RBI close to softening its hawkish monetary policy: Nomura

New Delhi: Ahead of the Reserve bank of India's (RBI) 16th September monetary review, investment bank Nomura today said the central bank is likely to halt its move to raise policy rates, given the tight liquidity situation and lack of global demand, reports PTI.

"With monetary conditions tightening and global demand still sluggish, we retain our view that growth and inflation are likely to moderate in the coming quarters and that the RBI is close to pausing in its rate hiking cycle," Nomura said.

The RBI has been tightening key benchmark rates since November last year after the country started recovering from the impact of the global financial crisis.

In its last policy announcement on 27th July, the RBI raised the repo rate, at which it lends to banks, by 25 basis points to 5.75% and the reverse repo rate, at which it absorbs excess cash from the system, by 50 bps to 4.50%.

In the policy review, it had also announced that mid- quarter statements will be given out, the first of which will be done on 16th September.

The economy grew by 8.8% in the April-June quarter vis-à-vis the corresponding quarter a year ago, the fastest pace in around three years.

However, industrial growth in June has fallen to a 12-month low of 7.1% as demand cooled and the low base effect of the previous year faded away. It grew at double digits during the eight months till May.

Exports expansion, too, slowed to 13.2% in July, the lowest growth rate so far this fiscal on account of the fragile economic recovery in the US and Europe, with total shipments valued at $16.2 billion. Growth in exports was 30% in June and 35% in May.

Between FY'06 and FY'08, the economy clocked an above 9% growth. The global liquidity crisis had resulted in a slowdown in growth to 6.7% in FY'09 and 7.4% in FY'10.

Meanwhile, inflation based on wholesale prices for July fell to single-digits at 9.97% after a gap of five months, on moderating food and non-food prices, raising hopes of a sustained decline. August inflation data is due on 14th September.


Policy for special manufacturing zones likely this year: DIPP

New Delhi: The Centre is likely to announce the policy for units in the proposed special investment zones by end of this year, a move that is aimed at increasing the share of manufacturing in the overall economic growth, reports PTI.

The government expects these special areas-National Manufacturing and Investment Zones (NMIZs)-will help in increasing the share of manufacturing from 15% of the gross domestic product (GDP) at present to 25% by 2022.

"We are seriously considering putting this (NMIZ) policy for public consumption by the end of this year (2010)," director in the Department of Industrial Policy and Promotion (DIPP) Rajat Kumar said today at the sidelines of PHDCCI meet.

The DIPP, part of the industry ministry, has received large number of suggestions on its concept paper for setting up NMIZs, which are being planned as mega industrial zones and subsume SEZs, industrial parks and warehousing units.

Mr Kumar said an inter-ministerial discussion on the issue is likely in October or November.

The paper had suggested radical steps including freedom to downsize workforce and curtailing workers' right to join unions.

It also says that state governments should acquire land for the NMIZs, which could be promoted mainly by the private sector.

Besides, it has recommended low-interest loans for units opting for clean technology or products in the NMIZs.

Although the policy is still awaited, commerce and industry minister Anand Sharma recently announced that the first NMIZ would come up in Rajasthan.


RBI asks banks to restructure aviation sector loans

Mumbai: The Reserve Bank of India (RBI) has asked banks to work out a special concessional package for the crisis-ridden aviation sector, in response to which the lenders said they will look into the problems on a case-to-case basis, reports PTI.

"The RBI has allowed in the case of aviation sector a special concession. Banking industry could on a case-by-case basis, subject to the guidelines and parameters given by RBI, look to see how this industry could be helped by a rescheduling, restructuring...," State Bank of India (SBI) chairman O P Bhatt told reporters on the sidelines of a banking conference here.

The RBI had sent a communication to the banks with regard to debt restructuring for airlines in the last week of August.

"We are sensitive to the requirement of the aviation sector and have communicated the same to the banks," RBI deputy governor Usha Thorat said.

The Indian airline industry is facing mounting debts due to an economic downturn and resultant excess capacity, which still exists. However, the industry of late has been showing signs of recovery, which could gather pace if banks restructure their loans.

According to an estimate, the cumulative debt of the airline industry stands at about Rs60,000 crore. As of March, 2010, Air India had about Rs40,000 crore debt, while Kingfisher had a debt of about Rs6,000 crore.

While SBI's aggregate exposure to the aviation sector is about Rs3,000 crore, Bank of India's exposure is Rs4,000 crore.

"Now the discussion is going on amongst the banks consortium (how to go about on the recast)," Mr Bhatt said.

Bank of India executive director M Narendra said, "RBI has given out some guidelines and we are currently studying and discussing those guidelines within the consortium."

Major carriers like Air India and Jet Airways have plans to restructure their debt and have been in talks with banks to get soft loans instead of high-interest ones.

Last month, civil aviation minister Praful Patel had said, "The RBI has to come up with guidelines for the restructuring of debt of the aviation sector... In the case of Air India, it (debt restructuring) is very much active on the government's agenda."

The aviation sector is a major infrastructure sector and should be treated that way, he had said.


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