New Delhi, January 29
India Inc sung in different tunes-- from outright disappointment to "understanding" focus on price stability-- while reacting to the Reserve Bank's decision today to keep the key rates unchanged. Reacting to the quarterly policy review, PHD Chamber of Commerce and Industry and Assocham have expressed that the RBI should have slashed the interest rates, but CII has supported the RBI and has instead expressed concern over the rising oil prices and rupee appreciation.

Reacting to the RBI review, Dr L. K Malhotra, president, PHD Chamber, said: “The industry was expecting a cut in the bank rate and repo rate to soften the high interest rate structure in the country.” A bank rate cut, he said, would have reinforced growth momentum by reversing the negative deviation from trend in the industrial sector. It would also have contributed to the stabilisation of investment flows and in turn also contained inflationary tendencies due to the recent cuts in US Federal reserve rate by 75 basis points.

Malhotra said the RBI might revisit key rates after the Budget proposals and reduce the bank rate and repo rate. The industry has been of the view that cutting down interest rate has been necessary at this point because of dip in manufacturing production to 9.8 per cent between April-November 2007 as against same period last year when it was 11.8 per cent

Habil Khorakiwala, Ficci president, said in context of the slowdown in industrial growth that the RBI could have done some rethinking on the interest rate regime and fine-tuned the rates. A revival in the growth of industry and services, he maintained, is essential to sustain a high rate of economic growth. The Ficci chief said along with the rising rupee, high interest rates have taken a toll on several sectors, particularly the small and medium enterprises. In fact, apart from housing, construction and consumer goods, the high interest rate regime is adversely impacting the intermediate and capital goods sectors. However, the RBI has pointed out that focus needs to be on control of inflation expectations, price stability and orderly conditions in the market and these would take priority under the current global situations.

CII said it recognises this policy stand as being “neutral” and a deviation from the “hawkish” stand taken by the RBI earlier. There is an underlying focus on stability, which is conservative, and the CII feels that in uncertain times, this is strategically a good stance, as long as the RBI explicitly makes it known that it can take any action pertaining to the key rates if the situation demands. CII has welcomed the RBI’s move to persuade banks to undertake institutional and procedural changes for enhancing credit delivery to sectors that are employment-intensive. The export-intensive and employment-intensive sectors, such as garments, leather & leather products and handicrafts, have been adversely affected due to appreciation of the rupee since the last five quarters. Ensuring adequate and timely credit delivery to employment-intensive sectors is pivotal to inclusive and sustainable growth, said CII.

However, CII took this opportunity to reinforce its earlier demand for fuel price corrections in the domestic market to deal with the situation of rising international prices. CII had earlier recommended that prices, levies and duties on oil need to be recalibrate in such a way that the burden of oil price hike is shared between the government, oil marketing companies and consumers.

New Delhi, January 29
With a view to control inflation at a time when food and energy prices are on an upward curve, the RBI has decided not to cut interest rate in its third quarterly review of the monetary policy. Speaking about the stand taken by the RBI Governor Y.V Reddy, finance minister P Chidambaram said: "I endorse the (RBI's) approach. The Governor has reinforced price stability, emphasised credit quality and credit delivery, particularly to the employment-intensive sectors."

He termed the third quarter review as "standstill" and said the RBI has the flexibility to move either way depending on international developments and liquidity situation within the country.

On being asked whether the arbitrage in interest rates between India and US will increase capital flows, Chidambaram said there is still no certainty that capital flows will increase due to rise in gap between India's interest rates and those in the US.

However, there is no surety that capital flows would increase due to the US Federal Bank's move, he said. "We do not know. We don't know what will happen. As I've said (the) cat can jump either way. There could be increased capital flows, but there are payment obligations in those countries and there could be outflow of capital," he said.

He also indicated that he would discuss with the RBI Governor about further steps to arrest capital inflows into the country.

New Delhi, January 29
The bankers today remained non-committal on slashing lending and deposit rates, despite the RBI Governor Y.V. Reddy giving them explicit hints for voluntary reduction of rates on deposits and loans.

India’s second largest state-run bank, PNB, and largest private sector bank, ICICI Bank, said they would adopt a wait and watch approach during the fourth quarter of the current fiscal.

“In fact, there is no policy indication from the RBI, by way of repo cut, to really enthuse the banks to cut rates,” PNB executive director K Raghuraman told The Tribune over phone.

“It is too premature to expect a rate cut from banks…Moreover, any move to cut rates from banks would depend on slowdown in credit demand over high liquidity position…However, right now the liquidity situation is just comfortable,” he said, adding the PNB would closely monitor the situation that emerges in the banking sector in the last quarter before making any move towards rate cut.

