Chennai, November 5
The Reserve Bank of India (RBI) may consider reversing its tight monetary stance as inflationary woes begin to ebb next month, a top policy adviser said on Saturday.

The RBI has raised interest rates 13 times since March 2010 in a bid to control inflation, which has topped 9 per cent for nearly a year.

However, C. Rangarajan, the Prime Minister's Chief Economic Adviser, said headline inflation may remain high for next one-two months after which it is expected to slow down to around 7 per cent by March-end.

"It is expected that by December, January we should see decline in inflation, that may be the time when perhaps reversal of policy (monetary policy) will become possible," he told reporters on the sidelines of a banking conference. "As the inflation rate shows definite signs of decline, the policy regime also have to change."

A cumulative rate tightening of 375 basis points is seen slowing down India's domestic consumption driven growth story. But the RBI has refused to lower its guard against inflation and remains the only central bank that continues to tighten monetary policy amid global slowdown.

Early this week, the Reserve Bank of Australia (RBA) became the latest central bank to cut rate in response to threats to the global economy from Europe's debt emergency.

India's slowing economic growth has slowed down tax revenues, squeezing federal finances and putting a question mark on the government's ability to restrict the fiscal gap for the 2011/12 financial year at the budgeted level of 4.6 per cent of gross domestic product.

Any slippage on the fiscal gap target has the potential of worsening India's inflationary problem and choking private investment.

The RBI, which last week signalled a pause in its tightening cycle, has warned of inflationary risks if the government's deficit for the current fiscal year ending in March exceeds the budget target.

Rangarajan, a former RBI chief, said the government should make all possible efforts to keep the fiscal deficit at the budgeted level and consider deregulate petroleum prices once inflation starts slowing down.

The government is under fire for allowing a hike in gasoline prices on Friday and is expected to delay a planned diesel price hike for fear the move could cause further damage ahead of key state elections beginning early next year.

He also flagged risks to the asset quality of Indian banks from a slowing economy and rising interest rates. — Reuters

New Delhi, November 5
The government yesterday assured the Supreme Court that it would file its response to a PIL which has challenged the appointment of UK Sinha as Chairman of the market regulator, SEBI.

Attorney-General GE Vahanvati made the assurance to a three-member Bench headed by Chief Justice SH Kapadia.

The PIL, filed jointly by former Chief of Air Staff S Krishnaswamy and former DGPs of Punjab and Haryana, Julio Ribeiro and BR Lall, has also challenged a recent amendment to SEBI rules, authorising the Finance Minister to appoint two members on the Search-cum-Selection Committee for choosing the Chairman and the whole-time members.

Instead of the FM, it should be the government that should have the power to appoint the members of the search and selection committee, the petition said.

The changes have been made “subverting the process of selection” and thereby undermining the independence of the SEBI and its status as a watchdog that safeguarded the interests of millions of people who invested their hard-earned money in the stock market, the PIL reasoned.

The government's 'baby sitting' and its readiness to 'play nanny' are merely temporary measures to prevent National Aviation Company (NAC) from plunging into bankruptcy. The 'money cushion' will indeed defer 'death' but the national carrier, once a pride of the country, will continue to operate with 'diseased body, mind and soul'.

The NAC's overall health will reveal a marked improvement only when a strong-willed CMD is able to instill a sense of discipline in the staff, particularly highly pampered cockpit crew.

Investigations reveal that pilots are occupying different corridors not because they have 'genuine' grievances against each other, but they are being made to wage a war of attrition at the behest of 'politicians' who are gunning for the liquidation of the NAC.

When the then Minister of Civil Aviation, Praful Patel, had forced merger on the two national carriers, he had screamed two vital assertions - the brand name of the product was NAC and staff of the two carriers was 'one big family'. Post-merger, from minister downwards, no one is talking about NAC and again from minister downwards everyone says Air India after wiping out Indian Airlines from the skies. When the family is one, how and why pilots of Air India and Indian Airlines are being shown in different family and why and how rival federations are allowed to function. A study reveals that all these factions are being sponsored by the 'politicians' so that anarchy exists in the NAC.

Civil aviation analysts are of the view that the national carrier on the domestic and international routes will fly peacefully and professionally only when interference of some politicians is removed lock, stock and barrel. The government should launch a 'secret probe' as to who is the 'brain' behind the agitation of pilots?

As early as July 3, 2009, the then CMD Arvind Jadhav, under letter No HQ/NACIL/60-3/1150 had categorically stated: "...All recruitment processes are being cancelled. Moreover, in view of the deferment of aircraft induction and uncertainty of 787 acquisition, it is necessary to review the requirement of pilots.

In utter violation of the CMD's letter, the selection of trainee pilots and cadet pilots was held in 2010. Among the successful 'trainee pilots' was son of the executive director of operations. With a view to protecting his son's seniority, the director operations issued directions that 'the successful cadet pilots will go for medical test one week after the trainee pilots, thus making all the cadet pilots junior to trainee pilots. When so much indiscipline exists in the national carrier, how can turnaround start in the national carrier?

Q: I sold shares that were inherited by me from my grandfather. I want to know whether the amount of gain earned by me is taxable? Will it be long-term capital gain as the shares were purchased by my grandfather years ago. However, I sold them within nine months of having got them transferred in my name.

— Bhupendra

A: For computing long-term capital gains arising out of the subsequent sale by the donee or the legatee, the cost of the property is the cost incurred by the donor when he originally acquired it, or the FMV as on 1.4.81 as assessed by an official chartered valuer, whichever is higher. This means that in the case of an inherited or gifted property, the cost of acquisition is the cost to the original holder (or FMV as on 1.4.81). Also, the character of long or short-term similarly depends upon the date of acquisition of the original holder. In case this original holder has also acquired the property by way of gift or inheritance then it will be the date of very first holder who purchased or constructed the property.