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A desperate US Fed cuts rate to near-zero
Dollar at 13-year low vs yen
OPEC to cut output by 2 m barrels a day
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Restoring growth a top priority: RBI
Diamond industry sacks 1.25 lakh
Satyam backtracks
Pharma industry rues excise exemption cut
Confidence Index
‘Monetary policy should be aggressive’
Spice hikes rentals without telling users
Honda defers expansion plan
WB to lend addl $3 b
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A desperate US Fed cuts rate to near-zero
New York, December 17 "The Federal Open Market Committee
(FOMC) today decided to establish a target range for the federal funds rate of 0 to 1/4 per cent," the Federal Reserve said in a
statement. FOMC anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. The statement further said the outlook for economic activity has weakened further as consumer spending, business investment and industrial production have declined. Besides, financial markets remain quite strained and credit conditions are tight. The focus of the committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level, the statement added. Further, the committee expects inflation to moderate in coming quarters due to declining prices of energy, other commodities and weaker prospects for economic activity. The Federal Reserve had earlier announced that over the next few quarters, it would purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. — PTI |
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Tokyo: The dollar slid to 13-year lows against the yen in Asian trade on Wednesday after the Federal Reserve slashed interest rates to near zero as it struggles to curb an accelerating economic downturn. The cut lowered US borrowing costs below the 0.30 per cent in Japan, which for years has had the world's lowest interest rates. The dollar dropped to 88.65 yen in Tokyo morning trade before rebounding to 88.89, still down from 88.98 in New York late yesterday. — AFP
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OPEC to cut output by 2 m barrels a day
Oran, Algeria, December 17 Saudi oil minister Ali Naimi said there was an OPEC consensus ahead of a formal agreement later in the day for the cut. An official decision to cut 2 million barrels from output all at once would be a first for the organization. OPEC had cut that amount from its output four years ago, but that was done in two stages. Also significant would be formal support from Russia, Azerbaijan and other non-OPEC producers. Mexico, Norway and Russia slashed production in the late 1990s, at a time oil was selling for about $10 a barrel. Russian Deputy Premier Igor Sechin and Azeri Energy Minister Natik Aliev said separately their countries would reduce output by a total of more than 600,000 barrels a day. Still, the Russian and Azeiri commitments appeared to be at least partially symbolic, with the Russians indicating they had already decided on their cutback last month, and Azerbaijan's output had already been reduced by roughly a third.
— AP |
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Restoring growth a top priority: RBI
Mumbai, December 17 Releasing its annual report on the banking sector, the apex bank said its priorities now lie with restoring the growth of the Indian economy. RBI also warned that the economic slowdown could affect the profitability of Indian companies and enhance the credit risk of the banking sector. The apex bank, however, stated that the long-term prospects of the Indian economy were favourable. "The overall long-term macroeconomic outlook continues to be favourable with moderation of growth being the current policy concern," RBI said. The central bank warned that the global economic recession would result in the financial contagion spreading to India and outflow of capital from Indian markets. RBI noted that banks and financial institutions worldwide were facing challenges of illiquid assets, capital shortages and collapse of counter-party trust. "The Reserve Bank has been vigilant about the lessons emerging from the crisis. The crisis suggests that risk management and supervisory practices lagged behind financial innovations and emerging business models," the apex bank said. According to the report, the RBI has already put in place a system to mitigate liquidity risks at the very short-end, risks at the systemic level and at the institution level. The report indicates that the challenge for banks is to develop adequate skills for managing emerging risks resulting from innovations in financial products as well as technological advancements. The Reserve Bank has been encouraging banks to develop an integrated approach to managing risk and also undertake stress testing exercises, both for liquidity and credit risk management. The report noted that the major challenge before RBI is how to meet the credit demand without impairing credit quality. "Banks have to monitor their credit portfolios closely in the context of persisting high growth in bank credit at the system level and take corrective action as appropriate in order to prevent undue asset-liability mismatches or deterioration in the quality of credit, recognising the reality of business cycles and counter-cyclical monetary policy measures," RBI said. RBI also noted that deposit growth continued to be strong, though it was marginally lower than the previous year mainly on account of deceleration in term deposits. Sounding an ominious note, the central bank noted that gross non- performing assets (NPAs) of scheduled commercial banks increased during 2007-08. "This was the first year since 2001-02 that gross NPAs increased in absolute terms. However, gross NPAs as percentage of gross advances continued to decline," RBI said. |
