Saturday, August 29, 2009
The official Wholesale Price Index (WPI) for 'All Commodities' for the week ended August 15 rose by 0.6% to 238.8 from 237.4 for the previous week. The annual rate of inflation, calculated on point to point basis, stood at -0.95% for the week ended Aug. 15 compared to -1.53% for the previous week and 12.82% during the corresponding week of the previous year.
The index for the Primary Articles group rose by 2.1% to 268.4 while the index for Food Articles group was up by 3.2% to 270.3. The index for the Fuel & Power group remained unchanged at its previous week's level of 338.2 and the index for Manufactured Products group rose by 0.1% to 206.4. Inflation rate for all the four indices stood at 7.7%, 13.29%, -10.12% and -0.82%.
For the week ended June 20, the final WPI stood at 235.8 compared to the provisional figure of 234.6. The annual rate of inflation, calculated on point to point basis, stood at -0.8% as against -1.3% reported earlier on July 2.
Inflation may turn positive and then start to accelerate in coming months as a poor monsoon threatens to reduce farm output and stoke food prices. Food costs as reflected in the nation’s consumer-price indexes (CPI) are already increasing at a rapid pace. Consumer prices paid by farm workers jumped 12.9% in July from a year earlier. Prices paid by rural workers rose 12.67% in July. Higher food prices will lead to WPI inflation accelerating to 6% in the fiscal year to March 2010.
The RBI cut benchmark interest rates six times between October 2008 and April 2009 to unprecedented lows. On July 28, the central bank left the reverse-repurchase rate unchanged at 3.25% and kept the repurchase rate at 4.75%. The RBI said it may have to reverse its expansionary measures to subdue inflation.
The RBI last month revised its fiscal year-end inflation forecast to 5% from an earlier estimate of 4%
The output from the kharif crop may drop by 15% to 20% due to scanty rains during the southwest monsoon season, Finance Minister Pranab Mukherjee said. India’s 278 districts, 44% of the nation’s total, have declared drought, or are in a drought-like situation because of below average rainfall this year, he said at an event organised by industry chamber FICCI in New Delhi.
"For impact of production on the Kharif crop, exact quantum will be known only when the harvesting starts. But from the picture of sowing, one can easily estimate that there is likelihood of a shortfall to the extent of 15-20%," he told a gathering of industry captains. He added that drought is a reality and rainfall deficiency for the season is to the extent of 26%. "We feel there is no need for a panic response," Mukherjee said.
The Finance Minister said that given the situation, the drought would have only marginal effect on central procurement, as the Government was able to contain the effects of drought in Punjab and Haryana. "I have been told that the yield in these states will not be affected due to drought and it is important from the central procurement point of view, as 65% of wheat and 30% of rice procurement is done from these states," Mukherjee said.
He said that the Government would have 1.77 million tons of wheat available by April 1, 2010, and 1.37 million tons of rice by October 1, 2009. The Finance Minister assured India Inc. that the Government was sensitive to the cause of industry and would take steps to contain inflationary pressures and monitor borrowings so that it does not crowd out private investments.
Prime Minister, Manmohan Singh addressed CBI and State Anti-Corruption Bureaux today on 26th August 2009 at Vigyan Bhavan.
I am very happy to be amongst you today. Let me begin by greeting and congratulating today’s recipients of the President’s Police Medal for Distinguished Services. I hope they will continue to excel professionally and be an example for other officers to follow.
This biennial conference will deliberate upon a very important issue - that of corruption in our public life. The urgent need to combat this menace cannot be over emphasized. Corruption distorts the rule of law and weakens institutions. It hurts our economic growth in a variety of ways, apart from hindering our efforts to build a just, fair and equitable society. Important projects, which have huge externalities for growth, do not get implemented in time, and when they do get finished, they are of a poor quality. The inflated project costs consume scarce resources which could have been better used in other important areas. The poor are disproportionately hurt because of corruption. We have some of the most ambitious and wide ranging programmes in place to help the poor and the deprived sections of the society.
However, there is a constant refrain in public discourse that much of what the government provides never reaches the intended beneficiaries - whether it is subsidized foodgrains for the poor, loans, fertilizers or seeds on concessional terms for small and marginal farmers or the benefit of employment programmes for the unemployed. This should be a matter of serious concern for all of us collectively.
The world respects our democracy, our plural and secular values, our independent judiciary and free press, our commitment to freedom and peace and our pursuit of equitable and inclusive growth. But pervasive corruption in our country tarnishes our image. It also discourages investors, who expect fair treatment and transparent dealings. As the country grows and integrates with the world economy, corruption continues to be an impediment to harnessing the best of technology and resources.
The malaise of corruption, so sapping our efforts to march ahead as a nation, should be treated immediately and effectively. And all of you present here today can contribute substantially in this war against corruption. Indeed, you are in a privileged position to do so.
