RBI advises govt to stick to fiscal consolidation road-map

RBI governor D Subbarao said, “If the government goes beyond the (targeted) number and gives details about how the number is going to rollout next year and beyond, I think that would be very credible not only for the RBI but also for all those people who are planning investments in India”

Mumbai: With public finances coming under coming under pressure, the Reserve Bank of India (RBI) has advised the government to stick to the road-map of fiscal consolidation as it affects the credibility of the system, reports PTI.

An unusually combative RBI governor D Subbarao, who has served as the Union finance secretary, also blamed the fiscal expansion for the ineffectiveness of the central bank's repeated rate hikes over the past two years.

Speaking to reporters at the customary post-policy press conference, Mr Subbarao said there is no doubt that the fiscal deficit has to be brought down but suggested that the targeted number is “actually fleshed out in some detail about how they will actually be materialised.”

He said, “If the government goes beyond the (targeted) number and gives details about how the number is going to rollout next year and beyond, I think that would be very credible not only for the Reserve Bank but (also) for all those people who are planning investments in India.”

The government should focus on both revenue augmentation and expenditure compression, he said.

The government had pegged fiscal deficit target at 4.6% of the gross domestic product (GDP). However, it is expected to exceed the Budget expectation.

Like on the revenue front, where the government has a specific list on the agenda such as the rollout of reformative measures Direct Tax Code (DTC) and the Goods and Services Tax (GST), Mr Subbarao said there is a need to come out with expenditure compression measures as well.

He said the government can focus on the discretionary spending and come out with a plan on how it plans to bring down the spend.

Mr Subbarao, who had unsuccessfully unleashed a series of 13 rate hikes over the past 18 months till December 2011 with an eye on inflation, also blamed the expansionary fiscal stance for the non-effectiveness of policy measures.

“We have raised policy rates over the past two years as you know. And one of the reasons the policy rate raising has not been completely effective was because there was demand coming in from the fiscal side,” he said.

Meanwhile, in the policy statement, the RBI said in the future, it will ‘constrained’ from not rolling back policy rates in the event of fiscal deficit staying high.

Making clear his intentions on the aggressive posturing, Mr Subbarao said that this is aimed at getting the right measures being included in the forthcoming Budget.

“The forthcoming Union Budget must exploit the opportunity to begin this process (of fiscal consolidation), in a credible and sustainable way,” the policy document said.

Mr Subbarao also rubbished a question which suggested that RBI is acting as the debt manager to the government through its buyback of government securities or open market operations (OMOs).

The government, which had targeted to contain the fiscal deficit at 4.6% the Budget, has been struggling to keep up with the target and even the finance minister has conceded that meeting the number will be tough.

In the face of dwindling revenues, the government has been forced to increase its borrowing by Rs92,000 crore in addition to the budgeted Rs4.20 lakh crore.

However, the final word on the issue was taken by the governor, reminiscing of his days as the finance secretary. “I wouldn’t have said that if I was in the government, but....” he said to grins in the RBI headquarters on the Mint Road.

 

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No weekly inflation figures now onwards

“There used to be lot of variation in the weekly food inflation numbers and the monthly data, that is why it has been decided to discontinue the practice,” an official said, adding that the weekly data were not giving any “clear and holistic” picture of the inflation situation

New Delhi: The government Tuesday decided to do away with the practice of releasing the weekly food inflation data as the figures were not portraying the ‘holistic’ picture of the price situation, reports PTI.

The government henceforth will only release the monthly headline inflation figures, sources said.

The decision, according to sources, was taken by the Cabinet Committee on Economic Affairs (CCEA), chaired by prime minister Manmohan Singh.

“There used to be lot of variation in the weekly food inflation numbers and the monthly data, that is why it has been decided to discontinue the practice,” an official said, adding that the weekly data were not giving any “clear and holistic” picture of the inflation situation.

The ministry of commerce and industry compiles and releases the Wholesale Price Index (WPI) data on primary articles and fuel and power every week, mostly on Thursdays.

The primary articles include food items.

The government also releases monthly data on overall or headline inflation measured on WPI. The food inflation has a weight of about 14% in the overall inflation.

Food inflation stood at -0.42% for the weed ended 7th January. Headline for December was 7.47%.

In September 2010, the government had changed the base year for calculating WPI to 2004-05 from 1993-94.

The new WPI series has 241 more items than in the old index. With the additional items, the WPI now measures a total of 676 items against 435 earlier.

Earlier, the government used to release the overall inflation data on weekly basis. But in October 2009, it changed the calendar and decided to release the comprehensive data on inflation on a monthly basis, but continued to release price movement of primary articles, including food, and fuel every week.

 

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RCom disconnects Etisalat DB from its network over dues

EDB, whose network remained disrupted for the fourth day, said the problem has been due to technical issue beyond its control

New Delhi: Anil Ambani group company Reliance Communications (RCom) on Tuesday said that it has disconnected telecom operator Etisalat DB’s (EDB) network because of non-payment of charges, reports PTI.

“Despite repeated reminders, payments have been inordinately delayed by EDB without any reasonable cause, leading to the disconnection of services.” RCom Spokesperson told PTI.

EDB, whose network remained disrupted for the fourth day, said the problem has been due to technical issue beyond its control.

“Etisalat DB apologises to its customers for a temporary mobile service disruption on Friday due to a technical issue beyond our control. Our team has been working round-the-clock to resolve the issue and restore the mobile services at the earliest,” said official statement of EDB.

“Our team has been working round-the-clock to resolve the issue and restore the mobile services at the earliest,” it added.

EDB, the joint venture between Etisalat and Dynamix Balwas Group, has telecom services license to operate in 15 circles. The company has tower sharing agreement with Reliance Telecom Infrastructure—a subsidiary of RCom.

These circles include Andhra Pradesh, Delhi, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, Mumbai, Punjab, Rajasthan, Tamil Nadu (including Chennai), Uttar Pradesh (East and West), Madhya Pradesh and Bihar.

According to Cellular Operators Association of India, it had over 1.67 million subscribers as on 31st December.

 

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