The Tribune, Chandigarh, India

	RBI hints at another CRR cut as liquidity remains tight Mumbai, February 21 Reserve Bank of India deputy governor Subir Gokarn said Tuesday the central bank would "consider" a further cut in the cash reserve ratio (CRR) if the systemic liquidity conditions continue to be tight. "To the extent that an opportunity is available for CRR (which is the percentage of deposits banks have to keep with the central bank,) cut further, we will also consider that," Gokarn, who oversees the monetary policy function at the RBI, told reporters here. However, ruling out any immediate action, he said there was no change in his earlier statements that if another round of CRR reduction were to happen, it could happen in the policy statement itself and not midway. Gokarn has been maintaining that a CRR reduction is a much broader decision which is addressed in the policy rather than the bond buybacks (open market operations) that the central bank has been announcing and carrying out almost on a weekly basis to inject liquidity in the system. The midquarter review of the monetary policy is scheduled for March 15 and it is widely expected that one more CRR cut can be on the anvil. Alarmed by the liquidity deficit, which had banks borrowing up to Rs 1.20 lakh crore through the overnight window or the liquidity adjustment facility (LAF), the Reserve Bank had cut the CRR by 0.50% in the January 24 policy review to 5.50% but kept the overnight lending rate unchanged, thus maintaining its anti-inflationary stance intact. However, in spite of the cut which infused about Rs 32,000 crore into the system, banks continue borrowing over Rs 1 lakh crore from the liquidity adjustment facility corridor, much above the RBI's stated liquidity deficit comfort zone of Rs 60,000 crore. "The issue is in terms of number that the LAF borrowing that we have seen as that is an indication of persistent tightness," Gokarn said, adding the RBI will continue using the OMOs option, through which it has injected over Rs 90,000 crore into the system this fiscal, if it feels the need. He, however, said the situation is very dynamic and said the central bank will not enter into any commitment by announcing an open market operations calendar. On the inflation situation, Gokarn said newer issues have emerged as the crude prices have gone up in the recent past following the Israel-Iran imbroglio. He said Brent crude prices, which occupies for two thirds of the country's imports, have moved up to US $120 a barrel, at a nine-month high, as against the RBI's baseline assumption of $110 and said it will continue monitoring the number. However, the recent appreciation in the rupee is helping as it offsets the impact of rising crude prices, the RBI deputy chief added. — PTI
	Inflation up at 7.65%, price pressures moderating New Delhi, February 21 Indian annual consumer price inflation touched 7.65 percent in January, higher than wholesale inflation for the period but still suggesting price pressures are moderating, adding weight to views that the central bank has room to cut interest rates. The Reserve Bank of India signaled last month that it was ready to cut rates to stimulate a flagging economy if there was a sustained decline in inflation. The wholesale price index, long India's main inflation gauge, eased to 6.55 percent over the year to January, the slowest rise since November 2009, data showed last week. The new CPI data, released for the first time on Tuesday, also captures price movements in services, giving policymakers and economists a better idea of price pressures at the consumer level. Services account for about 55% of the economy. Since the WPI largely reflects price pressures experienced by producers, reliance on it renders monetary policy less effective in cooling prices at the retail level. The new index is expected to eventually replace the WPI as India's main inflation measure since it better captures demand-side price movements in the economy. "Initially, the RBI may continue to look at both the WPI and CPI data for monitoring inflation," said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a New Delhi-based think tank. "But once the robustness of the CPI is established, it would become a better indicator." The annual CPI data compiled by the Federal Statistics Department covers retail prices in five major groups, food, fuel, clothing, housing and education across rural and urban India. The data showed food prices for consumers rose 4.11% in the year to January, while the cost of fuel and electricity rose 13.13%. Food comprises almost half of the weighting in the CPI. "The January consumer price inflation is indicating that inflation has moderated to a great extent," said Rupe Rege Nitsure, chief economist at Bank Of Baroda in Mumbai. "But the global oil price rise hasn’t been passed through completely and will act as a short-term barrier for the RBI's easing process." FUEL PRICES A CONCERN: Markets showed little reaction to the data. "One is likely to wait for more data prints to judge if it reflects the underlying drivers well," said Radhika Rao, an economist at Forecast Pte in Singapore. "For now, the WPI will still be more actively watched, especially for policy directions." The RBI is under pressure from politicians and business to cut rates to spark economic growth, which the government has said could dip below 7% in the fiscal to end-March. That would be the slowest pace since the 2008 financial crisis. The central bank ran a 20-month interest rate tightening cycle until October to slow down inflation to 7% by March. — Reuters
