RBI governor D Subbarao said that the targeted growth may not be achieved on account of several factors such as high inflation and the depreciating rupee
Vijayawada: The Reserve Bank of India (RBI) on Thursday said the Indian economy is likely to grow below its projection of 7.6% this fiscal, and is likely to revise downward the forecast in its policy review next month, reports PTI.
RBI governor D Subbarao said while addressing an event here that the targeted growth may not be achieved on account of several factors such as high inflation and the depreciating rupee.
The central bank is likely to revise downwards its gross domestic product (GDP) projection in its 3rd quarter review of monetary policy on 24th January, during which it will come out with revised forecast for year-end inflation.
In October, it had cut the GDP growth forecast for 2011-12 to 7.6%, from 8%.
Earlier this month, the government lowered its full-year growth forecast to between 7.25% and 7.75%, down from 9% projected in February.
Mr Subbarao said the macro-economic situation is a cause of concern, as growth is declining, inflation is stubbornly high and rupee is weakening.
After 13 interest rates hikes since March 2010, the RBI had paused the rate hike cycle in its policy review on 16th December. The overall inflation was still at an elevated level of 9.11% in November.
There are risks to inflation, Mr Subbarao said, adding that high oil prices and the sudden depreciation in rupee pose challenges for the economy.
The rupee has depreciated 18% against the US dollar so far this year. It is hovering at 52.65%.
Mr Subbarao said market forces would continue to determine the rupee level and RBI will intervene only if there is a sharp volatility. He said the course of exchange rate movement could change if the European markets improve.
The RBI chief said administrative measures taken by RBI would curb undue speculation and ensure that interest of the genuine customers in forex markets are not affected.
RBI had last week taken measures to support the rupee, including putting curbs on forward trading to check speculation.
India’s economy grew at a slowest pace in over two years at 6.9% in the July-September quarter. Further, factory output contracted 5.1% in October.
Mr Subbarao said he expects inflation to be below 7% by the March end, but did not specify as to when the benchmark interest rates would be reduced.
“I cannot say when and how the interest rates will come down. Challenges before the RBI is to balance growth and inflation,” he said.
Mr Subbarao said that in addition to the constraints in food supply and rising prices, the international oil rates also flared up the inflation levels.
The rates on NRE deposits have gone up in the wake of the RBI freeing the interest rates on non-resident deposit schemes on 16th December to stem the fall of the rupee by luring more funds from NRIs
Mumbai: Private sector lenders like HDFC Bank, Yes Bank, Dhanlaxmi Bank and the state-run Allahabad Bank on Thursday steeply increased the interest rates on select maturities of NRE deposits, reports PTI.
HDFC Bank increased the interest rates on NRE deposits of Rs1 crore and above with a maturity of one to two years to 9% against 3.82% earlier. It has, however, left the NRO deposit rates unchanged.
Yes Bank too increased the rate on NRE accounts by 2 percentage points to 6% for up to Rs1 lakh and by 3 percentage points to 7% for over Rs 1 lakh.
The state-run Allahabad Bank, too, yesterday announced a spike in its NRE deposits up to 7.5%. The Kolkata-based bank will now offer 7.5% for one to two years tenor (against 3.82% earlier), 7% on deposits of two to three years (from 3.51%), and 6.75% for those above three years (from 3.64%).
HDFC Bank NRE Services head Abhay Aima told PTI that the bank has increased the interest on deposits above Rs25 lakh to 8.5% for tenor under two years. The bank has an NRE deposit base of Rs7,100 crore.
He also said there has been a considerable spike in the inflows since the rupee fall and opined that such high rates will not last long.
The Thrissur-based Dhanlaxmi Bank too hiked interest rates on NRE deposits to 8% for a maturity of one to three years effective 26th December while the rate for deposits for three years and up to 10 years will be 7.75%, the bank said in a release.
Earlier this week, the Kochi-based Federal Bank and Laxmivilas Bank had also increased their rates on these deposits.
On 16th December, Federal Bank hiked the interest rates on NRE deposits for one year to 6.5% from 3.82% and left the rates on other deposits unchanged. It also said the new rates will be applicable for a limited period from 19th to 31st December.
Similarly, another Kerala based lender Laxmivilas Bank had revised the interest rates on NRE deposits of various slabs on Wednesday. For one year and under two years, it is offering 10%, 8% for deposits of two to three years and 7% for deposits above three years.
The Kerala-based banks have huge NRI clientele as a good portion of the state population work outside the country.
The rates on NRE deposits have gone up in the wake of the RBI freeing the interest rates on non-resident deposit schemes on 16th December to stem the fall of the rupee by luring more funds from NRIs.
The RBI had already freed the saving and deposit rates for resident customers.
The move gave banks the freedom to fix rates on non-resident external rupee deposits and ordinary non-resident (NRO) accounts with immediate effect.
“With a view to providing greater flexibility to banks in mobilising non-resident deposits and also in view of the prevailing market conditions, it has been decided to deregulate interest rates on such accounts,” RBI had said in a circular adding that the “interest rates offered by banks on NRE and NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.”
“For finalising the one-time charge applicable beyond 6.2 MHz, we support the route of auction instead of TRAI recommendations, which in our view are arbitrary and without a strong rationale," an internal communication of the DoT said, quoting the joint representation of telecom operators
New Delhi: Facing huge outgo on account of extra spectrum held by them, leading telecom operators including Bharti Airtel and Vodafone have contested any move of the telecom ministry to levy one-time charge on it, saying there is no such policy as per the licence, reports PTI.
The government is in the process to levy one-time charge on old GSM operators—Bharti Airtel, Vodafone and Idea—for holding extra spectrum beyond the contractual limit of 6.2 MHz as recommended by the Telecom Regulatory Authority of India (TRAI).
On their joint representation, sent to telecom minister Kapil Sibal, the Department of Telecom (DoT) is likely to consider the view at the Telecom Commission meeting scheduled to be held later this month.
TRAI had recommended that each MhZ of additional spectrum, after the 6.2 MHz limit, held by operators should cost a one-time Rs4,571.87 crore (all-India).
“In case DoT wishes to shift from the current regime of graded spectrum usage charges to one-time fee beyond 6.2 MHz, it should be on prospective basis, with a commensurately reduced spectrum usage charge.
“For finalising the one-time charge applicable beyond 6.2 MHz, we support the route of auction instead of TRAI recommendations, which in our view are arbitrary and without a strong rationale," an internal communication of the DoT said, quoting the joint representation of telecom operators.
However, TRAI had recommended that the one-time fee would vary from circle to circle and the operators would have to pay only for those circles where they hold extra spectrum.
For finalising the one-time charge applicable beyond 6.2 MHz, the firms supported the route of auction instead of TRAI recommendations.
According to TRAI recommendations, all licencees would have to pay for spectrum at the current price at the time of renewal of licences, or else at price to be discovered through auction or any other market-driven mechanism.