Mumbai, December 22
India’s current account deficit is expected to widen further on the back of higher oil prices and sharp increase in imports of bullion, machinery and electronics, the Reserve Bank of India said Thursday.

Rising incomes in India and the country's high fiscal deficit are driving inflation, RBI governor Duvvuri Subbarao said.

A slowdown in revenue collections and higher spending on subsidies may make it challenging to achieve the fiscal deficit target of 4.6 percent of gross domestic product in the fiscal year ending March, the RBI said earlier in its Financial Stability Report.

The current account deficit (CAD) swelled to $14.1 billion in its fiscal first quarter, nearly triple the previous quarter's tally. The full-year gap is expected to be around $54 billion. "Recent data indicate further widening of the trade balance. Consequently, CAD which increased during Q1 of 2011/12 is expected to widen further," the report said.

Subbarao also said the RBI would contain sharp volatility in the foreign exchange market, although he added the currency's value should be determined by the market.

The central bank is monitoring the forex market on an hourly basis, he added.

The rupee, the worst performer among its Asian peers, has fallen more than 16% since July peaks, although it has bounced off record lows hit last week after the central bank took steps to prop it up.

The trade deficit for 2011/12 is expected to widen sharply to between $155 billion and $160 billion from $104.4 billion a year ago. — Reuters

Mumbai, December 22
The Bombay Stock Exchange Sensex erased early losses and rose for a second day on Thursday, with sentiment helped by gains in European markets though investors were cautious because of domestic economic concerns and government policy inaction.

Banks led the gains in the main index, with sector leader State Bank of India rising 2.9% and rival ICICI Bank rallying 3.7%. The main 30-share BSE index closed up 0.82%, or 128.15 points at 15,813.36, with 22 of its components rising, after dropping 1.35% at one stage.

"I think Europe was the only positive factor today," said RK Gupta, managing director at Taurus Asset Management in New Delhi. "Otherwise, not much fresh buying coming at this point. People expect more downside."

Telecom carriers Bharti Airtel fell 1.8% and Idea Cellular shed 1.3%.

The outlook remains clouded by slowing growth and foreign fund outflows. The index is down nearly 23% on the year. FIIs have been net sellers for eight straight sessions to Tuesday. — Reuters

New Delhi, December 22
Food inflation fell sharply to a near four-year low of 1.81 per cent for the week ended December 10 as prices of essential items like vegetables, onion, potato and wheat declined.

This is the lowest rate of food inflation since the week ended February 9, 2008, when it stood at 2.26 per cent.

Food inflation, as measured by the wholesale price index (WPI), was 4.35% in the previous week. It had stood at 13.22% in the corresponding week of 2010.

According to the official data released on Thursday, onions became cheaper by 49.38% year-on-year during the week under review, while potato prices were down by 34.39%. Prices of wheat also fell by 4.21%.

Overall, vegetables became cheaper by 26.37 per cent.

Experts feel the sharp fall in food inflation numbers, which was in double-digit till the first week of November, comes as a big relief to both the government and the Reserve Bank of India, which have been battling high prices for over two years.

However, other food products grew more expensive on an annual basis, led by protein-based items. Pulses became 14.22% costlier during the week under review, while milk grew dearer by 11.19% and eggs, meat and fish by 9.25%.

Fruits also became 8.89 per cent more expensive on an annual basis, while cereal prices were up by 1.68%.

Inflation in the overall primary articles category stood at 3.78 per cent during the week ended December 10, as against 5.48% in the previous week. Primary articles have over 20 per cent weight in the wholesale price index. — PTI

Mumbai, December 22
The Indian rupee has lost about 17 per cent against the US dollar since its year high in July, and is the worst performing Asian currency in 2011. It touched a record low of 54.30 to the dollar last week.

The Reserve Bank of India and the government have taken measures to support the rupee, including putting curbs on speculative trading, but analysts say some of the steps risk hurting the currency in the long term.

The rupee closed weaker but off its intraday low on Thursday as the BSE Sensex and the NSE Nifty turned positive after early losses and on signs that the European Central Bank's massive loans to banks will avert a euro zone credit crunch for now.

Some traders cited dollar sales by foreign banks as a reason for the rupee's rebound, while others speculated about possible intervention by the RBI. Demand from oil importers limited the currency's gains, traders said.

The RBI is widely thought to have sold dollars on December 15 after the rupee hit a record low of 54.30 to the dollar, and traders suspect it has been intervening intermittently ever since.

Earlier in the day, RBI governor Duvvuri Subbarao said the central bank was monitoring foreign exchange markets hourly and would step in to contain any sharp volatility.

The euro is seen as the main gauge of global risk sentiment, so is closely tracked by traders in India. — Reuters

New Delhi, December 22
Farmers associations have reiterated their support for cabinet’s decision to allow foreign direct investment in multibrand retail.

In a meeting with Commerce, Industry& Textiles Minister Anand Sharma here on Thursday, P Chengal Reddy, secretary general of the Consortium of Indian Farmers Associations (CIFA), conveyed the desire of various farmers’ bodies to implement the decision as soon as possible. “FDI in retail will free farmers from middlemen and will get the remunerative prices for their produce”, he said after the meeting.

Sharma said the government had already had consultations with small and medium enterprises as well as food processing units after the announcement on multibrand retail FDI in Parliament. “The policy has a distinct Indian imprint that safeguards local farmers and SMEs. As supply chain efficiencies are built up, post-harvest losses will be considerably reduced, thereby enabling remunerative prices to farmers,” he added.

The safeguards pertaining to a minimum of 30 per cent procurement from Indian small industries would provide the necessary scales for these entities to expand capacities in manufacturing thereby creating more employment and also strengthening the manufacturing base of the country.

The rural economy will benefit as large scale investment in the retail sector especially in backend infrastructure will provide substantive gainful employment opportunities in the entire range of activities from the backend to the front-end retail business, the minister said.

Sharma also agreed to look into a suggestion for farmers’ advisory body for the commerce and industry ministry to incorporate the views of the farmers on a systematic basis.

Reddy also informed the minister about CIFA’s efforts to engage state governments on the issue of foreign direct investment in retail. “Many states are reconsidering their opinion after we explained to them various details on how FDI would help small farmers in the long run as a result of more competition”, he said.

New Delhi, December 22
Coming down heavily on operators for violating licence norms, the Telecom Ministry has asked service providers to discontinue their 3G roaming agreements and is also contemplating imposing penalty on them.

The decision comes after the unanimous view of telecom regulator TRAI, the law ministry and the department of telecom that such roaming agreement was in violation of the telecom licences.

Leading operators like Bharti, Vodafone and Idea had entered into agreement with one another to offer 3G mobile services in circles in which they could not succeed in getting spectrum in the auction held last year.

"The decision has been taken that this (3G roaming pacts) is in violation of terms and conditions of the licence... will be issuing notices asking them (operators) to stop their service with immediate effect. But on penalty, no decision has been taken yet," telecom secretary R Chandrasekhar told PTI.

The issue pertains to the pact among major service providers, including Bharti Airtel, Vodafone Essar and Idea Cellular, for providing 3G roaming network on a pan-India basis.

Other service providers like Tata Teleservices and Aircel had also entered into similar agreements to offer services in six circles. However, they have already discontinued the arrangement.

Shares of Idea Cellular and Bharti Airtel slipped over 5% in trade on Thursday on reports the telecom ministry had asked service providers to discontinue their 3G roaming agreements. — PTI