B U S I N E S S

Key rates stay
Mumbai, October 24
The RBI today announced a dovish credit policy without any changes in key rates, saying the system was flush with liquidity, but it disappointed bourses that went into a tailspin and bankers were disinclined to cut interest rates immediately.

India Inc disappointed
New Delhi, October 24
The status quo maintained by the RBI towards the interest rates has not gone well with the Indian industry and stock market investors. The industry has vehemently opposed this act and has predicted a turmoil for various cash-strapped sectors.

Global markets crash
London, October 24
Global stock markets plunged on Friday and currency markets were hit by a flight from risk as economic decline and corporate damage gripped investors. Wall Street stock index futures, pointing to large US losses later, were frozen on and off as they fell as much as rules allow in one day.

Re breaches 50-mark
Mumbai, October 24
Indian rupee today breached the historic 50-mark against a US dollar in intra-day on sustained demand for the greenback amid the American currency's sharp rise against its major rivals in overseas markets.

Financial system stable: RBI
Mumbai, October 24
After his first review of monetary policy, RBI Governor D Subbarao today asserted that Indian financial system was stable and healthy and said domestic banks have suffered some mark-to-market losses on account of exposure in foreign assets.

Crude tumbles; OPEC cuts output
Vienna, October 24
OPEC decided to slash its oil output by 1.5 million barrels per day from November 1, at an emergency meeting here today in a move which sent crude prices tumbling.

Maruti hikes prices
New Delhi, October 24
Car market leader Maruti Suzuki India today increased prices of select models by up to Rs 6,000 just ahead of Diwali. The price hike on select models would range between Rs 2,000 and Rs 6,000, a company official said.

High input costs hit textile industry
Ludhiana, October 24
The textile industry in Punjab, currently hit by global economic crisis, increased input costs led by 40 per cent rise in cotton prices, and high interest rates, is facing the threat of closure which may lead to mass unemployment.

350 stocks hit all-time lows
Mumbai, October 24
Signalling what could be a dark Diwali on Dalal Street, as many as 350 securities today hit their all-time lows as Sensex crashed by about 1,100 points and dipped below 9,000-mark for the first time in about three years.

Withdraw user charges at pvt airports: MPs’ panel
New Delhi, October 24
A department-related Parliamentary Committee in its report on functioning of private airports in the country has called for immediate withdrawal of User Development Fee (UDF) being charged from passengers at greenfield airports.

Gold plunges to Rs 11,550
New Delhi, October 24
Recording the steepest fall in the global markets, gold prices on Friday crashed to touch a seven- week low level at Rs 11,550 per 10 gram on the bullion market here as investors rushed to liquidate their holdings for raising funds to meet stock market losses.

Key rates stay

Mumbai, October 24
The RBI today announced a dovish credit policy without any changes in key rates, saying the system was flush with liquidity, but it disappointed bourses that went into a tailspin and bankers were disinclined to cut interest rates immediately.

While lowering the economic growth projection for 2008-09 to 7.5-8 per cent from 8 per cent earlier, the central bank said inflation could come down to 7 per cent by March-end as forecast already, even though maintaining a price line was identified as a major focus area.

Days before the busy season credit policy, the RBI had taken measures to inject Rs 1,85,000 crore in the economy, including through a 250 basis point cut in Cash Reserve Ratio.

Besides, it reduced the short-term lending rate (repo) by one per cent to lower the cost of borrowings by banks possibly to bring down commercial interest rates.

With the looming pressures of global meltdown, which it felt was the worst financial situation since the Great Depression, the bank said: "RBI is confident of managing the situation and minimising the adverse impact of the global crisis on the Indian economy." The response of commercial banks to the policy (for the October-March period) was subdued, while stock markets lost 1,070 points and the Rupee closed at an all-time low of 49.95 after breaching the 50-mark in intra-day.

Stating that the policy was on expected lines, finance minister P Chidambaram, who for the past few weeks has been battling to prop up the economy and restore confidence in the banking system, said RBI would pump in more liquidity as and when needed.

