Tough task for Centre to raise funds for infra financing: RBI

RBI governor D Subbarao said investments for the infrastructure sector during 12th Plan period are projected to double to $1 trillion as compared to that in the previous plan period. This meant the annual investment in infrastructure has to increase from current level of 6% of the GDP to over 10%

Chandigarh: Noting that infrastructure deficit is a major constraint in accelerating economic growth, Reserve Bank of India (RBI) governor D Subbarao on Friday said it would be a tough task for the Centre to mobilise huge resources required for the sector during the 12th Five Year Plan, reports PTI.

Delivering the Haksar Memorial Lecture here, Mr Subbarao said investments for the infrastructure sector during 12th Plan period (2012-17) are projected to double to $1 trillion as compared to that in the previous plan period.

This meant the annual investment in infrastructure has to increase from current level of 6% of the gross domestic product (GDP) to over 10%, he said.

“Given its fiscal compulsion, the government will clearly not be able to mobilise resource of this order,” he said.

He said the final expenditure in infrastructure in 11th Plan is likely to fall short of projected investment of $500 billion.

The 12th Plan projections call for 50% of projected investment to come from the private sector and much of project implementation to happen in public-private partnership (PPP) mode.

Stating the infrastructure requires long-term finance, he said it should be funded by long-term sources like insurance and pension funds.

“Since these markets in India are still not deep enough, the burden of financing is falling on banks,” he said.

He said banks could not expand lending for infrastructure beyond a point because of exposure risks and asset-liability mismatch problems since their liabilities are largely short term.

However, he observed that development of corporate bond would go a long way in augmenting infrastructure financing.

“Both the government and RBI have taken a number of initiatives to develop corporate bond market and some further initiatives are in pipeline,” he said.

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India to see 6.9% economic growth in September quarter: Nomura

The real GDP expansion is projected to slowdown to 6.9% in the September quarter on a year-on-year basis from 7.7% growth clocked in three months ended June. According to Nomura, the lower growth would be on account of broad-based slowdown in private consumption, fixed investment and exports

New Delhi: India is expected to see a real gross domestic product (GDP) growth of 6.9% in September quarter while the “downside risk” for the economy has increased amid prolonged turbulence in the global financial markets, reports PTI.

“We expect real GDP growth to remain below potential and inflation to moderate as tight monetary policy and weaker global growth cap demand,” global financial services group Nomura has said.

The real GDP expansion is projected to slowdown to 6.9% in the September quarter on a year-on-year basis from 7.7% growth clocked in three months ended June.

According to Nomura, the lower growth would be on account of broad-based slowdown in private consumption, fixed investment and exports.

“Although we expect GDP growth to rise in 2012, the downside risk to the economy has risen, mainly due to prolonged turbulence in global financial markets,” the report noted.

Regarding price rise, the report said that headline WPI (Wholesale Price Index) is expected to remain over 9% this month and moderate to about 8% in December.

Last month, WPI stood at 9.7%.

“Our view is that the RBI (Reserve Bank of India) will stay on hold as we also expect inflationary pressures to wane and growth slowdown to broaden in coming months,” Nomura said.

RBI has hiked interest rates 13 times since March 2010 to tame demand and curb inflation.

“On the fiscal front, rising subsidies and lower revenues should result in a higher fiscal deficit of 5.5% of GDP in FY 11-12 versus a budget estimate of 4.6%,” the report noted.

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RBI deregulates interest on savings accounts in UCBs

In a notification addressed to all primary (urban) co-operative banks, RBI said lenders are free to determine their savings bank deposit interest rate subject to two conditions

Mumbai: The Reserve Bank of India (RBI) on Friday deregulated interest rate on savings accounts in urban co-operative banks (UCBs), a move that will fetch better returns for depositors, reports PTI.

RBI had freed savings bank deposit rate for the scheduled commercial banks last month. Subsequently, it had liberalised this for the regional rural banks earlier this week.

In a notification addressed to all primary (urban) co-operative banks, RBI said lenders are free to determine their savings bank deposit interest rate subject to two conditions.

Under the first condition, the notification said, “each bank will have to offer a uniform interest rate on savings bank deposits up to Rs1 lakh, irrespective of the amount in the account within this limit”.

The other condition states that for savings bank deposits over Rs1 lakh, a bank may provide differential rates of interest, if it so chooses.

This would, however, be subject to the condition that banks will not discriminate in the matter of interest paid on such deposits, between one deposit and another of similar amount, accepted on the same date, at any of its offices, it said.

Till now, such banks were mandated to give 4% interest rates on such deposits. The rate was increased from 3.5% in May this year.

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