about effluents being discharged into CETPs are Lote Parshuram Environment Protection Cooperative Society (Ratnagiri), Greenfield CETP Plant (MIDC Chincholi, Solapur), Badlapur CETP Association (MIDC Badlapur), Chikhloli-Morivali Effluent Treatment (MIDC Ambarnath) and Tarapur Environment Protection Society CETP.


Perusing the reports, the judges observed, "it appears that the CETPs are not in a position to comply with the statutory norms."


The Court also directed the associations running CETPs to inform the state pollution control board about the highly polluting industries. Besides, MPCB has also been asked to inform the concerned associations running CETPs about such action being taken.


For instance, if directions for closure are issued by MPCB to the highly polluting industries, a copy of all such directions shall also be served on the associations running CETP, so that the concerned association can monitor compliance, the judges noted.


The Court further asked the associations to send particulars about such highly polluting industries to the MPCB within four weeks.


"On receiving such information, MPCB shall inform the concerned associations about the action being taken against the highly polluting industries, which shall also be done within four weeks thereafter," the judges noted.


The bench recently said that if the highly polluting industries are allowed to discharge effluents which do not meet with the norms, the ultimate action of closure of CETP will result into closure of all the industries in that area.


It therefore asked the MPCB to take serious note of any information about highly polluting industries received from the associations.


The judges asked MPCB to keep a check on the polluting industries on its own by carrying out surprise visits and taking samples of effluents being discharged by the units.


The Court said that in order to comply with its order, the associations running CETP will be at liberty to take samples of effluents of the industries which the associations consider to be highly polluting or having potential for high pollution. The associations shall also take into consideration the affidavit filed on behalf of MPCB, it noted.


The bench opined that the associations running the CETP will also be at liberty to make appropriate arrangements and to direct their respective members to make appropriate arrangements to see that the effluents being discharged by individual unit are segregated in such a manner that the association and MPCB will be in a position to find out the highly polluting industries.


The Court asked the associations running CETP to ensure that the effluents being received from the chemical industries meet with the inlet norms for the CETP, so that after the treatment, the CETP is able to release the treated effluents within the permissible norms.


The Judges further noted that in case the association running CETP finds that effluents being sent by an individual industrial unit into the CETP inlet are carrying such high pollution load that CETP will not be in a position to treat it for the purpose of meeting with CETP norms, the association shall discontinue receiving such effluents form the concerned unit after giving prior notice and thereupon the concerned industrial unit shall stop all manufacturing activities.


The Court warned that "hereafter any industrial unit having its own effluent treatment plant shall not carry on any manufacturing activity whenever its effluent treatment plant is not functioning for any reason whatsoever, whether for maintenance, repairs or for any reason whatsoever".


Similarly, whenever the CETP is not functioning for any reason whatsoever, the association shall call upon its members to stop manufacturing activities and the manufacturers shall thereupon stop their manufacturing activities, the judges remarked while adjourning the matter to 30th August.



Rajkumar Singh

5 years ago

It seems rather a suggestion, instead of an order from the court to follow the prescribed rules, which can be easily bend to their advantage for not attracting any punishment or penalty or not liable for any action to their inaction!

We feel that justice is done by such remarks of the court.

They know how to hoodwink or play with the sentiments of the innocent, unsuspecting citizens to maintain themselves in their business.

No scrapping of flat sharing formula for redeveloping MHADA buildings

Maharashtra has rejected 265 premium-for-FSI proposals because it want flats from builders so that it can be given to needy people from Mumbai through lottery

Mumbai: Turning down a demand that builders be allowed to get additional floor space index (FSI) by paying premium in redeveloping old buildings of Maharashtra Housing & Area Development Authority (MHADA) in Mumbai, state Chief Minister Prithviraj Chavan on Tuesday said they would have to share housing stock with the Authority in redeveloped buildings, reports PTI.


Replying to a calling-attention notice by Subhash Desai (Shiv Sena) and others, Chavan said a meeting of local legislators would be held after the monsoon session on the issue. However, there would be no compromise on the flat sharing formula, he said.


Some members of the ruling Congress and Nationalist Congress Party (NCP) also backed the Opposition's demand, saying scrap the flat sharing formula and allow only premium payment for getting extra FSI.


In 2010, the state government amended the re-development scheme, Chavan said. In addition to premium payment, the state also gave builders an option of sharing flats for free with MHADA for procuring more FSI, he said.


But few builders opted for the flat sharing scheme because it is not profitable to them. "We have rejected 265 premium-for-FSI proposals because we want flats from builders so that they can be given to the needy persons through lottery. We don't want money because MHADA does not have land to build houses," he said.


Only 17 proposals for sharing of flats were cleared, he said adding 36 were being scrutinised. In this scheme, MHADA gets two shares of flats built for free while builder keeps one portion for selling them in open market or giving them to the members of redeveloped society.


The area of the rehabilitation component has a cap of 300 square feet or of the size before re-development. In any case, the flat should not be bigger than 750 sq ft.



Rajkumar Singh

5 years ago

Whether it is flat sharing or premium pay for more FSI, it is only the government which is at an advantage.

They know that this delay tactics can make them ride the people's sentiments for the entire tenure-ship.

If any one tries to wake the public up from their slumber, he or she is silenced to go the other way with dire consequences.

We just get carried away without understanding our inner voice.

We should not be for justice, which is being delayed to give injustice.

We should be for justification of all their acts like a watch dog, now or never.

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)