On the interest rates, ICICI Bank also said it would keep on watching the situation for the entire fourth quarter of the current fiscal.

“Compared to the 4th quarter in previous years, this quarter interest rates have remained stable given the comfortable liquidity in the system,” joint managing director of ICICI Bank Chanda Kochhar said.

Commenting on the policy, she said the RBI has taken a measured approach given the global uncertainties, inflation and liquidity in the system.

Managing director and CEO of IndusInd Bank Bhaskar Ghose said it was unlikely that banks would lead the way in reducing lending rates in general, unless deposit rates first show a downward trend.

“RBI has provided a sufficient number of explicit hints that is expects banks to voluntarily reduce interest rates on both deposits and loans - despite having itself kept a rate cut in abeyance. An outcome of this may be the avoidance of the mad scramble to raise year-end deposits at uneconomically-high rates,” Ghose said.

New Delhi, January 29
The Federation of Indian Export Organisations (FIEO) today apprehended that the RBI’s policy of maintaining a status quo on lending rates may further strengthen rupee and dent competitiveness of Indian export sector.

FIEO president Ganesh Kumar said with the reduction in rates by some central banks and the aggressive rate cut once again made by the US Federal Reserve, has the possibility of greater FII inflows (both in equity and especially in debt), greater external commercial borrowings, which would lead to large capital inflows which could be inflationary.

“The significant interest rate differential would manifest itself in a surge in capital inflows resulting in the rupee appreciating further impinging on competitiveness of exports,” he said.

The FIEO chief stated that while the RBI’s policy of exercising a cautious stance of maintaining a status quo on basic parameters is well taken, a closer look at the industrial growth figures, which has declined from 11 per cent a year ago to 9.5 per cent during the first half of 2007-08 and a decrease in the merchandise export by 21.9 per cent in US dollars as compared to 26.2 per cent in the corresponding April-November period, indicate that rationalisation of credit rates to the SME export sector would be an extremely critical requirement at this stage.

He pointed out that there has been a dramatic appreciation in currency over the past two years on a tide of huge global liquidity, which has impacted export competitiveness severely reducing export margins. 

New Delhi, January 29
With a view to make India’s exports competitive in face of the rising Rupee and adhering to the WTO norm of exporting goods without levies and duties, the finance ministry has urged the empowered committee of state finance ministers to look into the measures for ensuring growth of the manufacturing sector.

The finance ministry, in a recently prepared note, has stated that the committee should deliberate with the commerce ministry the issue of effect of the Rupee appreciation on exports and rebate of state taxes and levies under the WTO commitment. The finance minister has also suggested the way in which the state governments should be compensated for the said rebate.

According to the finance ministry, after the introduction of GST, it is expected that all taxes - levied by the Centre or state- would need to be rebated to fulfill India’s WTO commitment. This loss of revenue for the states would have to be compensated by the Centre. The alternative proposed is to rebate state taxes by suitably adjusting the funds provided to the state governments under plan finance of the Centre.

According to the finance ministry, “since the state VAT on exports is zero, the state governments need to allow reimbursement of all remaining state taxes levied on inputs used in the production of goods that are exported”.

Since the relief on non-VATable state taxes is a legitimate end, and purview of state taxes is limited, it is necessary to ensure that exports remain competitive, states the finance ministry note.

State taxes for captive power generation, fees and taxes are levied by the state government. The finance ministry feels that as a matter of principle, the decision for rebating of these levies and taxes is possible at state level only. Since, state machinery also administers these taxes and collections get deposited in the state government’s accounts, rebating these levies and taxes would be feasible in lieu of the collections retained at the state government level.

Ludhiana, January 29
ING Vysya Bank would open 56 new branches across the country, including five in Punjab. The bank, that recently got licences for its new branches, is also striving to increase its home loan base by at least 70 per cent within this year.

Uday Sareen, country head, retail, while talking to The Tribune, said the bank was on an expansion spree with a special focus on northern region where it would have 40 new branches this year.

"We have identified Punjab as one of the top three markets outside metros with high growth potential. The coming year would witness major growth here," he said.

Buoyant on financial planning and wealth management business, where it is expecting a 60-70 per cent growth by the end of this year, Sareen said every branch would have dedicated wealth managers.

"Customer awareness on financial planning is quite high these days and to cater to this growing demand we have dedicated staff in every branch for the purpose."