	No tax returns for salary up to Rs 5 lakh/yr New Delhi, February 21 Salaried employees earning up to Rs 5 lakh a year will not be required to file income tax returns from this year, a finance ministry notification said on Tuesday. There are about 8.5 million salaried persons in the country whose yearly income, including earnings from other sources like bank deposits, do not exceed Rs 5 lakh. "An individual whose total income for the relevant assessment year does not exceed Rs 5 lakh and consists of only income chargeable to income tax under...salaries...(and) income from other sources,by way of interest from a saving account in a bank,not exceeding Rs 10,000" have been exempted from filing the returns from assessment year 2012-13", the notification said. Exemption from filing will be permitted only if the person has received a certificate of tax deduction in Income Tax Form 16 from his or her employer. To claim an income tax refund, however, such persons will have to file returns. Prior to Tuesday’s notification by the ministry, it was obligatory for all salaried persons to file income tax returns under the Income Tax Act, 1961. — PTI
	Europe seals new Greek bailout, doubts remain Brussels, February 21 Eurozone finance ministers agreed a 130-billion-euro (US $172 billion) rescue for Greece on Tuesday to avert an imminent chaotic default after forcing Athens to commit to unpopular cuts and private bondholders to take bigger losses. The complex deal wrought in overnight negotiations buys time to stabilize the 17-nation currency bloc and strengthen its financial firewalls, but it leaves deep doubts about Greece's ability to recover and avoid default in the longer term. After 13 hours of talks, ministers finalized measures to cut Athens' debt to 120.5% of GDP by 2020, a fraction above the target, securing a second rescue in less than two years in time for a major bond repayment due in March. "We’ve reached a far-reaching agreement on Greece's new program and private sector involvement that would lead to a significant debt reduction for Greece ... to secure Greece's future in the euro area," Jean-Claude Juncker, who chairs the Eurogroup of finance ministers, told a news conference. Greece will be placed under permanent surveillance by an increased European presence on the ground, and it will have to deposit funds to service its debt in a special account to guarantee repayments. The deal was hailed as a step forward for Greece, but experts warned that Athens will need more help to bring its debts down to the level envisaged in the bailout and will remain worryingly "accident prone" in coming years. By agreeing that the European Central Bank would distribute its profits from bond-buying and private bondholders would take more losses, the ministers reduced Greece's debt to a point that should secure funding from the International Monetary Fund. Italian and Spanish bond yields fell amid relief among investors. — Reuters
	Investors giving up on Kingfisher Shiv Kumar/TNS Mumbai, February 21 Investors are dumping troubled Kingfisher Airlines with its stock well below the 52-week high of Rs 49.25 even though the general market has recovered sharply from the lows of December last year. In Tuesday’s trade the stock fell nearly 20% to touch a low of Rs 21.40 before recovering slightly to close at Rs 26.80 on news that financial institutions could pump in another Rs 1,000 crore. Reports said a consortium of banks is likely to provide another Rs 400 crore by way of higher working capital. "The market has drawn comfort from political leaders expressing support to the airline," said Amit Dani, an analyst who tracks aviation stocks for a Mumbai brokerage. Jammu & Kashmir Chief Minister Omar Abdullah reportedly said he was hoping for a rescue package for the troubled airline. The Jammu and Kashmir Bank, majority owned by the J&K government, is one of the institutions that have lent money to Kingfisher. However, say analysts, conservative investors have long fled the Kingfisher Airlines counter. "It has become a punter's stock with operators playing on rumours surrounding the airline," said Viren Mehta, a veteran investor. The buzz among investors is that government is arm-twisting financial institutions at the behest of Kingfisher’s influential promoter, Vijay Mallya to pump money into the carrier. The market has punished lenders like SBI, ICICI Bank, IDBI Bank, Bank of Baroda and Punjab National Bank with some of these stocks underperforming their peers in the current market rally. The carrier’s net worth has already been eroded.
