“The economy has slowed down, but, we have not seen whether the deceleration has bottomed out ... we should wait for third quarter numbers to have a better picture of the whole year GDP number,” Planning Commission deputy chairman Montek Singh Ahluwalia commented
Mumbai: Planning Commission deputy chairman Montek Singh Ahluwalia on Wednesday said the third quarter gross domestic product (GDP) numbers are likely to ‘decelerate’ from the previous quarter, reports PTI.
“GDP numbers in the third quarter will be subdued. It is likely that it may decelerate in that period. However, whether growth rate in the second half will be less than the first half will be known after the third quarter figures are out,” he said, delivering 3rd M Visvesvaraya memorial lecture here.
GDP growth in the second quarter came down to 6.9% from 8.4% a year ago, indicating a slowdown in the economy, taking the H1 numbers to 7.3%. However, headwinds to growth in Q3 emanates from the Index of Industrial Production (IIP) for the first month of the third quarter, which contracted by a whopping 5.1% against a full 11.3% year ago.
About the growth forecast for the whole fiscal, Mr Ahluwalia said, “The economy has slowed down, but, we have not seen whether the deceleration has bottomed out ... we should wait for third quarter numbers to have a better picture of the whole year GDP number.”
He also said although it is going to be around 7%, it will not be a bad number by global standards.
Terming the sharp fall in October IIP data as temporary adjustment to slower growth rate, Mr Ahluwalia said, “IIP data themselves have a lot of shortcomings in terms of reporting, which means the monthly numbers are not very reliable.”
On inflation, he said it would be around 7% by end of the fiscal. “Food inflation has come down and overall inflation is also coming down. We hope inflation will be around 7% by the end of the fiscal.”
Implementation of the proposed Food Security Bill will not add to food inflation as supply-side concerns can be taken care of in the future, he added.
Referring to the massive fall of rupee, he said the exchange rate movement is not unreasonable. “We have seen rupee falling to lower levels and then coming to Rs44-Rs45 to a dollar in the past. The rupee movement is demand-supply driven and there is nothing unreasonable in it.”
The RBI on Wednesday allowed banks to borrow additional amount from it under the Marginal Standing Facility, a new lending window which was opened by the central bank in the current fiscal. It further said that banks will not be required to seek waiver for default in SLR compliance
Mumbai: In order to ease the liquidity situation, the Reserve Bank of India (RBI) on Wednesday allowed banks to borrow additional amount from it under the Marginal Standing Facility (MSF), a new lending window which was opened by the central bank in the current fiscal, reports PTI.
“It has been decided to permit banks to avail themselves of funds from RBI on overnight basis, under MSF, against their excess Statutory Liquidity Ratio (SLR) holdings,” the RBI said in a circular.
MSF is the rate at which banks can borrow overnight from RBI. SLR refers to the amount which the banks are mandatorily required to invest in government securities. At present, the banks’ SLR is 24%.
RBI also said that banks can borrow funds on overnight basis below the stipulated SLR, up to 1% of their deposits.
It further said that banks will not be required to seek waiver for default in SLR compliance.
There is liquidity problem in the system following payment of third instalment of the advance taxes by the corporates and other assesses. The last date for payment of advance tax was 15th December.
Besides, the companies and traders will have to garner resources for payment of service tax. The last date for payment of half-yearly service tax is 26th December.
The RBI had opened the MSF window to allow banks to borrow money from central bank from 9th May.
The central bank in its mid-quarter credit policy announced earlier in the month had refrained from tinkering with the key rates and ratios despite the demand from the industry to lower the Cash Reserve Ratio (CRR), the amount which the banks are required to park with the central bank in cash. The CRR is currently at 6%.
Besides removal of levy sugar obligations, the industry has been demanding end of monthly release mechanism, under which food ministry fixes the quantity of sugar that mills can sell in the open market every month
New Delhi: Noting that the sugar industry would be the priority area after the Food Bill, food minister KV Thomas on Wednesday said the government will consider the demand for partial decontrol of the sector after Parliament session gets over, reports PTI.
The minister also said the government would consider further export of sugar at an “appropriate time”, which would be favourable for the industry. Last month, an export of one million tonnes was allowed under Open General License (OGL).
“There is a request from the industry as well as farming community that there are too many controls on the sector. One is levy sugar, which we allocate to States for distribution through ration shops.
“After this Parliament session, I will discuss the issue (removal of levy sugar system) with finance minister Pranab Mukherjee and agriculture minister Sharad Pawar,” Mr Thomas said on the sidelines of the AGM of Indian Sugar Mills Association.
At present, sugar mills are required to contribute 10% of their production to government (called levy sugar) for public distribution system (PDS) at a cheaper rate.
“We have committed to the states to provide sugar at subsidised price... After this session, we will have detailed discussion with the finance minister on how this can be reasonably resolved,” Mr Thomas said, adding that detailed discussion was required as this involved financial implications.
Making a demand for removal of levy sugar, ISMA president Narendra Murkumbi pointed out that the compulsion to supply 26 lakh tonnes of sugar for the PDS at a discounted rate causes losses of around Rs3,000 crore to the industry every year.
Addressing the function, Mr Thomas said the issue of decontrol involves a large number of stakeholders—farmers, mills, States and consumers—and a consensus needed to emerge on this issue.
Besides removal of levy sugar obligations, the industry has been demanding end of monthly release mechanism, under which food ministry fixes the quantity of sugar that mills can sell in the open market every month.
Expressing concern over cyclical nature of sugar industry he said there was a need to tackle this phenomenon through long-term solution.