Talking about home loans business, he said real estate was a high growth segment and the trend was likely to continue in the coming days. "More demand would be generated and we are expecting high growth this year."

Chandigarh, January 29
The small-scale industry (SSI) in the region has been severely hit by the frequent hike in steel prices, which have shot up by Rs 4,500 per metric ton this month. With prices expected to increase by another Rs 3,000 per metric ton from February 1, the small-scale industry is accusing top steel manufacturers of forming a cartel and dictating market prices.

The price of steel increased by Rs 1,500 on January 1, and again by Rs 3,000 per metric ton on Monday. This hike has affected profit margins of the small-scale sector, especially the secondary producers. Though the steel manufacturers insist that the price hike is on account of increase in international prices, the secondary producers rubbish these claims. “International prices have gone up by $40-$60 per metric ton, on account of closure of certain furnaces in China and imposition of excise duty of 15 per cent on steel exports from China,” says Darshan Singh of Lakshmi Steel Rolling Mills, Mandi Gobindgarh.

Sources in the steel industry informed The Tribune that cartelisation of steel manufacturers is responsible for the rapid increase in steel prices. Though there is a shortfall in the demand and supply of steel- the annual steel production of the country is around 40 million tonnes as against a demand of about 60 million tonnes- it is believed that the steel prices are being determined by the six top players in the steel industry and the smaller players have to follow suit.

Interestingly, while steel prices in the domestic market continue to rise, steel is being exported at cheaper rates than those prevailing in the domestic market. There is a difference of at least Rs 2,000 a ton in the prices of steel sold in the domestic market and the price at which it is exported. S.C. Ralhan, regional chairman, Engineering Export Promotion Council, said: “With most Indian exporters exporting billets and ingots, there has been a shortage of these in the domestic market. The government should impose duty on their exports, so that their availability is assured in the domestic market for the secondary steel manufacturers.” He added that this sharp hike had also adversely affected exports as the exporters were unable to quote prices and take orders on account of frequent hike in prices of raw material.

New York, January 29
Four Indians, led by steel tycoon Lakshmi N. Mittal and Ambani brothers, have been named by the Forbes magazine in its latest list of 10 wealthiest chief executives in the world. Mittal is ranked second by the magazine, after legendary investor Warren Buffet, while Mukesh and Anil Ambani rank sixth and seventh, respectively. Wipro's Azim Premji is the fourth to make the list, with the magazine ranking him ninth.

"We found the 10 richest CEOs around, some of whom founded their own companies, others who benefited from large inheritances, and still others who built their fortunes through other means," the magazine said.

"These are people who don't have to work another day in their lives. And yet they choose to devote untold amounts of time and energy to the arduous task of running a company and answering to shareholders." Forbes has also given an estimate of the respective wealth of the richest chief executive, pegging that for Mittal at $32 billion, followed by $20.1 billion and $18 billion, respectively for Mukesh and Anil Ambani.

Premji's net worth was pegged at $17.1 billion. "Like his brother Mukesh, Anil doesn't call himself chief executive, even though he shares the duties of CEO with two other executives at Reliance Anil Dhirubhai Ambani Group," Forbes said.

Commenting on Premji, the magazine said his company Wipro was one of the largest IT firms. "Earlier this month, he denied market rumours that Wipro was interested in acquiring CapGemini of France." Forbes said it compiled the list by perusing the ranks of the Forbes 400 list of the richest Americans from the September issue and the annual billionaires' list from of last March. — IANS

New Delhi, January 29
Modernising airports seems to be the new mantra for the big industrial houses and real estate developers.

After 23 bids were received to develop the city side and cargo facilities at the Raja Sansi airport in Amritsar, the bids for modernising the Udaipur airport has stolen a march over the former. The government has received 24 bids, which include those from Reliance Energy, GMR, GVK and L&T, for the Udaipur airport signalling the eventual take-off of the aviation sector in the country.

What is further heartening is that Singapore’s Changi Airport operators have again evinced interest in developing the Udaipur airport to world-class standards as it had done for the Amritsar airport.

This time again, it has bid in a consortium with Tata Power and TRIL.

Atlanta Ltd, which used to run the Atlanta Airport and which had also bid for the Amritsar airport is again in race for developing the Udaipur airport.

January 24 was the last date for submitting the bids for modernising the Udaipur airport, which is part of the first phase of government’s efforts to upgrade 35 airports around the country by 2010.

The government had earlier opened the process for inviting bids for the commercial operation, maintenance of terminal building, development and operation of cargo facilities and cityside development of the Udaipur airport.