The government must address trade deficit issues if the fall of the rupee is due to weak fundamentals says Dr KC Chakrabarty, deputy governor, RBI
Mumbai: The Reserve Bank of India (RBI) cannot arrest the rupee's decline if it is caused by weak fundamentals or global factors but can only take more calibrated steps in the forex market in such a scenario, top official said on Friday.
"If the rupee fall is due to fundamental weakness of the economy, or due to global factors, then the RBI cannot support it," RBI deputy governor Dd KC Chakrabarty told reporters on the sidelines of an HR summit of the state-run banks.
The government must address trade deficit issues if the fall of the rupee is due to weak fundamentals, he added.
"If the rupee is depreciating due to real sector issues, financial sector measures will not solve it," Chakrabarty said.
The rupee has been losing value against all the major currencies, especially the American dollar, since April and hit an all-time low of 56.52 yesterday. It has shed nearly 24% year-to-date.
As a measure to contain dollar demand and help support the rupee, Chakrabarty also hinted at opening a separate window for oil companies.
"The option (of opening a separate dollar window for oil companies) is open. Whether they (RBI) is doing it or not, I don't know, because it will not be done in the public view," he said.
As the rupee loses ground almost every day against the US dollar, with the hands of RBI are tied in view of depleting forex reserves, there have been talks of directly selling dollars to oil companies -- the biggest consumers of the greenback -- by opening a separate window for them.
The move can take off the demand pressure from the open market for the dollar.
Oil has been the biggest component of the country's import bill for decades. In FY12, out of the total import bill of $488.6 billion, as much as $155.6 billion was on account of oil as India meets 70% of its fossil fuel needs through imports.
This has widened the current account deficit to over 4% last fiscal, as against 2.6% in 2010-11. Also, fiscal deficit shot up last fiscal hitting 5.76% of the GDP, from a projection 4.6%.
Economists have been blaming these factors for the plight of the rupee, apart from fall in investments, which came down to 30% in FY'12 from 38% in FY'08.
Without referring to the forthcoming mid-quarter review of the monetary policy slated for 18th June, the RBI Deputy Governor said, "If inflation comes down then interest rate will also come down."
On the highly disappointing GDP numbers, he said it does not matter if it is 6.5% or 7%, if we take corrective measures. Unless we work hard, GDP will fall further."
According to the GDP data released yesterday, India's growth rate during 2011-12 slipped to 6.5% from 8.4% in the preceding two financial years.
Even during the 2008-09, the year when the country was facing the impact of the global financial meltdown, growth rate was higher at 6.7%.
A panel of officials has been set up for implementation of various recommendations on pay fixation, level-mapping of all employees and promotional avenues
New Delhi: Five years after merger of two state-run airlines, the Indian government on Friday announced that implementation of uniform structures for pay, allowances and career progression for Air India employees would start in 45 days, saying it was necessary if the airline is to survive, reports PTI.
"This (employees' integration) is necessary if merger (in Air India) has to succeed, if Air India has to survive. The government is giving Rs30,000 crore .... One thing is clear. Government will not give public money any more to Air India," Civil Aviation Minister Ajit Singh told reporters here.
He also asked the striking pilots that their demands relating to their career progression can be examined only after they returned to work. "They should unilaterally call off their strike. The (Delhi) High Court has also said the same thing. It is an illegal strike. We will consider all their demands after they join back," Singh said.
Announcing a roadmap for implementation of the Justice DM Dharmadhikari Committee recommendations on HR integration of the employees of erstwhile Air India and Indian Airlines, he said there would be parity in pay scales and uniform working conditions for all staffers. The airlines were merged in 2007.
However, the pay scales and allowance structure for pilots, engineers, cabin crew and technicians would be determined on the basis of industry norms. "Since these issues are not dealt with by DPE guidelines, the Union Cabinet's approval is required."
A panel of officials has been set up for implementation of various recommendations on pay fixation, level-mapping of all employees and their promotional avenues.
This panel, called the Implementation-cum-Anomaly Committee, would seek the views of all sections of employees and complete its task within the next 45 days, Singh said.
"We will be patient and persuasive in talking to the employees. They will realise their future depends on the future of Air India," he said.
While implementation of public sector projects of over Rs1,000 crore will be tracked by the National Manufacturing Competitiveness Council, those in the private sector would be monitored by the Department of Financial Services
New Delhi: Amid declining growth rate and the need to arrest economic slowdown, Prime Minister Manmohan Singh on Friday approved setting up of an Investment Tracking System to ensure speedy implementation of mega projects envisaging outlay of over Rs1,000 crore, reports PTI.
The proposed mechanism is aimed at addressing delays in implementation of projects, said a statement from Prime Minister's Office (PMO).
While implementation of public sector projects of over Rs1,000 crore will be tracked by the National Manufacturing Competitiveness Council, those in the private sector would be monitored by the Department of Financial Services in the Ministry of Finance.
The decision to fast track investments would provide fresh impetus to the economy, which is grappling with slowdown. The economic growth rate during 2011-12 slipped to a nine-year low of 6.5% mainly because of slowdown in manufacturing and poor investment.
Several mega projects, including Posco's proposed $12-billion steel plant in Orissa, has been hanging fire because of regulatory clearances and land acquisition issues.
The decision to set up Investment Tracking System, the statement said, is in "the context of delays faced by projects on multiple fronts - security clearances, environmental clearances, other clearances and land related matters."
Issues concerning delay in implementation of projects was raised by India Inc at the last meeting of Prime Minister's Council on Trade and Industry in December.
The National Manufacturing Competitiveness Council and the Department of Financial Services would have to submit a quarterly report to the PMO of all projects monitored and issues that need to be resolved.
Through this tracking mechanism, projects would be periodically reviewed for any delays and specific or systemic issues will be identified for resolution, the statement said.
"While existing rules and laws have to be followed, it was widely felt that a lot of the delay is avoidable if only there is a will to resolve matters," it added.
The investment rate during 2011-12 declined to 29.5%, from over 30% a year ago.
Even Finance Minister Pranab Mukherjee had attributed the slowdown in economic growth to environmental issues and expressed hope that the situation would improve going forward.