Dealers said that the rupee, which closed on Wednesday at 56.23, opened weak and soon breached its previous intra-day low of 53.38 to touch 56.52. However, around 3 p.m. there were rumours that the oil companies would cease buying dollars from the open market and purchase them from select public sector banks. This was seen as a precursor to an arrangement where oil companies would buy dollars directly from RBI. However, oil company officials denied that there was any such arrangement leading to the rupee to slide back. Dealers said that RBI’s intermittent intervention was adding to intra-day volatility in the rupee as the central bank was unsuccessful in either reversing or stopping the slide in the rupee. While there is no move yet to sell dollars directly to oil companies, RBI has tabled a proposal to allow foreign institutional investors higher limits for investment in government bonds. The report also contains recommendations to increase liquidity in the debt market. Data released by exchanges showed that foreign investors have increased their holding of government debt by over $600 million.
1.6.12
Austerity measures
The cashstrapped government has announced a series of austerity measures, including ban on holding seminars in five-star hotels and purchase of vehicles, as it moved to restore the health of government finances. Earlier this month, FM Pranab Mukherjee had announced in Parliament that he would impose some austerity measures to tide over the tough fiscal situation. But the steps announced may not be enough to help him meet his fiscal deficit target of 5.1% of GDP. The circular announcing the measures is a repeat of what has been issued in previous years. Faced with a tight fiscal position, the government had imposed similar measures last year but failed to meet its fiscal deficit target of 4.6% of GDP. Economists say such measures are symbolic and wider spending reforms are needed to steady public finances.
The finance ministry has asked each ministry and department to impose a mandatory 10% cut in non-plan expenditure. But, this will exclude interest repayment of debt, defence capital, salaries, pension and finance commission grants to the states. It also announced a 10% cut in budgetary allocation for seminars and conferences and said holding such events abroad should be strongly discouraged except for trade promotion purposes. Purchase of vehicles has been banned until further orders, including against old vehicles. There will be a total ban on creation of new posts and foreign visits should be regulated to ensure that each ministry remains within the allocated budget.
In a move aimed at ensuring transparency and to avoid any controversy, a clause has been added which says the rush on procurement should be avoided during the last quarter of the fiscal and, in particular, the last month of the year to ensure that all procedures are complied with and there is no “infructuous or wasteful expenditure”. Financial advisors have been specifically asked to monitor this aspect in their reviews. The circular signed by expenditure secretary Sumit Bose, said it would be the responsibility of each ministry and department to ensure that foreign travel is restricted to most necessary and unavoidable official engagements.
The finance ministry has asked each ministry and department to impose a mandatory 10% cut in non-plan expenditure. But, this will exclude interest repayment of debt, defence capital, salaries, pension and finance commission grants to the states. It also announced a 10% cut in budgetary allocation for seminars and conferences and said holding such events abroad should be strongly discouraged except for trade promotion purposes. Purchase of vehicles has been banned until further orders, including against old vehicles. There will be a total ban on creation of new posts and foreign visits should be regulated to ensure that each ministry remains within the allocated budget.
In a move aimed at ensuring transparency and to avoid any controversy, a clause has been added which says the rush on procurement should be avoided during the last quarter of the fiscal and, in particular, the last month of the year to ensure that all procedures are complied with and there is no “infructuous or wasteful expenditure”. Financial advisors have been specifically asked to monitor this aspect in their reviews. The circular signed by expenditure secretary Sumit Bose, said it would be the responsibility of each ministry and department to ensure that foreign travel is restricted to most necessary and unavoidable official engagements.
Somewhere in Mumbai....
Will the BEST committee, which is controlled by the BMC’s ruling Shiv Sena-BJP combine, demand compensation for the damages caused to 101 buses during Thursday’s strike? BEST panel member Ravi Raja said, “It’s an irony that the bills would have to be sent by the Sena-BJP committee members to their own bosses. Let us wait and watch.”