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Diamond industry sacks 1.25 lakh
Mumbai, December 17 According to industry sources, only about 25 per cent of the diamond units in Mumbai and Surat have resumed operations after an extended Diwali vacation. More than 70 per cent of the units have asked their workers, mainly hailing from rural areas of Gujarat and Rajasthan, not to return to work after the extended vacation. "We had extended the Diwali vacation to 50 days instead of the usual 20 days as there were no orders for us," says Anilbhai Shah, owner of a diamond processing unit at the Santa Cruz Export Processing Zone here. Surat, which accounts for the bulk of India's diamond exports, is the worst hit with entire units shut down. According to the grapevine, owners of many diamond processing units are deep in debt having lost crores of rupees in the stock market crash earlier this year. Exports to the US ahead of the Christmas season has virtually come to an end with exporters even saying that buyers there are returning unsold stock. According to data available from the Gem and Jewellery Export Promotion Council, exports in the month of November fell 34.25 per cent to $987 million in November against $1,501 million recorded in the same period last year. The Council also stated that cut and polish diamond exports dropped 46 per cent to $510 million from $944 million recorded in November last year. Vasant Mehta, chairman, GJEPC, said in a statement that exports were not showing any signs of revival in the current month and the industry has been forced to sack people. "The industry has been forced to sack 65,000 workers between August and October," he said. However, others in the industry say the number of people sacked so far is almost double and would go up in the coming weeks. The gem and jewellery exporting industry is now demanding a number of concessions from the government. GJEPC now wants status holders to be allowed direct imports and sale of gold to exporters. The body also wants an increase in the recently announced measure of rupee interest subvention from two per cent to four per cent and extension of the same to dollar credit as well. The industry is also demanding that diamond units in SEZs be allowed to sell their products in the domestic markets as well. |
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Satyam backtracks
Hyderabad, December 17 A day after announcing the decision to acquire 100 per cent stake in Maytas Properties for Rs 6,228 crore and 51 per cent stake in Maytas Infra for Rs 1,437 crore, the company has backtracked following uproar in the market and the criticism that the deal was “unethical”. Both Maytas Properties and Maytas Infra were promoted by Satyam chairman B Ramalinga Raju’s son Teja Raju and are engaged in realty, infrastructure and construction business. Satyam, the country’s fourth largest software services provider, said it reversed the decision in deference to the wishes of investors. In a statement here, the company said it has decided not to go ahead with the deal in the light of feedback received from the investor community. “We have been surprised by market reaction to this decision even though we were quite positive about the merits of the acquisition. However, in deference to the views expressed by many investors, we have decided to call off these acquisitions,” Ramalinga Raju said. The deal had evoked strong reaction from the market. Satyam's American Depository Receipts (ADRs), listed on the New York Stock Exchange (NYSE), fell by over 50 per cent from $12.50 to $5.70 yesterday. The company reportedly lost over $2 billion in a matter of one hour. The deal came as a severe jolt to Satyam's 2.10 lakh shareholders as a majority of them felt that the deal was unethical and aimed to bail out firms owned by Ramalinga Raju's sons. It was felt that the firms proposed to be acquired by Satyam were over-valued. There were no takers for the company’s argument that the acquisition would help Satyam diversify its business, tap the growing opportunities in infrastructure and real estate sectors and accelerate the growth. |
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Pharma industry rues excise exemption cut
Solan, December 17 Reeling under losses due to reduced imports, the December 7 notification has reduced the excise exemption for the pharmaceutical industry from the earlier 8 per cent to 4 per cent now. Since this exemption was reduced from 16 to 8 per cent in March this year, this second change has rung the alarming bells for the hundreds of pharmaceutical units, who had invested in Himachal. Terming it as unfair, chairman of the Federation of Pharmaceutical Entrepreneurs, R.K.Arora said, “The union ministry had deceived the investors as hundreds of them had invested here after a package was announced in 2003. This exercise to change the incentive conditions midway had disillusioned the industry and we would approach the ministry to annul this notification.” He said the government should either declare nil excise on raw materials or should fix it at a minimum of 4 per cent. He added that a 100 per cent income tax holiday should be available for a period of 10 years as is the case in Jammu and Kashmir, which also enjoys similar central package. This rebate was presently available at the rate of 30 per cent for the first five years. The notification has specially hit the loan
