New Delhi, September 5
The finance and oil ministries are lobbying for an increase in prices of diesel, kerosene and LPG, warning cabinet colleagues that time is running out to avert a fiscal disaster and a sovereign credit downgrade to junk by global ratings agencies.

"The situation is very, very serious," a finance ministry official involved in the fuel price discussions told Reuters.

"We may need up to Rs 50,000 crore or US $8.99 billion) if there is no diesel price hike, leaving the fiscal deficit near 6 percent," he said. He declined to be identified due to the sensitivity of the issue.

The cabinet committee on political affairs, headed by Prime Minister Manmohan Singh, will make the final call on the hikes as early as next week after the oil ministry recommended the changes in a note this week, sources in the two ministries said.

The ministries have long advocated slashing subsidies on fuels like diesel that eat into the budget and affect the financial health of state-run oil companies. But fears of a popular backlash has stopped the government raising prices for more than a year.

The ministries are piling on the pressure now to try and squeeze the price rise through after the current parliament session ends on Friday and before a round of state elections begin at the end of the year.

"A sense of urgency is keenly felt by everybody right from the prime minister," a top oil ministry official told reporters.

Senior advisers to Finance Minister P. Chidambaram last week outlined the implications of raising diesel and other fuel prices for inflation and the fiscal deficit. The ministry is pushing for a rise of Rs 3-5 per litre in diesel prices and significant increases for LPG and kerosene.

"We’ve told him even a hike of one rupee per litre in diesel prices would bring down the finance ministry's oil subsidy burden by nearly Rs 55 billion besides helping the oil marketing companies to cut losses," said the finance ministry official.

The finance minister's immediate aim is to avert a downgrade that would make India the first country in the BRICS group — which also includes Brazil, Russia, China, and South Africa - to trade at junk, the official said. Ratings agencies Fitch and Standard & Poors warned earlier this year that a widening deficit had put India on the brink of losing investment grade.

Chidambaram also wants to convince the central bank to lower interest rates. RBI governor D. Subbarao also wants the government to rein in subsidies to check the ballooning deficit.

Another finance ministry official said an increase in the price of diesel, which accounts for more than 40% of all oil products consumption, would generate a short-term rise in inflation, but help bring down the fiscal deficit.

A fall in the fiscal deficit will boost private investment in the economy and ease inflation in the long term, the official added. — Reuters

New Delhi, September 5
The country's largest bank, State Bank of India, on Wednesday cut interest rates on fixed deposits by 0.5 to 1 per cent for most of the maturity periods.

SBI’s move may be followed by other banks as it is the largest lender. This may also be a precursor to bringing down lending rates a notch as without reducing deposit rates that is not possible.

For deposits between 241 days and one year, the downward revision is 1%. The new rate will be 6.5% as against 7.5%. Of the total 9 maturity periods for fixed deposits, 0.5% downward rate revision is for 6 categories. The new rates would be effective from September 7, SBI said.

With the revision, the interest rate on 7-90 days fixed deposits will come down to 6.50%, from 7%. Similarly, 91-179 days term deposits will be down by 0.5%, at 6.50% and 180 days FDs will also attract a 6.50% interest rate.

Fixed deposits with maturity of 181-240 days would now provide interest rate of 6.50%, down from 7.25%. For one year to less than 2 year maturity period fixed deposits, the new rate will be to 8.5% as against 9%, down by 0.5%.

Geneva, September 5
Switzerland ranked as the world's most competitive economy for the fourth year running, while the United States continued a four-year slide down the table, the World Economic Forum (WEF) said in its annual survey on Wednesday.

The study by the WEF, best known for running the annual meeting of world business leaders at the ski resort of Davos, ranks 144 countries by examining 113 indicators culled from official data sources and a poll of 15,000 executives who opine on the country where they do business.

Switzerland pipped Singapore to the top spot thanks to strong scores in areas such as innovation, labour market efficiency and effective public institutions.

The United States fell from fifth spot to seventh because of political and economic problems that detracted from its status as a global powerhouse of innovation, the study said.

"We see this development as a result of the growing macroeconomic imbalances in the country but also due to the political deadlock that has been augmenting the problem of macroeconomic imbalances," said Margareta Drzeniek, a senior economist at the Geneva-based organization.

"There does seem to be an inability to take decisions on the political side." Rather than a big shake-up in the rankings, the 2012 survey found deepening divides, she said.

"One of the reasons those persistent divides are not being closed - and the prime example here is Europe, or the United States as well — is because of the political deadlock that we've observed, that has prevented those countries from taking a longer term approach to improving competitiveness with a view to stabilising growth in the future."

"This political deadlock is jeopardising the future prosperity of those countries because it may lead to a reduction of productivity and a loss of competitiveness and reduced growth in the future."

The lowest ranked EU country was Greece, at 96th. But it was rock bottom — 144th out of 144 — for its macroeconomic environment.