The final report of damages incurred during a bandh is usually produced before the committee, which then approves the seeking of compensation. “In the past, when BEST union workers damaged buses, the committee sent bills and also recovered the amount,” Raja said.
Home minister R R Patil said he has instructed all collectors and superintendents of police (DCPs in cities) to do panchnamas of damaged properties so that legal action can be taken against “miscreants” and damages recovered.
The final report of damages incurred during a bandh is usually produced before the committee, which then approves the seeking of compensation. “In the past, when BEST union workers damaged buses, the committee sent bills and also recovered the amount,” Raja said.
Home minister R R Patil said he has instructed all collectors and superintendents of police (DCPs in cities) to do panchnamas of damaged properties so that legal action can be taken against “miscreants” and damages recovered.
Fissures in the BJP
L K Advani’s simmering differences with BJP chief Nitin Gadkari and the RSS appear to be coming to a head. On a day when it could claim some credit for a successful Bharat bandh, the BJP was embroiled in a fresh burst of dissidence with Advani launching a barely veiled attack on Gadkari’s leadership of the party. In a well circulated blog, Advani lamented the BJP’s inability to “rise to the occasion” to take advantage of the UPA-2’s shortcomings, specifically pointing to decisions linked to Gadkari like the controversial induction of UP health scam accused Babu Singh Kushwaha, nomination of a “shady” businessman for Rajya Sabha from Jharkhand and political troubles in Karnataka.
“The mood within the party these days is not upbeat…The results in Uttar Pradesh, the manner in which the party welcomed BSP ministers who were removed by Mayawatiji on charges of corruption, the party’s handling of Jharkhand and Karnataka—all these events have undermined the BJP’s campaign against corruption,” Advani said. He almost singled out Gadkari for the party’s failures by praising the performance of senior leaders Sushma Swaraj and Arun Jaitley in Parliament.
Advani’s sharp criticism annoyed his colleagues who felt it could undercut the BJP’s attempts to pitch itself as the natural alternative to the Congress by riding an anti-corruption mood and resentment over the general price rise, accentuated by decisions like a steep hike in petrol rates and a perception of frozen governance. An unfazed Gadkari went about his official chores and received a boost when all senior party leaders present in the national capital, barring Advani, turned up for a meeting he called on Thursday afternoon to build upon what BJP sources called the “success” of the Bharat bandh. The meeting ignored Advani’s comments with no one referring to the blog.
Advani’s absence from the meeting, days after he skipped a public meeting in Mumbai where Gadkari was given another term, fortified the perception of his estrangement from the party chief, the latter’s mentors in the RSS as well as senior party leaders who see Gadkari as the best bet in the given circumstances. Importantly, the stalwart did not appear to mask the differences. The blog where he publicly faulted Gadkari was a riposte to a column critical of the media for running down the recent BJP meeting in Mumbai as a factional show.
NTP 2012
Soon, you will not have to pay roaming charges for making calls on your cellphone while travelling within the country. Not just that, you will also be able to retain your number even if you move city. The Union Cabinet set the stage for big changes in India’s telecom story by approving a National Telecom Policy, which also seeks to put an end to your frustration with slow speed of internet surfing. The nod came after the telecom minister dropped controversial issues from his draft.
Anxious to prevent a repeat of the situation where former telecom minister A Raja allegedly rigged spectrum prices to favour a select group of businessmen, the Union Cabinet, which cleared the National Telecom Policy on Thursday, decided to vest the power to price spectrum in a ministerial panel, rather than just the minister. It also felt that revenue generation could not be excluded as a goal, borrowing the politically safe formulation of “affordability” from the New Telecom Policy, 1999. Deputy chairman of Planning Commission Montek Singh Ahluwalia had objected to the proposal to confer pricing power on the telecom minister of the day. The meeting saw him getting support from many of the attendees—home minister P Chidambaram, finance minister Pranab Mukherjee, rural development minister Jairam Ramesh, commerce minister Anand Sharma, heavy industries minister Praful Patel and highways minister C P Joshi.
