New Delhi, March 19
The DMK pullout from the ruling UPA coalition on Tuesday has jeopardized Prime Minister Manmohan Singh's economic reforms but poses no immediate threat to the minority government, which can survive with the support of other parties.

The withdrawal of the DMK could hamper the government's efforts to rein in the budget deficit, spur growth in Asia's third-largest economy and stave off the threat of a downgrade by global credit ratings agencies.

In a possible sign of policy paralysis to come, a powerful regional party that supports the government in parliament, the Samajwadi Party said it would not back bills aimed at liberalising pensions and insurance. The government had hoped to pass the reforms in this session of Parliament.

"With the general elections next year, political stability is key for all economic reforms. This will surely delay the economic reforms to some extent," said Rupa Rege Nitsure, chief economist, Bank Of Baroda, Mumbai.

The government announced a series of reforms late last year to boost India’s flagging economic growth, including opening the retail sector to foreign supermarkets and raising diesel prices. It also plans to push through reforms to further open the insurance and pension sectors to investment from overseas.

These latest reforms are due to be discussed in the ongoing Parliament session but they are unlikely to go through now, analysts said. This could hurt India’s growth prospects and limit its ability to narrow its trade and fiscal deficits. India’s economic growth has slowed to around 5 per cent and rating agencies have warned its sovereign rating could turn to junk status.

In other reform bills, the government wants to change land acquisition laws to make it easier for companies to buy land for industrial and infrastructure projects. Also planned are a food security bill to provide more subsidized grain for the poor.

It was not immediately clear what impact the withdrawal of the DMK would have on the bills as the party has previously expressed support for the land acquisition and food security measures.

But the withdrawal heightens the chance that the government will call a snap national election if it is unable to pass major legislation, although neither the ruling Congress party nor the main opposition have shown much appetite for early polls. Elections need to be held by May 2014.

"The government has lost majority. All the reforms including insurance and pension will now be put on the back burner," said Rajiv Pratap Rudy, a spokesman for the main opposition BJP party.

Bonds, the BSE benchmark Sensex and the rupee fell on the news of the DMK's withdrawal. — Reuters

New Delhi, March 19
The automobile industry, which is facing demand slump in recent months, gave a lukewarm response to the RBI’s decision on Tuesday to reduce short-term lending rates. It said the sector needs a cut of at least 100 basis points.

“The 25 basis points cut is nothing, we need at least 100 basis points reduction,” said Society of Indian Automobile Manufacturers (SIAM) deputy director general Sugato Sen.

Although the RBI’s move, to slash the short-term lending rate or repo rate twice by 0.25 percentage points each in two months, is a positive step, it is unlikely to revive the sales immediately, Sen added. “It’s too slow a pace... We’re reaching a desperate step, we need policy support”.

Even as the RBI on Tuesday cut the repo rate to spur growth and revive investment, it sounded a note of caution on further easing of rates on account of high food inflation and current account deficit.

According to SIAM data, the total sales of vehicles across categories registered a decline of 5.45% at 1,451,278 units in February 2013 as against 1,534,910 units in the same month of 2012.

Reacting to the central bank’s rate cut proposal, General Motors India vice president P. Balendran said: “This is a marginal decline. We were expecting at least 50 basis points cut as inflation has moderated. We were expecting CRR cut as well. The rate cut will hardly make any positive impact on vehicle sales in the country.” — PTI

New Delhi, March 19
With a local court summoning billionaires Sunil Mittal and Ravi Ruia in 2G spectrum allocation case, Bharti Airtel on Tuesday charged the CBI with attempting to tarnish its reputation while Essar Group said it will take appropriate legal proceedings to challenge the order.

"We will fight this charge sheet against Bharti Airtel and its chairman Sunil Mittal”, the company said.

An Essar Group spokesperson said: "We are consulting our legal experts and exploring all legal options and will in due course take up appropriate legal proceedings to challenge this order."

Based on the CBI charge sheet, a Delhi court today summoned as accused CMD of Bharti Airtel (earlier Bharti Cellular Ltd) Sunil Bharti Mittal, Essar Group promoter Ravi Ruia and five others in a case relating to alleged irregularities in allocation of additional spectrum to Airtel and Vodafone during the NDA regime.