There is no single remedy for fighting corruption. The battle against it has to be fought at many levels. The design of development programmes should provide for more transparency and accountability. Systems and procedures which are opaque, complicated, centralized and discretionary are a fertile breeding ground for the evil of corruption. They should be made more transparent, simple, decentralized and less discretionary. The Second Administrative Reforms Commission has given a wide range of recommendations in this regard in its report on ‘Ethics in Governance’. I am told that these have been examined in great detail and it should be soon possible to take a decision on them.
While systemic improvement is a long term goal, one cannot wait for it to happen. Our anti corruption agencies must make the cost of corruption unacceptably high for those indulging in it. There should be clear focus on corruption prone areas and individuals so that the available resources for anti corruption efforts are not dissipated. High-level corruption should be pursued aggressively. There is a pervasive feeling that while petty cases get tackled quickly, the big fish escape punishment. This has to change. Rapid, fair and accurate investigation of allegations of corruption in high places should remain your utmost priority. The nation expects you to act firmly, swiftly and without fear or favour. And you have the constitutional and legal protection and safeguards to do so.
The ever evolving levels of sophistication and complexity in different cases of corruption present special challenges for the enforcement agencies. The need is to stay one step ahead of the corrupt. For this, acquisition of new skills, through intensive and regular training, is an absolute pre-requisite. I hope all the agencies present here have put in place a system of learning and disseminating new ideas and skills for their personnel. It is only a well-trained, well-equipped and well-motivated set of officers who can be equal to the task.
It is also necessary for you to upgrade your capabilities by learning from the best global practices. I am told the Central Vigilance Commission has taken many initiatives in improving transparency in the procurement process in government and public sector undertakings, including introduction of an Integrity Pact for high value transactions. The Central Vigilance Commission has to play a pivotal role in sharing the best practices with all those involved in the anti-corruption effort. The State Vigilance Bureaus can also play a similar role by interacting with the various State departments, studying their procedures and coming up with suggestions to make them more transparent and less amendable to abuse or manipulation of any kind.
To the officers of the CBI I would say that the people have great faith and expectations from you. This is evident from the frequent public demand for a CBI investigation especially when a serious crime takes place. I urge the officers of the CBI to do their utmost to live up to this expectation. There have been occasions in the recent past when the conduct of the Bureau has come in for severe public criticism. I would like the CBI to have a critical look at itself and introspect deeply with an end to further improve its functioning. I have been informed that CBI has set a target for itself in investigation of cases for the next one year. I would urge the State agencies to set similar targets for themselves and aim at acquiring an enhanced credibility in the eyes of the people.
While quick investigation is important and necessary, it is not sufficient to bring the guilty to book. Trials should be conducted expeditiously and judgements delivered quickly. To begin with, the aim should be to conclude the trial in two years so that punishment could be given to the offenders within a period of three years or so. We have recently decided to set up 71 new CBI courts and expect them to function as model courts, hold day-to-day proceedings and avoid unnecessary adjournments.
I must also emphasize the need for the right balance which all of you need to strike in your anti corruption efforts. It must be ensured that innocent officials are not harassed for bonafide mistakes, even while the corrupt are relentlessly pursued and brought to book. Officials have to be encouraged to take decisions, to accept responsibility, to show initiative and, whenever required, to take risks if the bureaucracy is to shed its slothful and lethargic image. Very often, the fear of harassment and damage to reputation makes public officials unduly timid and slow and the whole government machinery ineffectual. Anti-corruption agencies have to develop a system of investigation that factors this into account. It is as much your duty to protect the honest and the efficient as it is to prosecute the venal and the corrupt.
As you begin deliberations, I wish the proceedings of this conference all the very best. I hope you will come up with concrete ideas on many important issues. Let me conclude by once again congratulating the medal winners for their splendid achievement.
Indians may soon get to surf the web at ultra high speed on their high-end mobiles, besides making video calls. The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee fixed the reserve price for third-generation (3G) radio frequency auction at Rs35bn. Any telecom company bidding for pan-India 3G spectrum will have to pay a minimum of Rs35bn. This is nearly Rs5bn lower than the base price that Telecom Minister A Raja and Finance Minister Pranab Mukherjee had agreed to during a meeting with Prime Minister Dr. Manmohan Singh in June. It is nearly Rs15bn more than the price specified by telecom regulator TRAI, which had set a base price of only Rs20.2bn.
The EGoM also decided that a total of five players will be allowed to offer 3G services in every circle, of which one slot will be reserved for state-owned telcos BSNL & MTNL. Raja and Mukherjee had earlier decided to have seven players per circle. The Department of Telecom (DoT) had presented three options to the EGoM - retaining the reserve price at Rs20.2bn as recommended by TRAI, double it to Rs40.4bn as demanded by the Finance Minister, or agree to a figure of Rs35bn.
