New Delhi, April 29
Prime Minister Manmohan Singh has urged the Indian industry that it can ensure price stability that will help sustain the growth process. A step that trade and industry can take is to absorb rise in input costs by laying emphasis on improved productivity and thereby help maintain the price line.

The prospects of domestic growth remain good, said the Prime Minister, adding, the industry must pass on benefits of tax and duty cuts to consumers.

The Prime Minister also raised concern about the poor international response to India’s concerns on crises that are gripping the world. India’s voice must be heard in the management of the world food economy, be it the energy economy, financial system or global security, said the Prime Minister while addressing Indian industry at the annual meeting of Confederation of Indian Industry (CII).

Pointing out the poor response to the ongoing energy crisis, he said the world oil demand rose by just 1 per cent per annum over the past two years, crude prices shot up by over 90 per cent in dollar terms and 40 per cent in euro terms.

“I am deeply dismayed that global response to third energy crisis has fallen short of our expectations and compares poorly with the response to the first and the second oil crisis,” Dr Singh said.

On the price rise, which has become a challenge for the present government, the Prime Minister reiterated that it could not be ignored that there were external factors contributing to inflation over which there was no control. The world community has not done enough to address this challenge. Singh suggested that there was a need for a new global compact between the developed and developing countries and between land surplus and labour surplus economies to stabilise global food prices.

The Prime Minister also blamed the international community for being slow to come to grips with the now visible structural weakness in the functioning of international financial system. The management of financial sector in the developed economies, especially the US, has been less than satisfactory, he said, adding, the sub-prime crisis and recession there had consequences for the stability and sustainability of global growth.

Mumbai, April 29
Reserve Bank Governor Y V Reddy today said the three-pronged strategy of fiscal, supply-side and monetary measures should bear fruit and inflation should moderate in the next 2-3-months.

"Inflation should begin to moderate in the next 2-3 months following fiscal and supply-side measures taken by the Government and the RBI's own monetary measures," Reddy said in his customary post-credit policy news conference here today. Forecasting an economic growth of 8-8.5 per cent this fiscal, Reddy said that the expected good monsoon coupled with a strong performance from the services sector would propel growth.

"The only pressure point in the economy now is inflation. We are, therefore, giving the highest priority to inflation," he said.

With global uncertainties increasing, growth slowing down and inflationary pressures being high, there is a dilemma for policy makers in advanced economies whether to go in for short-term financial stability at the cost of medium-term inflation, Reddy said.

In India, however, the RBI's focus is more on domestic factors, Reddy said.

There is no doubt over uncertainties regarding shooting global oil prices. "If its price remains at the present level and if some pass-through (in the domestic economy) is still incomplete but some fiscal measures are taken, then inflation can moderate," he said.

New Delhi, April 29
Facing widespread criticism from the Opposition as well as the supporting Left parties on the SEZ issue, the government today clarified that it was open to reviewing the Special Economic Zone Act once the number of SEZs in the country crossed the figure of 100.

The government also ruled out FDI in retail sector, an area that has come under flak from traders and political parties. It added that it would not subscribe to any agreement on WTO unless “India got what it wanted on special products” and farmers and interest of economically vulnerable countries were safeguarded.

Putting to rest fears raised by Rajya Sabha members during a discussion on the working of his ministry, commerce and industry minister Kamal Nath specified that the government was open to reviewing the Act governing SEZs in the country if it was felt that the act required a revision.

Defending the SEZ policy, Nath said it was an employment and economic activity generation scheme that had so far provided jobs to more than 1.76 lakh persons across the country.

He said during 2008-09, exports under SEZs were expected to be Rs 1,24,000 crore. Citing a report by the Indian Council for Research on International Economic Relations on revenue loss due to SEZ, he said India was estimated to generate net revenue gain of Rs 8,800 crore.

Meanwhile, Nath also said the government was not considering any FDI proposals in the retail sector. “About 97 per cent of the retail is under unorganised sector and we don’t want to disturb them. There is no proposal on FDI in retail sector,” he said.

Mumbai, April 29
Bankers on Tuesday indicated that the 25 basis point hike in the percentage of cash that banks must hold in reserve was hardly enough to soak up excess liquidity, but some banks may still hike interest rates.

"Ultimately interest rates are subject to demand and supply. Liquidity is good.. Liquidity may come down marginally (but) I don't think liquidity is going to just fall off. I would wait and watch," said K V Kamath, CEO and MD of the country's second largest lender ICICI Bank.

He was reacting to RBI's decision to increase Cash Reserve Ratio by 0.25 per cent to suck nearly Rs 9,000 crore surplus cash from the system, which would in turn temper demand for loans and help ease inflation.

"Due to the hike, the profit and loss accounts of banks would take a hit. We can shoulder this much of impact when it comes to the national interest," Kamath told reporters.

HDFC Bank Head (Trading) Ashish Parthasarthy, however, said that RBI's decision to leave repo and reverse repo unchanged was indicative "of the view that interest rates are at a reasonably high level at present."

HSBC India CEO Naina Lal Kidwai said: "It has been a very balanced policy and RBI has done a good balancing act between growth and inflation... (CRR) hike was expected".

