New Delhi, April 20
The Minister of Industry and Commerce has accepted that the Centre has control over inflation only "to a very small extent".

In an interview to the CNN-IBN on 'Devil's Advocate', Kamal Nath said: "If you're believing that inflation can be handled like pressing a button and it comes down, I'm afraid that's not going to happen". The minister said that to "a very large extent" fighting inflation "lies with the state governments" and added "if the states are not going to use the power they have, the laws they have, the regulations they have against hoarding, against profiteering, against excess stocking, obviously the Central Government will fail."

He said the Centre was prepared to use strong powers against the states if they fail to act and also indicated a willingness to ban forward trading in essential commodities as well as corporate purchases of wheat.

The minister accepted that although inflation had shown a marginal decline last week, 'we have a major battle' ahead. He said the perception or fear of inflation was worse than inflation itself. However, he claimed that the present inflation was a consequence of "unprecedented growth over the last four years":

"The marginal decline in inflation was not an accident but that we have a major battle is correct. We've had growth, unprecedented growth, over the last four years. Now is the challenge of managing that growth and in managing that growth is supply-side management. Worse than inflation is the fear of inflation or the perception of inflation or the feeling of inflation."

Claiming that last week's decline "is only going to be more ", the minister admitted that the government had expected a bigger decline. He also admitted the government needed a series of policies to tackle inflation. He said, "there's no one-size fits-all solution for inflation", adding that within "a couple of days" the government would do more but promised there would be "no knee-jerk reaction".

Speaking about future measures the government was considering, he specifically spoke of fiscal and monetary steps because, as he put it, "You cannot have too much of money chasing too few goods." However, the minister categorically ruled out reducing the increased expenditure envisaged by the Budget on the Rs 60,000 crore farm loan waiver, the NREGA and the Sixth Pay Commission, which would inject money into the economy and therefore push up inflation.

"This is the greatest economic stimulus in rural India," he said. However, he accepted the budgetary expenditure would generate demand but "it would not be instant." He added: "But, of course, when you have growth there is this challenge of managing growth, of aspirations."

Asked about forward trading in essential commodities, Nath said the government had an open mind about banning such trading. He said the need of the day was "to look at it with all its merits. The minister said the government could look at banning futures trading completely if it was the reason behind inflation.

When questioned about criticism of his decision to ban cement exports, Nath said this had been done "in anticipation of a steep price rise".

Mumbai, April 20
Worried over the unabated inflation now at over 7 per cent, Reserve Bank is expected to take more monetary measures, including a hike in key short-term rates in its credit policy on April 29, top bankers said.

A possible 0.25-0.5 per cent hike in the repo rate could be on the cards to supplement the 0.5 per cent cash reserve ratio (CRR) hike effected last week by the apex bank, they said.

Repo rate is the rate at which the RBI borrows from the banks while CRR is the amount of funds that the banks have to keep with the RBI.

“The first priority of the Reserve Bank would be to rein in inflation. A 0.25-0.5 per cent hike in repo rates is quite possible,” Uco Bank’s CMD S K Goel said here.

RBI had hiked CRR by 0.5 per cent to 8 per cent on Thursday to suck out Rs 18,500-crore liquidity from the banking system as a measure to combat ballooning inflation.

“The impound on Uco Bank with this CRR hike would be around Rs 400 crore, while the loss of income would be around Rs 24 crore. This would have an impact on the lending surplus of the bank,” Goel said.

The bank’s Asset Liability Committee (ALCO) will meet on May 5 to take a decision on lending rates, Goel said.

Even a 0.25 per cent hike in short-term rates could force banks to pass on the burden to their customers through a hike in lending rates.

An increase of 0.25-0.5 per cent hike in lending rates could not be ruled out if the RBI goes in for a further tightening of its monetary policy on April 29, they said.

Kotak Mahindra Bank’s Treasurer, Mohan Shenoy, said a hike in repo rates could not be ruled out.

A similar view was echoed by HDFC’s MD, Keki Mistry who said policy-makers would watch inflation in the coming weeks while structuring the monetary policy.

“The movement of inflation in the coming week will have an influence on RBI’s monetary policy as the core focus of policy-makers is to put a cap on spiraling inflation...I expect a 0.25 per cent hike in repo rates,” Mistry said.

HDFC would assess the increase in its cost of funds after the monetary announcement and then take a call on its interest rates, he said.

Punjab National Bank’s CMD K C Chakrabarty said any revision in key rates would not impact his bank as the bank was comfortably positioned in terms of its business. — PTI

New Delhi, April 20
Reeling under intense pressure from rising input costs, especially that of steel, the country’s largest carmaker Maruti Suzuki has decided to hike prices from the first week of next month. According to sources, the company’s sales department has written to dealers to be prepared for the imminent price hike and exhaust existing stocks before the new prices come in.

“There has been a continuous increase in the steel and commodity prices in the past few months. As a result our input costs have increased substantially. We have been trying to absorb this increase in the input costs, but now we are forced to pass on a part of this increase to the customers,” the company’s letter to dealers said.