The review was the first by RBI under its new Governor D Subbarao, who told reporters "We signal interest rates. It is for the banks to take a decision on what their interest rates should be." — PTI

India Inc disappointed
Bhagyashree Pande
Tribune News Service

New Delhi, October 24
The status quo maintained by the RBI towards the interest rates has not gone well with the Indian industry and stock market investors. The industry has vehemently opposed this act and has predicted a turmoil for various cash-strapped sectors.

Dr L.K. Malhotra, president, PHDCCI, has expressed disappointment that the RBI did not consider adding further liquidity into the banking system by reducing CRR in the mid-term review of monetary policy announced today. The tight monetary policy stance taken by RBI to check inflationary pressures, since April 2008 has adversely affected the performance of major sectors of like manufacturing, mining, electricity, real estate, as also financial services sector. Even consumer loans like home loan, education loan, consumer durables etc. saw a major decline, adversely affecting the industry.

Dr Malhotra expressed concern that despite the recent monetary measures taken by RBI to infuse liquidity into the banking system and to ease pressure on rising interest rates in the wake of international financial crisis, the interest rates continue to be very high thereby hampering growth in major sectors of the Indian economy.

“There is a clear case for reassessing the interest rates and reducing repo rate by at least 0.5 per cent.” He has appealed to the RBI to keep tight vigil on the monetary situation to ensure adequate flow of credit at affordable cost to various sectors of the economy, particularly the small and medium enterprises, to check economic slow down and the resulting adverse consequences, such as layoffs.

Reacting to the credit policy announcements, Ficci said “RBI is clearly waiting to see the impact of the various monetary measures that were taken in recent days.”

Rajeev Chandrasekhar, MP and president, Ficci, said, the RBI’s policy statement has taken the industry by surprise.

He said: “in our opinion, the past few quarters of focus on inflation management through monetary policy measures has seriously weakened our economic growth momentum and it will require the government to really refocus on growth as its priority.”

Ficci said the credit policy has been framed keeping in mind the inflation target of 7 per cent for the current fiscal. “At the present juncture, the need, however, was to give some critical boost to growth by pushing more credit to the productive sectors. Focus on growth had become all the more important given that inflation is showing signs of moderation.”

The reason is despite the liquidity infusion of the said amount, the credit requirement of industry, business and trade is still unmet.

Assocham president Sajjan Jindal said though the central bank had been constantly reviewing the monetary development in the wake of current downturn, it should have reduced the repo rate by 100 basis points and brought down CRR at 6 per cent. Jindal suggested that the RBI should urgently create a mechanism for weekly monitoring of banks’ lending to ensure smooth extension of finances to India Inc. 

Global markets crash

London, October 24
Global stock markets plunged on Friday and currency markets were hit by a flight from risk as economic decline and corporate damage gripped investors. Wall Street stock index futures, pointing to large US losses later, were frozen on and off as they fell as much as rules allow in one day.

European shares lost 8 per cent and Japan's Nikkei tumbled 9.6 percent.

The dollar and yen, considered among the safer currencies, surged to multi-year highs as investors repatriated investors and looked for shelter.

MSCI's all-country world index was down 4 per cent at five-year lows and its emerging market benchmark down more than 6 per cent.

The emerging market stock index has now lost more than 15 per cent this week and has wiped out all its massive gains from the last four years.

The financial crisis has now spread far beyond the banking sector, with electronics maker Sony Corp and US online retailer Amazon.com Inc cutting their forecasts in the face of weakening consumer demand.

South Korea led the decline on Friday with shares falling 11 per cent, leading to a brokerage industry group asking its members to stop selling shares to save the country from more losses.

In Europe, the FTSEurofirst 300 index was down 8.1 per cent having earlier hit its lowest level since mid-2003.

Earlier, Japan's Nikkei slid 9.6 per cent or 811.90 points to 7,649.08, a 5-1/2 year closing low. The benchmark lost 12 per cent in the week and has fallen 50 per cent so far this year.

Dollar, Yen soar

The dollar hit two-year highs versus a basket of currencies and the euro, and sterling hit a six-year low, reflecting heavy dollar repatriation. The euro was down 3 per cent at $1.2595. Sterling lost 4.5 per cent to $1.5580.— Reuters

Re breaches 50-mark

Mumbai, October 24
Indian rupee today breached the historic 50-mark against a US dollar in intra-day on sustained demand for the greenback amid the American currency's sharp rise against its major rivals in overseas markets.

