RBI hikes cash ratio for banks by 75 bps
January 29, 2010
The Reserve Bank of India (RBI) Friday hiked the cash reserve ratio (CRR) for commercial banks by an unexpected 75 basis points, in a clear bid to curb inflationary expectations in the economy.
All other policy rates were left unchanged.
The CRR, presently at 5 percent, will be hiked in two stages — 50 basis points from Feb 13 and another 25 basis from Feb 27, RBI Governor D. Subbarao told the chief executives of commercial banks in Mumbai.
“As a result of this increase in the CRR, about Rs.36,000 crore of excess liquidity will be absorbed from the system,” Subbarao added, as he presented the third quarterly update of the central bank’s monetary policy for this fiscal.
Cash reserve ratio is the minimum liquid assets banks have to retain against deposits or park with the central bank in the form of government securities.
Subbarao said the cut in excess liquidity will help anchor inflationary expectations and that the recovery process of the economy will be supported without compromising on price stability.
The unexpected hike in the cash reserve ratio saw the benchmark sensitive index (Sensex) of the Bombay Stock Exchange plummet nearly 325 points, or almost 2 percent, before staging a marginal recovery.
The central bank projected an impressive 7.5 percent growth for the Indian economy in the current fiscal even as it hiked the outlook for annual inflation rate to 8.5 percent by end-March. Earlier, it had earlier pegged the growth rate at 6 percent and inflation at 6.5 percent.
“Assuming a near-zero growth in agricultural production and continued recovery in industrial production and services sector, the baseline projection for gross domestic product growth for 2009-10 is now raised to 7.5 percent,” the central bank said.
“Keeping in view the global trend in commodity prices and the domestic demand-supply balance, the baseline projection for wholesale price inflation for end-March 2010 is now raised to 8.5 percent,” Subbarao said.
He also expected the country’s growth rate of 7.5 percent to be sustained in the next fiscal.
“As with growth, we shall formally announce our inflation projection for 2010-11 in our monetary policy in April. But on the assumption of normal monsoon and global oil prices remaining around the current level, it is expected inflation will moderate from July.”
Highlights of RBI’s third quarter monetary policy update:
- Cash reserve ratio hiked by 75 basis points to 5.75 percent in two stages
- Move to suck out excess liquidity worth Rs. 36,000 crore from system
- Bank rate retained at 6.0 percent
- Repo rate retained at 4.75 per cent
- Reverse repo rate retained at 3.25 percent
- India’s economic growth projection hiked to 7.5 percent from earlier 6 percent
- Annual inflation rate projection hiked to 8.5 percent from 6.5 percent
- Inflation risk looms larger when viewed in the context of global price movements
- Reserve Bank to monitor price situation closely and take further action as warranted
- Reduction in excess liquidity to help anchor inflationary expectations
- Recovery process to be supported without compromising price stability
- Central bank focus now on managing recovery from managing crisis
- There is still uncertainty about pace and shape of global recovery
- Stronger global recovery could prop oil prices sharply
- Monetary policy for 2010-11 to be announced April 20
Muslim women have to shed burqa to Vote: SC
January 24, 2010
The Supreme Court on Friday observed that Muslim women have to shed their burqa to vote. A bench comprising Chief Justice K G Balakrishnan and Justice Deepak Verma gave the order on Friday while hearing a petition by Madurai resident Ajmal Khan, who had pleaded that printing photos of Muslim women in the voters list violates Islam and their fundamental right to practise and profess their religion.
The Supreme Court was not convinced, and asked him what Muslim women would do if they contested elections.
“What if you want to contest an election?” asked the court. “If you have such strong religious sentiments, and do not want to be seen by members of public, then do not go to vote. You cannot go with burqa to vote. It will create complications in identification of voters.
“If someone comes to vote in a burqa and the photograph was also taken with a veil covering the face, how would anyone identify the voter?” the court said.
Khan filed a plea in the apex court after the Madras High Court ruling dismissed his plea questioning Election Commission of India’s move to have photographs of voters in electoral rolls.
“The religious custom and preachings of Holy Quran lay down that Muslim women should wear purdah and ‘burqa’ and show their faces only to their husbands and close relatives,” Khan said in his plea.
