The Tribune, Chandigarh, India

	Interest rate cut a distant dream as RBI keeps key rates unchanged Shiv Kumar/Sanjeev Sharma Tribune News Service Mumbai/New Delhi, June 17 In its mid-quarter policy review announced today, the RBI has kept key rates unchanged. The central bank has left the cash reserve ratio (CRR), the portion of deposits banks have to deposit with RBI, unchanged at 4 per cent. The repo rate, at which banks borrow from RBI under the liquidity adjustment facility (LAF), has also been left unchanged at 7.25 per cent. The reverse repo rate, at which RBI lends to banks, too has been left unchanged at 6.25 per cent. ''The monetary policy stance has been influenced by the evolving growth-inflation dynamics, the balance of risks as well as recent developments in the external sector,” RBI said in its statement. RBI Governor D Subbarao pointed to enhanced global uncertainties triggering risks of flight of capital, high current account deficit and the need for reviving investments. He said on the domestic front, macroeconomic conditions remain weak, hamstrung by infrastructure bottlenecks, supply constraints, lacklustre domestic demand and subdued investment sentiment. He emphasised the need to reverse the continuing weakness in manufacturing activity. He said since the last policy review in May global economic activity has slowed and risks to the domestic economy remained high especially on account of uncertainty over policies of ''systemic central banks.'' Though inflation shows signs of moderation, it could reverse as a result of rupee depreciation, recent increases in administered prices and persisting imbalances especially relating to food. The central bank also urged the government to create a conducive environment for private investment and speed up clearances of projects. Finance Minister P Chidamabram said: "I think the government at various levels conveyed its view to RBI. This is a mid-term review. We recognise that RBI is independent. There is nothing more for me to say at this stage." Industry disappointed Industry has expressed disappointment at the RBI's policy. In a statement, CII said sluggish private and government capital expenditure is hurting investment in industry and economy. "In such a situation CII is looking at the RBI for interventions which would improve the cost and availability of credit to industry. Besides, inflation is on a downward trajectory and core inflation, which reflects demand side pressures on the economy, has dipped to more than three-year low. Admittedly, global growth is still fragile and the recent slide of the rupee has revived fears of inflation. But, inflation in India is a supply side problem and expectation of a normal monsoon should keep inflationary expectations under check. CII hopes that the RBI would not wait for the next quarterly review but intervene sooner if the economic condition warrants a mid-course correction," the statement said. Analysts, however, felt that the central bank was adopting a cautious note before cutting rates. "The RBI would like to wait to see the impact of the depreciation on inflation and also action from the government to reign in the CAD. In any case, significant monetary transmission of the 75 basis points cuts in 2013 is yet to take place. The CRR has been left unchanged and the RBI’s focus will be to reduce the liquidity deficit, which stands at over Rs 1 trillion. While it is not clear if the Governor will cut rates in the next policy review, we expect an incremental 50-75 basis points Repo cut till March 2014,” said Amar Ambani, Head of Research, India Infoline. Dinesh Thakkar, CMD, Angel Broking, felt that the depreciating rupee would offset the positive impact of falling commodity prices. "The external sector also remains vulnerable as the trade deficit has widened sharply in April and May 2013. But going ahead, I believe the onset of a normal monsoon, decent rabi production in FY 2013 and expectations of moderate MSP hikes are likely to support moderation in food inflation and give the RBI room to cut the repo by an additional 50 basis points in FY2014,” Thakkar said. Assocham said it was disappointed by the RBI’s refusal to cut rates. "If we read the RBI policy document, we get a clear signal that it is being done under large economies. We cannot be going just by a sole consideration of rupee depreciation and its possible impact on inflation. Why ignore other factors like arrival of good monsoon which will surely boost food supply to have a dampening impact on the price situation," the industry association's president, Rajkumar N Dhoot, said. Naresh Takkar, MD & CEO, ICRA, said interest costs would continue to weigh upon the margins of Indian corporates until monetary transmission improves. Criticising the RBI’s status quo credit policy, realtors apex body CREDAI chairman Lalit Kumar Jain sounded a note of caution that the no-change approach will lead to an irreversible economic slowdown, hurt employment and GDP growth. Monetary Policy Review Repo rate kept unchanged at 7.25% CRR too unchanged at 4% Rupee fall, elevated food inflation areas of concern Balance of Payments, inflation and growth rate to determine future monetary stance First quarter review of policy on July 30
	RBI urges people to evaluate investment decisions Tribune News Service Chandigarh, June 17 The RBI has issued an advisory to members of public urging them to carefully evaluate their investment decisions, including making deposits with non- banking finance companies (NBFCs). With a view to protecting investors, the central bank has also given in detail various kinds of financial entities and the regulations governing them. They also list where members of public can lodge complaints in case some financial entity is found to be conducting business in an unauthorised manner or does not repay the deposits. RBI said though there are many NBFCs that conduct financial activity as their principal business, it has authorised only a few of them to accept deposits. All incorporated entities must necessarily be authorised to collect deposits either under the Reserve Bank of India Act 1934 or under the Companies Act, 1956; and it does not regulate chit fund activities or Collective Investment Schemes (CIS). The list of such NBFCs that can collect deposits is available on the RBI website. An official press release said RBI has been cautioning general public not to fall prey to fictitious offers promising unsustainable returns by individuals, unincorporated bodies and companies. The RBI has advised consumers to register their complaints in case they notice any company accepting deposits in an unauthorised manner or not repaying the principal and/or interest, with the local police or with the Economic Offences wing of the state police, and in case the entity is a company, to register their complaints with the Registrar of Companies. The apex bank clarified that NBFCs can’t use the name of the RBI in any manner while conducting their business. Currently, the maximum interest rate that an NBFC can pay to a depositor should not exceed 12.5 per cent, though RBI keeps changing these interest rates depending on the macro-economic environment. Investors must generally be circumspect if the interest rates or rates of return on investments offered are higher than those offered by others in the market place. Unless the entity accepting funds is able to earn more than what it promises, the entity will not be able to repay the investor as promised. For earning higher returns, the entity will have to take higher risks on the investments it makes. Higher risk could mean undertaking speculative activities and on such activities, there can be no assured return. As such, the public should forewarn themselves that the likelihood of losing money in schemes that offer high rates of interest are more.