Qatar moved up three places to 11th but may need to reduce its vulnerability to commodity price fluctuations if it is going to break into a top 10 dominated by northern European countries, the report said.

Four of the five BRICS nations fell in the rankings, with only Brazil climbing, up five places from last year to 48th.China still led the group. Its 29th place ranking was down from 26th in 2011 but still 30 places ahead of India, which has lost 10 places since peaking at 49 in 2009.

"(China's) various barriers to entry appear to be more prevalent and more important than in previous years," the report said.

Russia was 67th, down one place from 2011, with a sharp improvement in the macroeconomic environment offset by weak public institutions, which were ranked 11th worst. — Reuters

New Delhi, September 5
Confederation of Indian Industry president and Godrej Group chairman Adi Godrej has expressed serious concern about the deteriorating economic situation and deepening industrial slowdown.

Godrej has called for a multi - pronged strategy for reviving the economy and restoring business confidence which is presently on the wane. He added that the prevailing situation is unlikely to turnaround any time soon as uncertain external demand conditions and slowing investments at home continue to affect business confidence.

Outlining the measures, Godrej said that since exports growth is highly stressed, there is a need to extend the interest subvention scheme, which is presently available to certain labour intensive exports, to key sectors like engineering, automobiles and chemicals.

Calling for more government spending, CII suggested implementation of the second phase of the JNURM scheme, which would provide an impetus to investment and consumption demand and for a pickup in rural demand, the government could consider fast tracking implementing the Bharat Nirman programme.

CII also expressed concerned over the fiscal deficit situation as the recently submitted Vijay Kelkar report which indicates that in the worst case scenario, without any action on subsidies, fiscal deficit could rise to 6.1 per cent of GDP in the current year. Remedial action is urgently required through rationalizing diesel subsidies, effecting tariff rationalization of electricity, expediting the disinvestment process and creating a special monitoring body for quick implementation of infrastructure projects as some of the remedial measures to restore the fiscal balance.

On land acquisition, CII has been strongly recommending the government must play a prominent role in acquiring land for the industry.

On allocation of captive coal blocks, Godrej stated that the law should take its own course and no precipitate action should be taken. The coal blocks which were allocated as per due process, should not be cancelled as any such cancellation will adversely impact business sentiment, he added.

There are several issues which lead to delays in the start of production in coal blocks, according to Godrej and these are related to forest and environment clearances, land acquisition, law & order, security issues and lack of supporting infrastructure, especially in the case of blocks in remote areas. 

Chandigarh, September 5
The country’s largest insurer, Life Insurance Corp of India, is now exploring other marketing channels to widen its reach. From direct marketing of policies to offering micro insurances, and from bancassurance to appointing chief life insurance advisers, the state-owned firm is adopting new marketing methods according to changed customers’ needs in order to retain its top slot in the insurance sector.

New marketing channels, led mainly by the chief life insurance advisers, now account for an astounding 30% of the business for the insurer. LIC officials said marketing of the products through the chief life insurance advisers accounts for 20% of business. The bancassurance, direct marketing and micro insurance through business correspondent model together contribute almost 10% to the total business.

“As customers’ needs evolve, we see a substantial rise in business share due to these alternate marketing channels. With our vision to sell insurance policies to each eligible person by 2020, we’re permitting all selling and promotion channels,” said L.C. Meena, senior divisional manager, LIC, Chandigarh division.

The share of bancassurance in the new business is 1.7% (592,978 policies in FY12), of micro insurance is 10.71% (3,826,783 policies) to the total new business and of direct marketing is 0.25% (87,578 policies).

LIC is identifying and appointing business correspondents of various banks to sell its three micro insurance products — Jeevan Madhur, Jeewan Mangal and Jeewan Deep — to the poor and workers. All these products are customized offerings to cater to the needs of the low income groups.

LIC, which sold 50,000 micro insurance policies last year, has 29.16 crore individual assurances with Rs 28,61603 crore as sum assured, and 10.45 crore group insurance policies with Rs 60,2639.72 crore as sum assured. This year, the company is targeting a 95% growth in its business.

Bangalore, September 5
Internet search giant Google on Wednesday announced the launching of two new features for Google Maps in India – turn by turn voice-guided driving directions through Google Maps Navigation (Beta) and live traffic information for six major cities – which apparently are not perceived as security threat by the authorities.

Last year the city police had halted the Google Street View project – which was first launched here as part of its India launch.

Google Maps Navigation, launched here today, is an Internet-connected GPS navigation system that provides turn-by-turn voice-guided driving directions as a free feature of Google Maps for mobile on smartphones running Android version 2.2 or later.

As a part of the Google Maps for mobile application, Google Maps Navigation automatically accesses the latest information about roads and points of interest from Google’s online mapping services without the need for any manual data updates. Both satellite images and drawings can be accessed for availing this service.

Google Maps Navigation takes advantage of Google Maps features for cellphones.