New Delhi, August 14
Finance Minister P Chidambaram today said the Reserve Bank of India (RBI) must focus on growth and job creation instead of only targeting price stability in its monetary policy.

"The mandate of price stability must be seen as part of the larger mandate and the larger mandate is growth and employment," he said in Rajya Sabha while replying to a debate on the state of economy.

Chidambaram said a consensus needs to be built on the issue of larger mandate for the RBI so that a clear message can be sent.

"I wish each party takes stand on this. Let Parliament take a stand on this so that the message will go to the central bank that price stability is important… it is primary mandate of the central bank, but it is part of the larger mandate of promoting growth and employment," he said.

Laying out the policy stance of the government on growth, the Finance Minister said the UPA government believes in inclusive and sustainable growth and if adhering to these objectives means sacrificing some growth then so be it.

Citing the example of Niyamgiri hills in Orissa, he said if people there do not allow bauxite mining then it has to be respected.

Committing to fiscal consolidation and reducing Current Account Deficit (CAD), Chidambaram said steps are being taken to stabilise the rupee and expressed confidence that it would find its correct level once the other fundamental problems are taken care of.

"We will leave no stone unturned to contain CAD at $70 billion (in current fiscal) and add to the foreign exchange reserves. As fiscal deficit is a red line, the CAD is also a line and every endeavour will be made not to breach that line," he said.

On the issue of rise in prices of essential commodities, he said although the wholesale price-based inflation has come down to below five per cent in five months till June, efforts would have to be made to address the supply side problems to bring down the retail inflation. In the same vein, he added that some elevated inflation is not such a bad thing if it means better prices and wages for farmers.

Describing the state of country's economy as critical, the Opposition attacked the government saying it was due to lack of good governance, mismanagement and crony capitalism.

CHIDAMBARAMSPEAK The mandate of price stability must be seen as part of the larger mandate and the larger mandate is growth and employment More efforts will be made to contain current account deficit at $70 billion (in current fiscal) Rupee to stabilise with fiscal consolidation Measures would have to be taken to address the supply side problems to bring down the retail inflation. Elevated inflation is not such a bad thing if it means better prices and wages for farmers

New Delhi, August 14
The sharp rise in the prices of onions and other vegetables and hikes in diesel and petrol prices have pushed headline inflation to a five-month high of 5.79 per cent in July.

There may be more pain on the inflation front as the government is mulling a one-time hike of Rs 2-3 per litre in diesel prices to offset the impact of fall in the rupee.

The monthly hike in diesel prices for the last few months may also have contributed to the jump in vegetable prices as transportation costs are going up.

Inflation based on the Wholesale Price Index (WPI) was at 4.86 per cent in June. In July 2012, it was 7.52 per cent. This is the highest level of inflation since February 2013, when it was 7.28 per cent.

There has been a sharp increase in the food articles category in the WPI index which rose to double digits at 11.91 per cent, driven by rising prices of onions, cereals and rice. The rate of the price increase in food articles, which has a 14.34 per cent share in the WPI basket, was at 9.74 per cent in June. Inflation in food articles has risen for the third straight month. Onion prices on annual basis more than doubled in July, shooting up by 145 per cent. Vegetables prices went up by 46.59 per cent during the month from 16.47 per cent in June.

The declining value of the rupee has made imports of oil costlier and pushed up fuel and power inflation to 11.31 per cent in July.

According to Crisil Research, a weak rupee raised the cost of imported items and pushed up inflation in July. Imported inflation (market-linked fuels, ferrous and non-ferrous metals, and edible oil) also rose.

Crisil said the rise in imported inflation was further complemented by a sharp pick-up in food articles inflation to 11.9% as vegetable inflation flared to over 46%. Despite weak demand-side pressures, the pick-up in inflation reflects some impact of pass-through of rising input costs and higher food inflation, it added.

Mumbai, August 14
The Reserve Bank of India today announced measures to reduce foreign exchange outflows by resident Indians in the latest of a slew of measures intended to support the battered rupee.

While the measures are aimed at moderating outflows, the RBI said genuine requirement beyond these limits would continue to be considered under the approval route.

The central bank has reduced the limit for overseas direct investment (ODI) by domestic companies under the automatic route from 400 per cent of the net worth to 100 per cent.

"This reduced limit will also apply to remittances made under the ODI scheme by domestic companies for setting up unincorporated entities overseas in the energy and natural resources sectors," the apex bank said.

It said the reduction would not apply to ODIs by Navratna PSUs, ONGC Videsh and Oil India in overseas unincorporated entities and incorporated entities.

The RBI also reduced the limit for remittances made by resident individuals under the liberalised remittances scheme (LRS) from $2 lakh to $75,000 a year. Resident individuals are however, allowed to set-up joint ventures/ wholly-owned subsidiaries outside under the ODI route within the revised LRS limit.

New Delhi august 14
Seeking to reduce the import of gold, the Reserve Bank today prohibited inward shipment of gold coins, medallions and dores without a licence.

"From now onwards, import of gold in the form of coins and medallions is prohibited and henceforth, all import of gold in any form or purity shall be subject to a licence issued by the DGFT prescribing 20-80 scheme," Economic Affairs Secretary Arvind Mayaram said.

The latest measures are part of the series of steps taken to curb gold import, the single biggest contributor to the widening current account deficit (CAD).

He said it should be incumbent on all nominated banks, agencies and other entities to ensure that at least one-fifth, or 20 per cent, of every lot of import of gold is exclusively made available for the purpose of exports and the balance for domestic use. — PTI

Mumbai, August 14
The Finance Ministry today said the public sector insurance behemoth LIC could increase its investment in companies up to 25% from the current 20% under special circumstances.

“The investment norms of LIC at the moment are settled at 20%, but in special circumstances it can go up to 25%. In case LIC wants, the board can take this to 25 per cent,” Financial Services Secretary Rajiv Takru said.

He was talking to reporters on the sidelines of an insurance summit organised by the CII here. Interestingly, former IRDA chairman J Harinarayan had opposed the move to increase the equity exposure limit of LIC, saying the move was “imprudent”.

Earlier this year, the government had proposed to allow LIC to invest up to 30% in a single company. LIC has been perceived as the last resort for the government to meet its disvestment target, though the Centre has denied it. — PTI

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