	Exports dip 1.1% in May; trade deficit highest in 7 months New Delhi, June 17 India’s exports entered the negative zone after a gap of four months, recording a contraction of 1.1 per cent in May and leading to a trade deficit of $20.1 billion, highest in the last seven months. The decline in shipments, according to Commerce Secretary SR Rao is mainly due to the steps taken by the government to suspend gold trading in special economic zones (SEZs). Gold exports from SEZs in May declined by $0.8 billion. Besides problems in gold, weakness in the European markets has also impacted exports growth. The country's exports in May stood at $24.51 billion compared to $24.78 billion in the same month of 2012. Imports in May grew by 6.99 per cent to $44.65 billion. "As far as trade deficit is concerned, it is very worrisome...It is largely contributed by heavy imports of gold and silver," Rao said. Gold and silver imports, during the month under review, grew by 89 per cent to $8.39 billion. During April-May period, it grew by 109 per cent to $15.88 billion. However, exports during the first two months of the fiscal grew by 0.21 per cent to $48.67 billion. Imports during the period was up by 8.88 per cent to $86.6 billion. Oil and non-oil imports in May grew by 3 per cent and 9.1 per cent to $15 billion and $29.62 billion, respectively. The Secretary said hopefully from June, exports will bounce back as gold trading activities have started again in SEZs. "We have now made it mandatory that even in SEZ, gold units shall comply with the DGFT notification of minimum value addition of 3 per cent in gold jewellery and 5 per cent in gold and precious stone studded jewellery," Rao said. Prior to May 1, the value addition norm was not applicable for SEZ exports and now this has to be adhered to. The biggest trade gap of $21 billion was recorded in October, 2012. — PTI
	Wheat production down over 130 lakh MT Ruchika M. Khanna Tribune News Service Chandigarh, June 17 The vagaries of weather had an impact on wheat production this year. With inconsistent weather and untimely rains in February-March, the production of foodgrain and its procurement have fallen down by over 130 lakh metric tonnes (LMT) this year. The figures, accessed from the Department of Agriculture, reveal that as against India’s total wheat procurement of 381.48 LMT in 2011-12, the procurement has fallen to 250.30 LMT. The main reason for the fall in procurement is low production because of lower than anticipated yields in major wheat-growing states of Punjab, Haryana and Uttar Pradesh. The yield in these three states is reportedly 8 to 10 per cent lower as compared to last year due to smaller and shrunken kernel size. The figures available with The Tribune show that in Punjab, the wheat production fell from 180 LMT last year to 160 LMT. As a result, the wheat procurement from the state has fallen from 128.34 LMT last year to 108.78 LMT, while in Haryana, the wheat production fell from 86.65 LMT in 2011-12 to 58.73 LMT this year. The most drastic fall in wheat production has been in Uttar Pradesh, where the production fell from 50.63 LMT last year to just 6.77 LMT this year. The good news for Punjab, however, is that it is the only state which has contributed over 100 LMT to the Central government pool. In Madhya Pradesh, which is one of the fastest emerging states for wheat production, the production and government procurement fell from 84.93 LMT to 63.55 LMT. In Rajasthan, the contribution to the Central pool fell from 19.64 LMT to 12.34 LMT. Experts say the reason for fall in the production was lower yield because of low temperature in February-March, which is the wheat maturing season, and higher minimum day temperature and high humidity during this period. This adversely affected the ripening process of wheat leading to smaller grain size and shrunken wheat kernels. However, officials in the Agriculture Department say in spite of a lower production this year, there was no need to worry. The country already has a buffer stock of 44 million tonnes of wheat and 34 million tonnes of rice.
	Ramadorai is AirAsia India Chairman Mumbai, June 17 AirAsia India today moved closer to getting off the ground by appointing S Ramadorai as its Chairman, ending months-long suspense and having in place the entire top management team. A day after getting Tata Group patriarch Ratan Tata as the chief advisor, AirAsia Group chief executive officer Tony Fernandes today announced the name of Tata Consultancy Services vice-chairman S Ramadorai as the chairman of his proposed low-cost airline venture here. — PTI
	Sushil Modi quits as GST panel chief New Delhi, June 17 Sushil Kumar Modi, who ceased to be Bihar Finance Minister following the JD(U)-BJP split, today resigned as chairman of the Empowered Committee of State Finance Ministers looking into the implementation of the proposed new indirect tax regime - Goods and Services Tax (GST). "I have demitted my office as Deputy Chief Minister and Finance Minister, Bihar. I have also resigned from the post of chairman, Empowered Committee of State Finance Ministers," he stated in a letter to Union Finance Minister P Chidambaram. — PTI