	BUDGET 2012 Foreign bank a/cs, paintings, watches may attract wealth tax under DTC New Delhi, February 21 Deposits in foreign banks, paintings, sculptures and expensive watches may come under the wealth tax net as part of the government's drive to unearth “black” (unaccounted for) money. The proposal to expand the ambit of the wealth tax forms part of the Direct Taxes Code (DTC) Bill which is being scrutinized by a parliamentary standing committee. Some of the proposals are likely to be incorporated in the budget for 2012-13, pending approval of the code. Wealth tax, according to the proposal, will be levied at one per cent on taxable assets (specified under the Wealth Tax Act) exceeding Rs 1 crore. The current limit is Rs 30 lakh. "For the purpose of levy of wealth tax, taxable assets have been defined to include deposits in banks located outside India in case of individuals, unreported bank deposits in case of others...," the finance ministry said in a note, adding this was one of "specific new measures for unearthing ‘black’ money". The other assets which would be included for computing the wealth tax liability are — cars, yachts, helicopters, aircraft, jewellery, bullion, archaeological collections, paintings and sculptures. Watches exceeding Rs 50,000 apiece and cash in excess of Rs 2 lakh would also attract wealth tax. As regards the real estate, the DTC makes it clear that wealth tax will not be levied on residential houses, commercial premises and those immovable property which is rented out for a minimum of 300 days in a financial year. The value of other properties, including urban land and farm houses located within 25 kilometers of any municipal or cantonment board will be included while computing the tax liability on this count. Wealth tax, according to the DTC, would not be levied on land property and bullion of former rulers of the princely states. The direct taxes code also proposes a "reporting requirement ... making it obligatory on the part of resident assessees to furnish details of their investment and interest in any entity outside India," the document said. Besides, an assessee's interest in a foreign trust or a company is also proposed to be made taxable assets under the new tax regime, it said. The government is hoping for approval of measures by Parliament in the next fiscal. Pending parliamentary nod, some of the provisions may be included in the budget to be presented on March 16. The bill, introduced in the lower house of Parliament (Lok Sabha) in August 2010, proposes to overhaul the over 50-year-old Income Tax Act. At present, wealth tax contributes a meager amount to the government kitty. For the current fiscal, the only Rs 635 crore is targeted from this source out of the total tax revenue of Rs 9.32 lakh crore. — PTI
	Tata Motors to double JLR investments; China JV soon Mumbai, February 21 Tata Motors will double investments in its Jaguar Land Rover brands to 1.5 billion pounds a year, even as the Indian automaker warned that it will be a challenge to sustain high margins at its key profit generator. With soaring revenues and expanding margins, Jaguar Land Rover (JLR) has driven the company's growth in recent quarters, as strong demand in emerging countries for the famous British brands offset sluggish performance in Tata's home market. "Over the past 5 to 6 years, JLR has spent around 700 to 800 million pounds annually on capital expenditure and product development. Going forward, we will double that," C.R. Ramakrishnan, Tata's chief financial officer, said on Tuesday. JLR contributed 95% of the company's profit in the quarter to end-December, with a profit margin of 20%, three times the profitability seen at Tata's domestic business. Sales of its new compact Evoque SUV accounted for much of JLR's revenue growth in the fiscal third quarter, alongside surging demand in emerging markets such as Russia and China. Tata has selected a joint venture partner for manufacturing JLR cars in China and is awaiting approval from government regulators in the world's fastest-growing auto market, Ramakrishnan said. An announcement on the company's China joint venture will be made "very soon," he added, without giving details. JLR had agreed in principle to develop a luxury car with China's Chery Automobile in order to win approval for a manufacturing venture, a Chinese newspaper reported in December. FIAT JV TO STAY: Tata's joint venture with Fiat SpA, through which the Italian automaker utilises the company's distribution network in India, is not producing the expected financial results or sales, Ramakrishnan said. Fiat and Tata have held meetings to discuss new measures to improve the Italian automaker's sales in the country, he added, but there were no plans to end the tieup. — Reuters
	MCX Rs 663 cr IPO opens today, first exchange listing New Delhi, February 21 The Multi Commodity Exchange (MCX), the country's biggest commodity exchange by turnover, will hit the capital market on Wednesday with an estimated Rs 663 crore initial public offer, becoming India’s first ever exchange to get listed. Bidding for shares in the IPO, the first in 2012, will close on February 24, MCX MD & CEO Lemon Rutten said. The price band has been fixed in the range of Rs 860 to Rs 1,032 per share, with a face value of Rs 10 each. Based on the upper end of the price band, the IPO could raise up to Rs 663 crore. Pursuant to the IPO, MCX shares would be listed on the BSE. Investment banking sources said shares are getting huge oversubscription of over 50 times from the anchor investors. — PTI