Washington, D.C., Jan 2
The United States averted economic calamity on Tuesday when lawmakers approved a deal to prevent huge tax hikes and spending cuts that would have pushed the world's largest economy off a "fiscal cliff" and into recession.

The agreement hands a clear victory to President Barack Obama, who won reelection on a promise to address budget woes in part by raising taxes on the wealthiest Americans. His Republican antagonists were forced to vote against a core tenet of their antitax conservative faith. The deal also resolves, for now, the question of whether Washington can overcome deep ideological differences to avoid harming an economy that is only now beginning to pick up steam after the deepest recession in 80 years.

Consumers, businesses and financial markets have been rattled by the months of budget brinkmanship. The crisis ended when dozens of Republicans in the House of Representatives buckled and backed tax hikes approved by the Democratic-controlled Senate.

Asian stocks hit a five-month high and the dollar fell as markets welcomed the news. China's state news agency Xinhua took a more severe view, warning the US must get to grips with a budget deficit that threatened not a "fiscal cliff" but a "fiscal abyss". Most of China's $3.3 trillion foreign exchange reserves are held in dollars.

The vote averted immediate pain like tax hikes for almost all U.S. households, but did nothing to resolve other political showdowns on the budget that loom in coming months. Spending cuts of $109 billion in military and domestic programs were only delayed for two months.

Obama urged "a little less drama" when Congress and the White House next address thorny fiscal issues like the government's rapidly mounting $16 trillion debt load. There was plenty of drama on the first day of 2013 as lawmakers scrambled to avert the "fiscal cliff" of across-the-board tax hikes and spending cuts that would have punched a $600 bn hole in the economy this year. — Reuters

"Demand for gold must be moderated. We may be left with no choice but to make it a little more expensive to import the yellow metal. The matter is under the government’s consideration," Chidambaram added.

Bangalore, January 2
The country's manufacturing activity surged to a six-month high in December, boosted by strong factory output and a spike in new orders, both of which hit their highest levels since June, a business survey showed on Wednesday. The HSBC Markit India Manufacturing PMI, which gauges the business activity of India's factories but not its utilities, jumped to 54.7 in December from 53.7 in November, its biggest monthly rise since January 2012.

The PMI index has now stayed above the 50 mark that separates growth from contraction for almost four years.

"Activity in the manufacturing sector picked up again, led by faster output growth and a further uptick in new orders, which led to a faster increase in backlogs of work as companies struggled to keep up with demand," said Leif Eskesen, economist at HSBC.

Official data released last month showed industrial output soared 8.2% annually in October, its highest in more than a year, although the rise was attributed by economists to a low base a year earlier. — Reuters

Bangalore, January 2
Jet Airways Ltd is the front-runner for an investment by Gulf carrier Etihad Airways, a senior government source told Reuters on Wednesday, adding a deal was likely in 10 days.

Etihad Airways, seeking to widen operations in India and other Asian markets, is in the final stages of talks to buy part of either Jet Airways or grounded rival Kingfisher Airlines, a government official had said. A deal, would be the first since the government relaxed ownership rules in September to allow foreign airlines to invest up to 49% in a domestic carrier.

Shares in Jet Airways, the No. 2 Indian carrier, closed 0.47% higher on the BSE.

The other contender for an investment from Etihad is Vijay Mallya-led Kingfisher Airlines, whose flying permit expired on Dec 31, 2012. The airline has been suspended by aviation regulator DGCA, but rules allow that it can be renewed within two years.

DGCA has asked cash-strapped Kingfisher to clear employees' dues at one go before being allowed to resume operations. Kingfisher submitted a third revival plan on Dec 24 to save its licence, but the aviation regulator found it unconvincing and demanded reassurances from the company besides setting many preconditions on Dec 29. Kingfisher is saddled with a loss of Rs 8,000 crore and a debt burden of another over Rs 7,524 crore.

While its lessors and service providers like the Airports Authority of India are insisting that the airline should not be allowed to fly till it clears all dues to them, airline sources say as per DGCA rules, they have a two-year window to renew the scheduled operator's permit. — Agencies

New Delhi, January 2
Former RBI governor Y.V. Reddy has been appointed chairman of 14th Finance Commission, Finance Minister P. Chidambaram said Wednesday. The panel has been tasked with submitting its report by October 31, 2014.

The commission has also been mandated to suggest steps for pricing of public utilities like electricity and water in an independent manner. Chidambaram said it will look into issues like disinvestment, GST compensation, sale of nonpriority PSUs and subsidies.

The other panel members include ex-finance secretary Sushma Nath, NIPFP director M. Govinda Rao, Planning Commission member Abhijit Sen and former National Statistical Commission acting chairman Sudipto Mundle.

The recommendations of the panel, set up under the provisions of the constitution on sharing tax proceeds between the central and state governments, will apply for the period beginning April 1, 2015. Among other things, it will look into the "need for insulating the pricing of public utilities like drinking water, irrigation, power and public transport from policy fluctuations through statutory provisions". 

New Delhi, January 2
A recent meeting that Prime Minister Manmohan Singh held to review the progress of the projects in the transport sector reflected the importance being attached by the government on the development of infrastructure in the country. He underlined the need for putting major rail, road and port projects, whose slow development could become a major roadblock for growth, on the fast track.

After the meetings decisions were taken to go full throttle with the Mumbai elevated rail corridor, the dedicated freight corridor, and two new ports in Andhra Pradesh and West Bengal. However, this was not the first meeting that the Prime Minister has held over the two terms of the UPA government at the helm of affairs.

But this meeting was probably the most important one with an eye on the future. With just over a year left for the next round of general elections, the Congress-led UPA government’s focus on infrastructure development is not misplaced. Having seen governments in various states returning to office just on the plank of infrastructure development, the UPA would also be keen on stressing on this point while seeking a reelection in 2014. In the present situation of recession, infrastructure development would be one factor which the government would have to showcase while seeking votes again.

Addressing the council of ministers at a special meeting Singh had pointed out a particular concern was the fiscal deficit, which was too high and was acting as a deterrent to domestic and foreign investment. The government’s focus, he stressed, would now be on developing the much- needed infrastructure. But to bring it off, he admitted, it would have to “overcome the constraints that currently deter or slow down this investment,” as “fuel supply arrangements, security and environmental clearances and financing difficulties” were all hampering development.

Singh’s concern is genuine as in most sectors, whether it is power, road transport, railways, shipping or ports, the growth rate has remained far below the expectations or the targets set by the government.

India’s electrical infrastructure has always been considered unreliable and what happened on those two consecutive July days left the government red faced asking the state governments, on whom the central government has little control, to exercise restraint in drawing power from the grid. Projections suggest India remains decades away from having a sufficient energy supply. As an effort to fuel infrastructure growth, the government has also decided to set up a special body to speed up projects in various sectors seen as vital to reviving economic momentum by dismantling a complex web of regulatory requirements that throttle its infrastructure growth.

In an effort to speed up investment in infrastructure, the government last month approved the setting up of a cabinet committee on investment and a new name for the National Investment Board, which faced opposition from cabinet members.

However, the CCI was approved after Finance Minister P. Chidambaram gave his clarification and said the intent of the body was to only make the approval process transparent and faster. The CCI is being billed as latest move in a slew of big-ticket reforms by the prime minister to spur growth which is at its slowest pace in nearly three years. Government officials point out that regulatory delays have held up projects worth nearly two trillion rupees in the road, power, coal and mining sectors alone.

Experts point out presently a typical infrastructure project requires clearances from 19 central ministries ranging from environment to defence and an average 56 permissions from different central, state and local agencies.