RBI paints bleak picture on investment, warns of tougher FY12-13

“Indications are that investment demand is softening as a result of a combination of factors, including monetary tightening, hindrances to project execution and deteriorating business confidence,” the RBI said in its Macroeconomic and Monetary Developments Report released yesterday

Mumbai: The Reserve Bank of India (RBI) on Monday said a slew of factors, including its own policy of monetary tightening and “perceived governance issues” are impacting investments, and warned it can have an adverse effect on growth in FY12-13, reports PTI.

“Indications are that investment demand is softening as a result of a combination of factors, including monetary tightening, hindrances to project execution and deteriorating business confidence,” the central bank said in its Macroeconomic and Monetary Developments Report released on the eve of mid-year policy announcement.

The business confidence has been dented by an array of factors, including “the perceived governance issues”. A slowdown in both the domestic as well as global economies and the impact of volatile equity markets on wealth are having an ill-effect on investments, it maintained.

Further, it warned of a greater impact of the slowdown, saying, “...the pipeline of investment is likely to shrink, putting 2012-13 growth at risk.”

“Information from the corporate sector, the banking system’s capex funding, housing transactions as well as falling construction activities suggest that investment has been adversely impacted,” the report said.

Data collected from 33 major lenders indicate a sharp decline in investment intentions during the April-June quarter, RBI said.

During the first three months of FY11-12, only 135 projects were sanctioned funding assistance, amounting to Rs80,300 crore, as against 195 projects and Rs1,42,800 crore in the corresponding quarter previous fiscal, it said.

Defending its tough anti-inflationary stance, which has seen 12 straight hikes in the last 19 months, the report said though the softening was anticipated, a combination of “non-monetary factors” has aggravated the investment climate.

The factors, including hindrances to execution and uncertainty about the global economy, appear to have significantly impacted investment climate, the report said.

“Persistent high inflation, weakening demand, lower availability of credit and prevailing global uncertainties appear to be affecting the business sentiments of companies,” it added.

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Sustain increased productivity for food security: RBI

The RBI said the current foodgrain stocks was ‘sufficient’ to meet the demand for various welfare schemes under the public distribution system (PDS), but pointed out that the requirement would increase with implementation of the proposed Food Security Act

Mumbai: The Reserve Bank of India (RBI) on Monday said growth in foodgrain production has been achieved on the back of increased productivity but asserted that the momentum needs to be sustained to ensure food security, reports PTI.

The central bank also pointed out the country needs to attain self-sufficiency in pulses and oilseeds.

“The increased agricultural production in recent years has been mainly due to improvement in productivity, while the area under cultivation has remained more or less constant for major crops.

“With a view to ensuring food security to the growing population, productivity gains need to be consolidated and sustained,” the RBI said in its Second Quarter Review for 2011-12.

The apex bank emphasised that the country’s needs to produce surplus food for long-term food security.

It said the current foodgrain stocks was ‘sufficient’ to meet the demand for various welfare schemes under the public distribution system (PDS), but pointed out that the requirement would increase with implementation of the proposed Food Security Act.

“...larger coverage and enhanced entitlement under the PDS, as envisaged under the proposed National Food Security Bill, may necessitate additional procurement. This would require creation of additional storage facilities,” it said.

Quoting the National Sample Survey Office (NSSO) survey, the RBI said there has been a structural change in food consumption pattern towards protein-rich food items, both in rural and urban areas. Simultaneously, the share of cereals in food has declined.
“A situation when the demand for high value items such as meat and fish, eggs, fruit and vegetables is rising faster than supply, calls for an overhaul of the entire supply chain mechanism,” it said.

The development of vegetable clusters and terminal market complexes under the public-private partnership model is a significant step which holds immense potential for better post-harvest management and price discovery.

The apex bank said effective implementation of the model Act was necessary for developing a nation-wide agricultural market.

“The model Agriculture Produce Market Committee (APMC) Act allows for contract farming and markets in private/cooperative sectors. So far, 17 states/union territories have amended their APMC Acts and the rest are in the process of doing so.”

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COMMENTS

Jude

6 years ago

he same problem obtains worldwide. There has to be strong measures for sustainability. This will be the only hope of developing nations in Africa.

Home loans up to Rs15 lakh may get 1% interest subsidy

The Union Cabinet in its meeting on Tuesday is likely to increase the home loan cap for availing 1% interest subsidy to Rs15 lakh from existing Rs10 lakh. It may also raise the ceiling on cost of house to Rs25 lakh from Rs20 lakh to avail this benefit

New Delhi: To give a boost to the housing sector, the government may increase the home loan cap for availing 1% interest subsidy to Rs15 lakh from existing Rs10 lakh, reports PTI.

The government may also raise the ceiling on cost of house to Rs25 lakh from Rs20 lakh to avail this benefit.

The Union Cabinet in its meeting on Tuesday may take decision on the matter, sources said.

Under a scheme introduced in 2009, home loan borrowers now get 1% interest subsidy on bank loans of up to Rs10 lakh, provided the cost of the house does not exceed Rs20 lakh.

Finance minister Pranab Mukherjee in his Budget speech this year had announced liberalisation of the existing scheme of 1% interest subvention on housing loans of up to Rs15 lakh, where housing cost is not exceeding Rs25 lakh.

“To further stimulate the growth in housing sector, I am liberalising the existing scheme of interest subvention on 1% on housing loans by extending housing loan up to Rs15 lakh where the cost of the house does not exceed Rs25 lakh, from the present limit of Rs10 lakh and Rs20 lakh respectively,” Mr Mukherjee had said.

The Cabinet is also likely to approve increase in India’s contribution to the International Monetary Fund (IMF) that would provide higher voting rights to the country.

The increase in contribution is part of ongoing quota reforms aimed at providing greater say to the emerging economies.

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