RBI policy may change if industrial growth slides further: Basu

New Delhi: Within days of India reporting a 16-month low industrial growth of 4.4% for September, a top government economic advisor today said industry is expected post a recovery in October, else the Reserve Bank of India (RBI) will have to change its tight money policy stance, reports PTI.

"The data that you will get on December 12 (for October) should see a reasonably good recovery. If that does not happen then we will have to think in terms of policy change," chief economic advisor Kaushik Basu said on the RBI monetary stance.

Speaking on the sidelines of a summit at International Management Institute, he said that growth in the Index of Industrial Production (IIP) in the last two months has been a disappointment.

"But going by the base effect...I expect a sharp recovery, especially in the manufacturing sector, over the next month (October)," Mr Basu said, adding that the country is on track for a good fiscal despite the slowdown.

He said, "I think the RBI policy has been a very matured and balanced policy...What it does on policy rates and such things will of course have to be evaluated and decided."

The CEA said he also expected a sharp decline in inflation within weeks.

"I think we are going to see in the next couple of weeks, including December, pretty sharp decline in inflation. So I expect us to move into a pretty good zone of inflation over the next month...next three weeks...the data you will get on food. And the middle of December should be an improvement," Mr Basu said.

Industrial growth fell for the second consecutive month to a 16-month low of 4.4% in September. It was 6.91% in the previous month.

The wholesale price index (WPI) based inflation has also come down to 8.58% in October, after being in double digits during the initial months of the year.

However, food inflation is still high and clocked 12.30% for the week ended 30th October.

Combined with declining inflation and industrial growth numbers, many analysts feel that the RBI will press a pause button in its tight money supply stance, an indication of which was given by the central bank itself in its 2nd November policy review.

The RBI has hiked the short-term lending (repo) and borrowing (reverse repo) rates by 150 and 200 basis points, respectively, this year. On 2nd November, it had hiked both the rates by 25 basis points for sixth time this year.
 

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CAG indicts Raja, says he ignored PM, law, finmin advice

New Delhi: The Comptroller and Auditor General (CAG) today indicted former telecom minister A Raja for ignoring the advice of the prime minister, finance and law ministries to allocate second generation (2G) spectrum to new players in 2008 causing a whopping revenue loss of over Rs1.76 lakh crore, reports PTI

In the report, tabled in both houses of Parliament, the CAG noted that the ministry of communication and IT "decided to go ahead with arbitrarily deciding that the cut-off date for issuance of Letters of Intent would be advanced to 25 September 2007 and applications received would be decided on FCFS (first-come first-served) basis."

In November, 2007, prime minister Manmohan Singh had written to the telecom ministry suggesting introduction of "transparent methodology" of auction, "revision of entry fee" in the "backdrop of inadequate spectrum and large number of applications received for fresh licences."

The CAG highlighted that the law ministry had suggested setting up of an Empowered Group of Ministers (EGoM) to discuss the large number of applications and spectrum pricing, but the telecom ministry rejected it saying "the need for forming an EGoM arises when a new policy is being framed and in this particular issue no new policy for grant of UASL (unified access service licences) was being framed."

The auditor, however, said the "contention of the Department of Telecom (DoT) is untenable as the rejection of the advice" of the law minister to have detailed deliberations on the issues in the EGoM on the ground that changes in policy might lead to litigation "goes against the well established and time-tested procedures of functioning of the government and the collective responsibility of the Union Cabinet."

The report said the presumptive loss caused to the exchequer through spectrum allocation to 122 licensees and 35 dual technology licences in 2007-08 was Rs1,76,645 crore. It pegged the figures on the basis of third generation (3G) auction held earlier this year in which the government mopped up over Rs67,000 crore.

In the 77-page report, the CAG said the figure of the presumptive loss has been determined on the basis of various indicators like 3G auction and a price offered by an operator in 2007, besides scarcity value, nature of competition, business plans envisaged, number of operators and growth of sector.

The auditor pointed out that spectrum was allotted by DoT to the existing operators beyond the contracted limits (6.2 MHz) without imposing any upfront charge for such allotment.

On the values determined through various indicators, the presumptive value of 2G spectrum on account of grant of 157 licences in different circles during 2007-08 would be in the range of approximately Rs58,000 crore to Rs1,52,038 crore.

The value of spectrum held by 13 operators for 51 circles based on the 2001 rates works out to be Rs2,561 crore, while its value based on above indicators like 3G auction would be Rs12,000-Rs37,000 crore.