She said: "Some banks might pass it on to the customers. HSBC would decide on its interest rates in about two-weeks." Canara Bank CMD M B N Rao said: "CRR hike of 0.25 per cent will suck out only a small amount from the system? the liquidity in the banking system is comfortable. Canara Bank's ALCO will meet in about a week's time to decide on its interest rates". — PTI

New Delhi, April 29
Union finance minister P Chidambaram today said the way forward for inclusive growth was not in increasing tax rates but in removing exemptions. Replying to the Finance Bill in the Lok Sabha, the finance minister said: “We must eventually move to a system where few tax exemptions exist, they are periodically reviewed and gradually phased out.”

The Finance Bill was passed by a voice vote in the House later during the day amidst Left parties walking out over “the government’s neglect of their proposals regarding inflation control, especially reduction in prices of petroleum and petroleum products.”

The minister proposed amendment to the Finance Bill to extend sunset clauses on software technology parks and export oriented units to March 31, 2010. The new income-tax code is to be placed before the public soon, he said, admitting that his efforts were not entirely successful because of continuing demand for corporate tax exemptions.

Stressing the need to have an exemption-free system, Chidambaram said: “I would be disclosing no secret in saying every demand for exemption has the support of some or the other honourable member of this House.” He admitted further that the subsidy burden was becoming unbearable for the government. “At some point we will have to see how subsidies can be prioritised,” he said.

The fiscal deficit, including off-Budget items at this point, stood at 3.3 per cent while revenue deficit was 2 per cent. “This year we will bring the revenue deficit to 1 per cent whereas we inherited 3.4 per cent,” he said, announcing tax amendments for different sectors.

Stating that there would be no increase in tax rates, Chidambaram clarified that only genuine charitable organisations will be granted tax exemption under clause (3); all other entities engaged in trade, commerce or business and wearing the mask of charity will be taxed, he said.

About exemptions on anonymous donations, the finance minister said exemption would be granted only on anonymous donations made to religious organisations. “The rest, it is assumed, are donating unaccounted money. They must be taxed to plug the source of black money,” he said, adding that the donee would have to maintain records of all donations.

Agricultural produce marketing committees and state agricultural boards have, however, been allowed tax exemptions and a clause would be added in the Bill to ensure the provision and its clarity, the government today said. Coir board will be given tax exemption with retrospective effect from April 1, 2002.

There would, however, be no tax exemption for refineries of mineral oils as the refining margins were very high, the finance minister believed. He, however, proposed an amendment to extend tax exemption to public sector refineries if they were commissioned by March 2012. Here, Chidambaram a special mention of the affected PSU oil refineries at Paradip, Bina and Bathinda, whose interests, he said, would be protected.

New Delhi, April 29
The RBI Annual Policy for 2008-09 has drawn mixed reactions from the industry bodies with some expressing concern over the CRR hike, while others felt it would help tame inflation. PHD Chamber said the further increase in CRR by 0.25 per cent to make it 8.25 per cent would adversely affect availability of credit to all sectors of the economy.

“It would reduce the profit margins of the scheduled commercial banks and compel them to increase interest rates. This is bound to temper demand for loans and adversely impact investments as well as consumption,” the chamber said.

According to the PHD Chamber, the Monetary Policy has failed to adequately focus on pushing investments for growth and improving the supply side.

“It is feared that the RBI’s measures to tackle inflation by sucking liquidity from banking system might trip economic expansion and hamper the realisation of projected GDP growth of 8.5 per cent for 2008-09. This would be further impacted if we fail to get normal monsoon,” it said.

However, industry body CII is confident that the CRR hike will help the RBI’s objective to bring down inflation to around 5-5.5 per cent without increasing interest rates at this point in time.

CII welcomed the RBI’s announcement on introduction of repo in corporate bonds, as this move will go long way in developing the corporate bond market.

The hike in the CRR may not be able to bring the desired effect on inflation. However, the resultant increase in interest rates would further underpin the slowdown in the industrial growth, said Assocham president Venugopal N Dhoot.

“The tightening in money situation may lead to fall in business and consumer confidence. As the current inflation is due to supply-side constraints and global rise in commodity prices, hike in CRR is less likely to curtail the inflation rate,” Dhoot said.

The chamber has appreciated the increase in the limit for home loans under 50 per cent risk weight, as it would provide marginal relief to the slowing housing sector.

FICCI said despite severe inflationary pressure on the economy, the RBI has refrained from any rate hikes, which is indeed a welcome move.

The increase in limit of bank loans to individuals for housing loans with lower risk weight from Rs 20 lakh to Rs 30 lakh is heartening news, FICCI president Rajeev Chandrasekhar said.

The industry body also welcomed the RBI’s move to relax the asset classification norms for infrastructure projects. This will help boost the bank financing for the Infrastructure development.

The RBI’s decision to keep the bank rate, repo rate and the reverse repo rate unchanged was lauded from all corners. — UNI

New Delhi, April 29
Country’s largest car manufacturer Maruti Suzuki India Limited (MSIL), after having achieved the highest number of sales and highest turnover ever, is now looking at focusing on the used cars to up its new cars sales.