licencees, who comprise nearly 70 per cent of the total manufacturers. “Since this was the second reduction of excise benefit in the past one year, it had almost nullified the impact of the special incentives in Himachal,” observed a senior executive from
Cipla. He added that “The package had seized to mean anything in Himachal as all gains were exhausted in transporting raw materials and finished goods to the markets, leaving no special advantage of the concessions.” “The trade where margins had already shrunk due to reduction in exports would further suffer adversely. While it meant tough time ahead for the small manufacturers, who had set up units after availing loans, only units who had their own products would manage to survive,” opined another manufacturer. |
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Confidence Index
Bangalore, December 17 “The entrepreneurial confidence index is an assessment of satisfaction levels of entrepreneurs in their respective states”, the report said defining the section dealing with the comparative satisfaction of entrepreneurs across 15 Indian states. Chandigarh scored 3.28 in the index. Andhra Pradesh (4.14), Goa (3.93) and Rajasthan (3.88), figured on first, second and third place, respectively, in the assessment. Punjab was placed at 7th, followed by Chandigarh at 8th. Haryana got the 12th position ranking below UP, which was put at the 11th position. Interestingly, Haryana figured only after Gujarat and Maharashtra as a preferred investment destination. But, entrepreneurs already operating in the state were averse to rate the state
favourably. In governance issues, Haryana obtained 2.40 against 3.03 of Punjab and 3.12 of Chandigarh. Under the parameter of local environment, Haryana’s score was 2.81 against Punjab’s 3.31 and Chandigarh’s 3.29. With regard to regulatory issues, Punjab’s score was 3.05 against Haryana’s 2.71 and Chandigarh’s 3.16. As for infrastructure, entrepreneurs in Haryana gave the state 3.32 against 3.63 obtained by Punjab and 3.50 of Chandigarh. The survey, for which some 1,000 entrepreneurs were contacted, however, warned against viewing the scores in absolute terms. |
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‘Monetary policy should be aggressive’
New Delhi, December 17 About calibrating the fiscal policy, Dr Virmani said one has to take cognisance of the shrinking global exports. “We do not have any policy to address to what is happening in the US or any other economy, which are reeling under financial meltdown,” he said. When asked about the length of the financial crisis and its severity, he said there was no clarity on the longevity of the crisis. Some analysts pointed out the crisis would bottom out by the end of the year and they revised their prediction to July 2009. The pertinent point was that it was a global problem and its solutions were closely linked to global economic developments, he added. When asked as to why the government was not coming out with a comprehensive package for the revival of the economy, Dr Virmani said, “there are various macro issues that have to be considered while calibrating the fiscal sops in abnormal times.” Dr Virmani clarified that all financial flows would not be affected. “FDI flows have increased in the recent months, so also the NRI investment in the country.” He also mentioned that in the past five years, employment generation in the country has gone up, thanks to the export opportunities, particularly in textiles, IT etc. |
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Spice hikes rentals without telling users
Chandigarh, December 17 This has been done without informing the customers. A number of customers were in for a shock when they received their bills, and had been charged extra as monthly rental. Even the call charges had been hiked, without the knowledge of the customers. Rajeev Sehgal, a Spice customer from Moga, said he had subscribed to a tariff plan of Rs 75 per month as rental and with a call charge of 10 paise per minute on the Spice telecom network (from one Spice subscriber to another). “I was shocked when I learnt last week that the monthly rental had been hiked by Rs 39, and the call charges had been increased to 20 paise per minute. Inspite of repeated attempts to contact officials at Spice Telecom over the past five days, the company officials refused to comment or respond to the querries sent by The Tribune. |
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Honda defers expansion plan
New Delhi, December 17 “Addition of new capacity, initially scheduled for Q4 of 2009, has been deferred in view of the current economic slowdown, which has impacted the automobile industry, resulting in a drop in demand. Honda will continue to assess the market situation to decide on the timing of the car rollout,” the company said here in a statement. |
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WB to lend addl $3 b
New Delhi, December 17 "The World Bank has included additional lending of $3 billion in the Country Assistance Strategy 2009-12," minister of state for finance P.K. Bansal said in a written statement to a query in the Lok
Sabha. — PTI |
SBI to open 2,000 branches ACC closes Gagal plant Bigflix.com to invest Rs 450 cr Accentia bags $22-m order Payments via mobile Nissan to cut production |
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The US Federal Reserve has cut its benchmark lending rate to virtually zero per cent and said it would employ all available tools to promote resumption of sustainable economic growth and preserve price stability.