The EGoM also decided that the reserve price for WiMAX spectrum will be Rs17.5bn and has decided to issue three licences. "We hope to complete the 3G auctions within 90 days and we expect to get a minimum of Rs250bn from these auctions," Raja said. In his Budget for 2009-10, Mukherjee had estimated raising Rs350bn from auction of spectrum, both 3G and 2G, in future allocations.
Industry expressed disappointment with the policy announced. Both GSM and CDMA players said that the base price for 3G auction was on the higher side and the EGoM should have stuck to the initial figure of Rs20.2bn for 3G spectrum. BSNL and MTNL have already been given spectrum for both types of services.
Operators who win the 3G bidding will get a chunk of 5 MHz spectrum and Broadband Wireless Access (BWA) players will get 20 MHz. Only 1.25 MHz spectrum has been earmarked for one CDMA player. With only four slots up for grabs, the Government can expect some aggressive bidding considering there are least 6-7 players eyeing the 3G segment.
Union Commerce Minister Anand Sharma announced the Foreign Trade Policy for the period between August 2009 to March 2014. He said that the Government is aiming to achieve an export target of US$200bn by the end of fiscal year 2010-11. This will represent an increase of 15% over the export of fiscal year 2009-10. India's exports reached US$168bn in the fiscal year 2008-09 from US$63bn in FY04 and is expected to remain flat in the year ending March 2010. Sharma also said that the Centre aims to double global merchandize trade in five years and double the share in worldwide trade by 2020. India's share of global merchandise trade was 0.83% in 2003. It rose to 1.45% in 2008 as per WTO estimates. He said that export growth should reach 25% by the end of March 2014. India's share of global commercial services export was 1.4% in 2003. It rose to 2.8% in 2008. India’s total share in goods and services trade was 0.92% in 2003. It increased to 1.64% in 2008.
The Government would extend tax refunds to exporters and explore new markets in Africa and Latin America to bolster overseas trade, Sharma said while unveiling the Foreign Trade Policy in New Delhi. "The immediate objective of this policy is to arrest and reverse the declining trend of exports and to provide additional support, especially to those sectors which have been hit badly by recession in the developed world.," Sharma said.
The policy, coming in the backdrop of a 30% contraction in exports in the last 10 months, identified 26 new markets for trade that would be eligible for sops. These include 16 in Latin America and 10 in Asia and Oceania. At present, India's exports are highly concentrated in Europe (36%) and the US (18%) and Japan (16%) and these are the worst hit by the biggest financial crisis since the 1930s. "We have taken a conscious view to expand and diversify our export markets, especially in the emerging markets of Africa, Latin America, Oceania and CIS countries," the Commerce & Industry Minister said. The Government would offset disadvantages that exporters may face in these new markets, he added.
The policy also sought to help gems and jewellery sector, one of the worst hit, by allowing duty drawback on exports. Handloom and handicrafts would be helped under the Market Development Scheme, while the government also announced the continuation of the DEPB scheme till December 2010. In the short term, the relief measures include providing dollar credit to exporters that will be overseen by a high level committee, comprising Finance Secretary, Commerce Secretary and the Indian Banks Association. To insulate the small and medium scale exporters who are unable to seek expensive legal help for foreign markets, a Directorate of Trade Remedy Measures would be set up. The policy continues with the interest subsidy for exporters of 2% for pre-shipment credit and income tax exemption to 100% Export Oriented Units (EOUs) for till the end of next fiscal.
The Commerce Minister said that infrastructure and industry sectors showed some signs of recovery in exports in June, but added that it was still difficult to take a call on the nature of the recovery in the global economy. The Indian economy has not been affected as badly as many other economies by last year's financial meltdown, Sharma said. Much of the sharp fall in Indian merchandise exports was due to contraction in external demand, especially in the big markets such as the US and Europe, he added. The slew of fiscal as well as monetary measures announced by the Government and the RBI since October 2008 have managed to mitigate the fallout from the global economic downturn, the Commerce Minister said. The global economic downturn had pushed the country’s export growth into the negative territory in October last year. This was followed by imports registering a decline in January.
The bulls seem to be in an adventurous mood as they pushed the indices to a fresh 2009 highs. The coming week has some data in terms of first quarter GDP numbers and Import-Export figures. The new month will also see auto sales and cement dispatch numbers coming in. The Reliance-RNRL issue will continue to hog the limelight even though the Supreme Court has decided to commence final hearing on the high-profile gas dispute from October 20. Technical analysts are upbeat and see the 5000-mark breaching in a few weeks. Notwithstanding the lack of real improvement in the economy, investor exuberance appears to have escalated. Stay cautious and don’t overindulge in stock-buying as any reversal could prove difficult for investors to digest.