The company, however, is still in the process of finalising the quantum of the proposed hike on different models. “The amount of increase is likely to be substantial and will increase the ex-showroom price by the first week of May,” the letter added.

When contacted, MSI officials confirmed that the cost pressures were mounting due to increase in input costs, but refused to elaborate further on the issue.

The company had last increased the prices of its cars in February 2008 ranging between Rs 1,000 and Rs 11,000 (ex-Showroom, Delhi) across most of its models.

It, however, reduced prices in its six models following the excise duty reduction announced in the Budget on small cars from 16 per cent to 12 per cent. — PTI

New Delhi, April 20
German luxury car maker BMW has scrapped plans to launch premium small car Mini in India by 2009, citing feasibility reasons.

“Last week, we have taken a decision to scrap plans to bring Mini by 2009. After the feasibility study we had undertaken, it is clear to us that it will not be viable to bring the car that soon,” BMW India president Peter Kronschnabl said.

He, however, reiterated that the company has not completely abandoned the plan to bring Mini in India.

“Probably in another one-and-a-half years, we will have a re-look at the issue and assess the market again. What we have found is that Mini being a small car coming at a high price of approximately above Rs 20 lakh, it is not going to be a viable option at the moment,” Kronschnabl said.

Considering the price sensitive Indian market, there has been a debate as to whether such small car, despite its lineage, will be accepted at such a high price.

Chandigarh, April 20
Personal computer penetration in India is still a low 2 per cent, says Saurabh Grover, country head of AOC, world leaders in computer display screens.

Laptops are now gaining popularity and desktops are bowing out. In desktop industry also, computer users prefer TFT or LCD monitors than conventional huge CRT monitors.

As of now, ratio of desktops to lap tops may be 1:6.

The laptop or computer industry faces no real threat from hand-held sets, like blackberry as laptop has become an integral part of life in the developing societies, adds Saurabh Grover.

“We in AOC are the world leaders with 27 per cent of all computer display screens coming from our manufacturing lines in China, Brazil and Poland. In India we sold 1.8 million LCD monitors last years of which 1.5 million were sold to the top computer brands while three lakh were sold under the AOC brand name,” reveals Saurabh Grover.

“There was a big gap between us and Samsung, the second largest seller of computer display screens which sold only 1.1 million screens last year. While both Samsung and LG have discontinued manufacturing conventional CRT monitors, we have decided to continue its production till next year.

The most important component of an LCD or TFT screen is its panel. AOC that supplies computer display screens to all major computer companies, including IBM, has less than 1 per cent rejection of its display screens because of high quality controls.

In India, the market share of AOC was 33 per cent where it achieved a turnover of Rs 800 crore last year. The worldwide turnover was $ 8 billion,” Saurabh Grover told 75 partners of AOC marketing network from all over the region here last night. The meet was a mix of entertainment intermittent with small sessions of company addresses by TPV, the parent company, and its associates.

New Delhi, April 20
The Finance Ministry is understood to have set up a cell to implement by September, the Sixth Pay Commission recommendations that is awaiting government approval.

Sources said Finance Minister P Chidambaram approved setting up of the Implementation Cell “to process and implement the accepted recommendations of the Pay Commission by September.” The six-member cell set up in the Department of Expenditure, will be headed by a Joint Secretary and will complete its work in six months with effect from April 1, 2008, sources said.

The government had earlier set up a Committee headed by Cabinet Secretary to process the Sixth Pay Commission report before giving its final approval. Once the Cabinet approves the report, the Implementation Cell will implement the report, the sources said.

Ever since inflation rose to a three-year high of over 7 per cent, the government has been eager to implement the recommendations of the Central Pay Commission report at the earliest, sources said.

The pay panel has recommended an average hike of 28 per cent in the salary of the central government employees, which is expected to benefit over 40 lakh persons.

The government is concerned that the armed forces, along with employees of the Railways and other departments are unhappy with the disparities in the pay commission’s recommendations and have asked the Cabinet Secretary to submit the report at the earliest.

The Implementation Cell is also expected to look into timely flow of funds to all Ministries, which is estimated at Rs 12,500 crore by the Pay Panel for 2008-09.

The pay panel has estimated that the government would require additional about Rs 18,000 crore this year towards payment of arrears. — PTI

Decent guidance for financial year 2008-09 by the IT major Infosys, prediction of normal monsoons and buoyant markets overseas ensured that Indian bourses ended last week on a high note. Sensex gained 674 and nifty gained 180 to close the truncated last week at 16,481 and 4,958, respectively.

However, high inflation and rising crude oil is a cause for concern for the market in the near term. On the global front, good results and guidance from Intel Corp, JP Morgan Chase & Co and other blue chips eased worries that weak US economy would sap corporate profits.

The near term would continue to be dictated by the forth quarter results and what the managements have to say for the current financial year.