The domestic currency later closed the day a little lower at 49.95/96 after suspected intervention by the RBI in the inter-bank foreign exchange (forex) market. — PTI 

Financial system stable: RBI

Mumbai, October 24
After his first review of monetary policy, RBI Governor D Subbarao today asserted that Indian financial system was stable and healthy and said domestic banks have suffered some mark-to-market losses on account of exposure in foreign assets.

"Indian banks do not have direct financial exposure to the US sub-prime assets. Foreign subsidiary and foreign branches of Indian banks have suffered some mark-to-market (MTM) losses on financial instruments due to the widening of credit spreads," he told reporters after the mid-term review of the annual monetary policy here.

Pointing out that the Indian financial system is stable and healthy, Subbarao said "these (MTM) losses are modest relative to the size of their business and adequate provisioning has been made for these".

"The overall Capital Adequacy Ratio (CAR) of the commercial banks is 12.7 per cent, well above the regulatory minimum of 9 per cent and Basel requirement of 8 per cent," he said, adding, mandatory Statutory Liquidity Ratio (SLR) of 25 per cent and Cash Reserve Ratio (CRR) of 6.5 per cent provide inherent strength to the Indian banks.

Under the regulatory norms, all banks are required to park 25 per cent of their funds in government securities (SLR) and keep 6.5 per cent with the RBI to meet CRR requirements.

As regards the impact of global financial meltdown, Subbarao said, the developments are having an indirect impact on the domestic financial and money markets resulting in tightening of liquidity conditions. — PTI 

Crude tumbles; OPEC cuts output

Vienna, October 24
OPEC decided to slash its oil output by 1.5 million barrels per day from November 1, at an emergency meeting here today in a move which sent crude prices tumbling.

Analysts had expected the Organisation of Petroleum Exporting Countries (OPEC) to cut its daily output by at least one million barrels per day as a global economic slowdown amid a worsening financial crisis slashes demand for energy.

OPEC ministers wanted to cut production in a bid to support plunging crude prices despite a looming worldwide recession.

Yet moments after the decision was announced, the price of Brent North Sea crude sank to $62 per barrel for the first time since March 2007.

Crude futures in London and New York have plunged close to 60 per cent from record highs of above $147 a barrel reached only three months ago when supply concerns sent prices soaring. — AFP

Maruti hikes prices

New Delhi, October 24
Car market leader Maruti Suzuki India today increased prices of select models by up to Rs 6,000 just ahead of Diwali. The price hike on select models would range between Rs 2,000 and Rs 6,000, a company official said.

Post the price hike M800 would be costlier by Rs 2,000 while Alto would cost Rs 2,500 more. The company has also raised the price of its compact cars Zen Estilo and WagonR by Rs 3,000 and that of Omni van by Rs 2,200.

MSI's Sedan SX4 would be expensive by Rs 6,000 while utility vehicle Versa would come at an additional cost of Rs 3,500. The company's multi-utility vehicle Gypsy would now be costlier by Rs 5,500. Select variants of premium hatchback Swift would also see a price increase of Rs 4,500. The company has, however, spared its mid-sized sedan Dzire from the price hike. — PTI 

High input costs hit textile industry
Charu Chhibber
Tribune News Service

Ludhiana, October 24
The textile industry in Punjab, currently hit by global economic crisis, increased input costs led by 40 per cent rise in cotton prices, and high interest rates, is facing the threat of closure which may lead to mass unemployment.

"The textile industry in Punjab is passing through the toughest times. Total textile output of Punjab is estimated at Rs 10,500 crore, including Rs 3,250- crore exports of knitwear, shawls, made-ups and yarn. The direct and indirect employment of textile activity in the state is estimated at two million persons," said H.S. Cheema, chairman, Punjab Committee, Northern India Textile Mills Association (NITMA).

Cheema disclosed that Punjab produces around 1.8 to 2.2 million bales, which is about 11-12 per cent of the country's total output of cotton. But only 43 per cent of the cotton yarns produced in Punjab is used within the state while the rest is sold outside.