As part of the strategy, MSIL is looking at assessing the resale of about 1.2 million used vehicles by putting in place an exchange offer for the used cars.

The company’s True Value outlets would do evaluation of the used cars and focus would be on translating such evaluations into sales of new cars.

MSIL, with its aggressive sales strategy, has achieved a share of about 30 per cent in the overall turnover of the parent Suzuki Motor Company.

MSIL officials here said customers looking at discarding old vehicles and buying new Maruti cars would be offered a loyalty bonus of Rs 10,000 besides other sops, which are generally available to other customers also.

This scheme would, however, not be available on the MSIL models of the newly launched DZire and Swift as the two are already in great demand and short supply.

The officials said shift in strategy is due to the resale car market. It is estimated to be valued at about Rs 21,000 crore with the sale of the used cars touching 1.14 million.

Besides, during 2007-08, Maruti almost doubled the evaluations it carried out of the used cars from 4.6 lakh vehicles to 8.91 lakh. Further it sold over one lakh used vehicles in 2007-08, which was 21 per cent higher than the previous year.

Maruti has also worked out plans to increase its number of outlets from the present 265 to 300. The focus is also on increasing rural penetration and the company is encouraging the dealers for the same. This is also in anticipation of the GST regime, which is expected to be in place by 2010 and would make the sales of cars in states easier as the tax differential would vanish.

Maruti officials feel that the growth in the rate of exchange is an encouraging sign for the company as it reflects the change in the customer’s mindset. It reflects that the customer is now ready for changing his car much before than what was the case earlier.

New Delhi, April 29
There was a major rally in the shares of leading export-driven software companies, including Infosys, today as finance minister P. Chidambaram extended by a year a tax holiday scheme for export-driven software firms as he outlined some changes to the federal budget for 2008-09.

The scheme for facilities based in technology parks was set to expire in March 2009, but now has been extended till March 2010. The announcement came during the finance minister’s reply on the debate on his Budget.

The government had announced a 10-year tax holiday for the units in April 2000 under a policy aimed at encouraging growth in the sector.

As a result, software services firms in the parks pay taxes only on the business they get from India. Most of them get more than three-quarter of their revenue from exports.

Reports suggested that the step from the finance minister came as the original expiry date would have pinched earnings of the top firms from the following fiscal year by raising their tax rates to 18-22 percent from about 12-15 percent.

The minister also said it was time to remove exemptions and not to increase income tax rates.

"This decision is particularly beneficial for BPO companies and the small and medium segment, who have been greatly impacted by the rupee appreciation, inflation and signs of slowdown of the US economy," the National Association of Software and Services Companies (Nasscom) said in a statement welcoming the move.

Officials of the IT companies also said the decision had come at the right time and hoped that this would be ratified by both Houses of Parliament by early May.

"The IT-BPO industry is expanding into tier-II and three cities which will help remove the pressure on large centres as well as help in more balanced economic development. It is important that we incentivate this move to tier two and three cities with STPI/SEZ (special economic zone) like benefits," it added.

Mumbai, April 29
Reliance Capital today announced a consolidated net profit of Rs 365.57 crore for the fourth quarter ended March 31, a 19.46 per cent growth over the corresponding period last year. The company had a net profit of Rs 306.01 crore for the corresponding period of last fiscal, Reliance Capital said. Total income rose to Rs 1,634.71 crore for the quarter from Rs 828.75 crore in the corresponding period last year.

BRIEFLY

Berger acquires Polish Co
KOLKATA: Berger Paints India Ltd on Tuesday said it has signed an agreement to acquire Poland-based Bolix for $38 million. Berger Paints will acquire Bolix, a leading provider of external insulation finishing system, in an all-share deal from Advent International, a global private equity group. — PTI

BHEL, NTPC form 50:50 JV
NEW DELHI: BHEL and NTPC on Tuesday formed NTPC-BHEL Power Project Pvt Ltd, a 50:50 joint venture company. The joint venture will carry out engineering procurement and construction contract for power plants and infrastructure projects in India and abroad. — PTI

Dabur H&B stores
NEW DELHI: Dabur India’s health and beauty retail subsidiary H&B Stores on Tuesday said it would open around 350 stores in the next three years with an investment of over Rs 140 crore. — PTI

Reliance Globacom 
NEW DELHI: Reliance Globalcom on Tuesday launched Passport Global SIM services in 115 countries targeting 8 million Indians going abroad. The SIM offers unlimited free incoming calls in 57 countries, the company said. It said the GSM-based solution would enable customers to avail unmatched benefit of using a single number across the world, including free unlimited incoming calls in 57 countries. Reliance Passport Global SIM has been launched in pre-paid and post-paid plans. — PTI

Oracle buyout
BRUSSELS: Oracle Corp gained permission from European Commission competition regulators on Tuesday to buy BEA Systems Inc for $8.5 billion. — Reuters

Tata Power refinances loan
MUMBAI: Tata Power on Tuesday said it has refinanced $850 million out of a total of $950 million bridge loan taken at the time of acquisition of stakes in Indonesian coal companies. — PTI