The CBI in its charge sheet, however, had only named Shyamal Ghosh and three telecom firms Bharti Cellular Ltd, Hutchison Max Telecom Pvt Ltd (now known as Vodafone India Ltd) and Sterling Cellular Ltd (now known as Vodafone Mobile Service Ltd), but Mittal, Ruia and Asim Ghosh were not arrayed as accused in the case by the agency.

Essar said it was a minority partner with Hutchison Group when additional spectrum was allocated and the charge sheet filed by the CBI does not mention Ravi Ruia or any other member of the Essar Group. However, the order of the Special Judge purports to hold that Ravi Ruia was "the directing mind and will" of Sterling Cellular Ltd.

"Given the facts, such a conclusion is clearly incorrect and misconceived and it is not clear from a reading of the order of the learned judge as to on what basis the conclusion has been arrived at," it added.

Besides Mittal and Ruia, the court issued summonses against Asim Ghosh, who was the then MD of Hutchison Max Telecom and former telecom secretary Shyamal Ghosh for April 1.

Airtel said the CBI has asserted that they have not found any evidence of conspiracy against any individual whatsoever. — PTI

Mumbai, March 19
The rupee bounced off a near three-week low touched in early trade on Tuesday after a disappointing RBI policy statement and as DMK withdrew support from the ruling coalition UPA government.

The withdrawal of support is seen jeopardizing Prime Minister Manmohan Singh's economic reforms but poses no immediate threat to the minority government, which can survive with the support of other parties.

The RBI cut its key lending rate as expected, spurring a brief rally in markets, but warned that scope for further easing was limited, prompting markets to soon start reversing the gains.

"Political stability is the new concern now. The market was caught short following the rate cut decision, and hence the USD/INR spiked up," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank.

"Going ahead we may see a range of 53.90 to 54.60 on the USD/INR this week. Unless some new event crops up in the euro zone, I expect the USD to be capped at 54.60 on the top," he added.

The partially convertible rupee closed at 54.37/38 per dollar, weaker compared with its close of 54.1650/1750 on Monday. The rupee strengthened to as much as 53.9050 in early trade, its highest since February 28.

"The rupee looks weak in the short-term now. We could see 55 levels depending on the developing political scenario and the pace at which it evolves," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

In the currency futures market, the most-traded near-month dollar/rupee contract on the National Stock Exchange, the MCX-SX and the United Stock Exchange, all closed at around 54.47 with a total traded volume of around US $9.4 billion. — Reuters

Washington, D.C., March 19
A top American senator has introduced a legislation that he claims is aimed at eliminating fraud and abuse of the H-1B visa programme, but provisions of which would make it tougher for Indians to get this popular work visa.

Among other things, the H-1B and L-1 Visa Reform Act of 2013 ensures that an H-1B application filed by an employer that employs 50 or more US workers will not be accepted unless the employer attests that less than 50% of the employer's workforce are H-1B and L visa holders.

The legislation, introduced by Senator Chuck Grassley, Ranking member of the Senate Judiciary Committee, makes reforms to increase enforcement, modify wage requirements and ensure protection for visa holders and American workers.

"Somewhere along the line, the H-1B programme got sidetracked. The programme was never meant to replace qualified American workers, but it was instead intended as a means to fill gaps in highly specialized areas of employment. When times are tough, like they are now, it's especially important that Americans get every consideration before an employer looks to hire from abroad," Grassley said. "The legislation will benefit the American worker, while still ensuring that US companies get the specialized workers they need," he added.

The H-1B and L-1 Visa Reform Act requires all companies to make a good faith effort to hire Americans first; requires prospective H-1B employers to list available positions on a Department of Labor sponsored website for a period of 30 days prior to petitioning for foreign labor; prohibits employers from advertising only to H-1B visa holders and prohibits companies from outsourcing visa holders to other companies.

A waiver is provided for companies that can attest that they have not displaced a US worker, and if it is not a "labor for hire" arrangement. It also provides that the wages paid to H-1B visa holders must be the highest of the locally-determined prevailing wage for the occupational classification in the area of employment. — PTI