"Punjab can muster its economic strength through the consumption of cotton yarn within the state for value addition by encouraging downstream fabric manufacturing and processing units. The textile industry, particularly spinning units located in Punjab, are suffering more because of higher taxes and levies, higher cotton cost and power shortage," he said.

The taxes and levies in the state are higher than other states. With the introduction of entry tax on cotton, the textile industry in Punjab will suffer even more. The industry is already facing power shortage which is resulting in the slowing down of manufacturing growth besides loss on production.

"The state also has a geographical disadvantage being far off from the sea ports, thus the logistics cost further adds to the financial burden on the industry. To offset this, the state government had introduced the scheme "freight subsidy" to help the industry. However, this was never disbursed to the industry in the past four years," said Ashish Bagrodia, vice-chairman, NITMA.

The industry was also suffering due to the interest costs which had gone up, he added.

350 stocks hit all-time lows

Mumbai, October 24
Signalling what could be a dark Diwali on Dalal Street, as many as 350 securities today hit their all-time lows as Sensex crashed by about 1,100 points and dipped below 9,000-mark for the first time in about three years.

Making the things worse, those hitting their record low share prices included big names like Reliance Power, Cipla, Ranbaxy, Ambuja Cement, Hindalco, Indian Hotels, Jaiprakash Associates, Jet Airways, Suzlon Energy and Idea Cellular.

Realty majors DLF Ltd, Unitech, Parsvnath, Sobha Developers, Omaxe and Puravankara also plunged to their all- time lows.

Other big names plunging to their record lows included Central Bank, Power Grid, PFC, Edelweiss Capital, Future Capital, Biocon and Patni Computer, GMR Infra, Tech Mahindra, Mahindra Forging and Lanco Infra. — PTI

Withdraw user charges at pvt airports: MPs’ panel
Vibha Sharma
Tribune News Service

New Delhi, October 24
A department-related Parliamentary Committee in its report on functioning of private airports in the country has called for immediate withdrawal of User Development Fee (UDF) being charged from passengers at greenfield airports.

“The UDF imposed on passengers may be withdrawn immediately and no more UDF may be imposed on passengers in any of the airports,” the committee in its report tabled in the Parliament yesterday said, adding that this was particularly important in context of policy objective to make air travel more affordable.

Categorically recommending to the government that developers of such airports be restrained from charging the UDF, the committee headed by Left leader Sitaram Yechury said the government should not agree to it (UDF charges).

“The UDF, in fact, has rendered air travel from these airports (greenfield airports at Bengaluru and Hyderabad) costlier both in terms of money and time,” noted the report on the functioning of private airports and other related issues.

The committee suggested that airport operators should instead "be directed to implement modernisation plans as per agreement within the scheduled time limit instead of concentrating on revenue earning from commercial activities”.

The report is based on a study undertaken by the Committee on greenfield airports at Bengaluru and Hyderabad and also Mumbai and Delhi airports that are being developed.

Besides, the UDF added with high taxi/bus fares due to out-of-city locations of the greenfield airports at Bengaluru and Hyderabad was compelling passengers to use other means of transport like road and rail to travel to short-distance destinations.

At the Mumbai and Delhi airports, the committee is particularly critical about poor state of affairs due to lack of adequate civic utilities besides inadequate sitting space and food articles were being sold over and above the MRP. The committee is also scathing about the new Bengaluru and Hyderabad airports where besides the UDF charges the passengers also have to pay exorbitant prices for food items.

Gold plunges to Rs 11,550

New Delhi, October 24
Recording the steepest fall in the global markets, gold prices on Friday crashed to touch a seven- week low level at Rs 11,550 per 10 gram on the bullion market here as investors rushed to liquidate their holdings for raising funds to meet stock market losses.

The yellow metal dropped Rs 400 at Rs 11,550 per 10 gram, a level last seen on September 11, on brisk selling by stockists and investors after the Bombay Stock Exchange benchmark Sensex recorded a second steepest fall in its history.

Standard gold and ornaments dropped by Rs 400 each at Rs 11,550 and Rs 11,400 per 10 gram, respectively while sovereign lost Rs 50 at Rs 10,400 per piece of eight gram. — PTI