The CAG said that 85 out of 122 new licences issued to 13 companies in 2008 were granted to ineligible companies as all of them (85) did not have stipulated paid-up capital at the time of application.

Further 45 out of 85 licensees were issued to companies which failed to satisfy conditions of main object clause in the memorandum of Association (MoA), the government auditor said.

The CAG said the process of giving dual technology licences to leading telecom firms including Reliance Communications and Tata Teleservices "lacked transparency and fairness", and equal opportunity was denied to other similarly placed operators who could apply for use of dual technology only after formal announcement of the policy.

Noting that this approval (dual technology use) had violated the Cabinet decision of 2003 to allow additional spectrum at 2001 prices, the auditor said, "Deviation from a Cabinet decision should normally be with the approval of Cabinet.

"However, in the present case, such a crucial decision to permit service providers to offer access using combination of technologies (CDMA, GSM and/or any other) under the same licence with dual spectrum allocation was taken without the matter being referred to the Cabinet."
 

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Personal finance Tuesday

BSE launches first-ever Realised Volatility Index in India; Kotak Mahindra MF unveils FMP 15M Series 7; Principal MF floats Fixed Maturity Plan-91 Days-Series XXVI; HSBC Mutual Fund declares dividends in four equity schemes; Sun Pharma fixes 26th November as record date for stock split

BSE launches first-ever Realised Volatility Index in India

The Bombay Stock Exchange (BSE) has launched its Sensex Realised Volatility (REALVOL) Index - the first of its kind in India.

Realised volatility is a measure of actual price volatility, based on past price movements over a specific period of time. REALVOL Index will provide market participants with an accurate measure of the historic volatility of the Sensex over fixed one, two and three-month time horizons.

The BSE intends to launch financial products based on the REALVOL and other new indices in the near future, as one of many parts of its broader strategy to strengthen its existing equity derivatives segment.

The introduction of the Sensex Realised Volatility Index will give market participants a new way to measure and mitigate market risk.

The BSE plans to launch futures & options contracts on its new family of realised volatility indices, after the required approvals are received. The exchange is also exploring offering of licensing options to structured product providers, who wish to create variance and volatility swaps based on the Sensex REALVOL Index.

Kotak Mahindra MF unveils FMP 15M Series 7

Kotak Mahindra Mutual Fund has launched Kotak FMP 15M Series 7, a close-ended income scheme.

The investment objective of the plan is to generate returns through investments in debt and money market instruments with a view to significantly reduce the interest rate risk.

The plan offers growth and dividend (payout) option. The tenor of the scheme is 15 months. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 16th November and closes on 18th November. The minimum investment amount is Rs5,000. The minimum investment amount is Rs1 crore. The exit load for the scheme is nil.

CRISIL Short Term Bond Index is the benchmark index. Deepak Agarwal and Abhishek Bisen will be the fund managers for the scheme.

Principal MF floats Fixed Maturity Plan-91 Days-Series XXVI

Principal Mutual Fund has launched Principal Pnb Fixed Maturity Plan-91 Days-Series XXVI, a close-ended income scheme.

The investment objective of the plan is to build an income oriented portfolio and generate returns through investment in debt/money-market instruments and government securities.

The plan offers growth and dividend option. The tenor of the scheme is 91 days. During the new fund offer (NFO), the units will be offered at face value of Rs10 per unit. The NFO opens on 16th November and closes on 18th November. The minimum investment amount is Rs5,000. The minimum investment amount is Rs35 crore. The exit load for the scheme is nil.

The benchmark index for the plan would be CRISIL Liquid Fund Index. Shobit Gupta, head-fixed income would be the fund manager for the plan.

HSBC Mutual Fund declares dividends in four equity schemes

HSBC Mutual Fund has announced dividends in its four schemes. The record date for the dividends is 19th November.

A dividend of 20% (Rs2 per unit on a face value of Rs10) has been declared under the dividend option of HSBC Equity Fund and HSBC Midcap Equity Fund. A dividend of 10% (Rs1 per unit on a face value of Rs10) has been declared under the dividend option of HSBC India Opportunities Fund and HSBC Small Cap Fund.

Sun Pharma fixes 26th November as record date for stock split

Drug-maker Sun Pharmaceutical has fixed 26 November as the record date for its proposed stock split, under which shareholders will get five shares for each equity held by them presently.

The company has already received approval from shareholders for splitting every equity share of Rs5 face value into five shares of Re1 face value, translating into a stock split ratio of 1:5.

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