Well I agree with the observation made by the apex court but my view is that in a secular country like India everyone has the right to practice their religion and nobody should be forced to act in a way which hurts the religious sentiments. If photos without burqa is a necessity to vote, which I agree to, at least the court can direct the Election Commission to appoint a women election officer at every booth so that the Muslim women can easily reveal their identity and vote. These are my personal views. Are we going to see a new controversy in the days to come. What will the political parties who treats Muslims as their vote-bank have to say about the observation?
Economic Survey calls for reforms, predicts 7% growth
July 2, 2009
New Delhi: The Economic survey suggested reforms in areas like foreign direct investment, divestment, taxation and the subsidy regime and says that India can achieve 7.75 percent growth this year despite the difficult global circumstances.
The economy can even expand much higher than last year’s growth if the monsoon rains were normal, said the country’s annual economic report card for 2008-09 tabled in parliament on Thursday by Finance Minister Pranab Mukherjee.
“If the US economy bottoms out by September 2009 there would be good possibility for the Indian economy repeating its 2008-09 performance,” it said, adding, even as wide ranging challenges remained, the Indian economy had shock absorbers to facilitate early revival.
The $1.2 trillion Indian economy expanded by 6.7 percent last fiscal, after registering a 9 percent average growth in the preceding three years.
The survey, tabled annually ahead of the national budget and prepared by chief economic advisor in the finance ministry, presents an overall view of the state of the economy and gives some suggestions on the future course of action.
The survey, which wants restoration of high growth with price stability, has also called for limiting subsidies such as those doled out on fertilizers and cooking gas, while asking for a review of exemptions granted to exporters.
The survey says government must also take a thorough re-look at its divestment policy and target to realize 25,000 crore per annum ($5 billion) from the sale of at least 10-percent equity in government-owned enterprises.
Further, the survey has suggested the auction of loss-making state-run enterprises.
In the case of excise, customs and taxation, the survey calls for a new income tax code, rationalisation of double taxation, phasing out of surcharges, removal of fringe benefit tax and withdrawal of dividend tax.
In the area of external reforms, the survey wants the government to allow 49 percent foreign equity in defence production, 100 percent in high-technology defence equipment and permission for global firms in multi-brand retailing.
The survey also appeared to have taken notice of the controversies surrounding the allocation of radio frequencies to telecom companies and has suggested auction of spectrum and make it freely tradable among the operators.
The survey says to counter the negative fallout of the global slowdown, India the Government responded by providing substantial fiscal expansion in the form of tax relief to boost demand and increased expenditure on public assets.
Polling begins for the last phase of Lok Sabha elections
May 12, 2009
Voting began on wednesday in 86 constituencies across seven states and union territories in the last phase of Lok Sabha elections. Polling began at 0700 hrs across 1.21 lakh booths.
A total of 1,432 candidates are in the fray in Himachal Pradesh, Jammu and Kashmir, Punjab, Uttar Pradesh, West Bengal, Tamil Nadu, Uttarakhand, Chandigarh and Puducherry.
Among the key contenders in this round are Congress’ P Chidambaram and Md Azharuddin, BJP’s Maneka and Varun Gandhi and Mukhtar Abbas Naqvi, DMK’s T R Baalu, A Raja, Dayanidhi Maran and M K Azhagiri, MDMK’s Vaiko, TC chief Mamata Banerjee and SP’s Jayaprada.
Congress’ Mani Shankar Aiyar, Sajjad Gani Lone of People’s Conference, BJP’s Vinod Khanna and Navjot Singh Sidhu are others who are prominent among the 1,432 candidates in the fray in this round.
All 39 Lok Sabha seats of Tamil Nadu, all four of Himachal Pradesh and all five of Uttarakhand will see polling on wednesday.
Jammu and Kashmir will vote for two Lok Sabha seats, Punjab for nine, Uttar Pradesh for 14 and West Bengal for 11. There is one seat each in Puducherry and Chandigarh.
Polling has been completed to 457 Lok Sabha seats since the exercise began on April 16. Results will be out on May 16.