The affordability argument can provide comfort to telecom operators who have launched a high decibel campaign against the regulator’s prescription for a 10-fold increase in the reserve price for spectrum auction. However, the government has virtually ruled out a rethink on the second suggestion of refarming of spectrum. The regulator has proposed that GSM operators switch from 900 MHz band to 1,800 MHz at market determined rates, something that is being opposed by the industry on the grounds that it will cost it nearly Rs 1.5 lakh crore.
On giving more powers to Trai—another issue which saw an animated debate in the Cabinet—the ministers were unanimous that policymaking function would remain with the government, not the sectoral regulator. “This means Trai will not make policy,” telecom minister Kapil Sibal said. This apart, there were at least two other modifications, with the telecom department dropping proposals to enact a separate law for spectrum management and to set up a finance firm for the sector.
Anxious to prevent a repeat of the situation where former telecom minister A Raja allegedly rigged spectrum prices to favour a select group of businessmen, the Union Cabinet, which cleared the National Telecom Policy on Thursday, decided to vest the power to price spectrum in a ministerial panel, rather than just the minister. It also felt that revenue generation could not be excluded as a goal, borrowing the politically safe formulation of “affordability” from the New Telecom Policy, 1999. Deputy chairman of Planning Commission Montek Singh Ahluwalia had objected to the proposal to confer pricing power on the telecom minister of the day. The meeting saw him getting support from many of the attendees—home minister P Chidambaram, finance minister Pranab Mukherjee, rural development minister Jairam Ramesh, commerce minister Anand Sharma, heavy industries minister Praful Patel and highways minister C P Joshi.
The affordability argument can provide comfort to telecom operators who have launched a high decibel campaign against the regulator’s prescription for a 10-fold increase in the reserve price for spectrum auction. However, the government has virtually ruled out a rethink on the second suggestion of refarming of spectrum. The regulator has proposed that GSM operators switch from 900 MHz band to 1,800 MHz at market determined rates, something that is being opposed by the industry on the grounds that it will cost it nearly Rs 1.5 lakh crore.
On giving more powers to Trai—another issue which saw an animated debate in the Cabinet—the ministers were unanimous that policymaking function would remain with the government, not the sectoral regulator. “This means Trai will not make policy,” telecom minister Kapil Sibal said. This apart, there were at least two other modifications, with the telecom department dropping proposals to enact a separate law for spectrum management and to set up a finance firm for the sector.
That sinking feeling !
India’s economic growth has come down to a nine-year low of 5.3% in the January-March quarter of this year, showing up in bolder relief than ever before the signs of the severe stress in the economy, and prompting calls for urgent action to reverse the trend. Data released by the Central Statistics Office (CSO) showed growth in 2011-12 stood at 6.5%, much lower than the 8.4% posted in the previous year. It was below the government’s previous estimate of 6.9% and way off the mark of estimates handed out periodically by top government policymakers.
The Indian economy, once the star among emerging market economies, has steadily slowed since the January-March quarter of 2010-11, and on Thursday after digesting the January-March growth figure of 5.3%, some economists cut their growth estimates for 2012-13. The manufacturing sector growth fell 0.3% in the March quarter compared to an expansion of 7.3% in the corresponding period the previous year. Agriculture posted a growth of 1.7%, sharply lower than the 7.5% growth in the March quarter of 2010-11 For the full year, the manufacturing sector grew 2.5% in 2011-12 compared with 7.6% in 2010-11.
Growth in the eight core industries slowed in April, pointing to a rut. Coal, crude oil, natural gas, refinery products, fertilizers, steel, cement and electricity grew 2.2% in April, lower than the 4.2% posted in the same month last year.
The slide in the economic growth has led to calls for quick action on the part of the government. The sluggishness in the services sector, which accounts for nearly 60% of GDP, emerged as a worry for policymakers already burdened by the slowing economy and stubborn inflation. Data showed the services sector growth slowed to 7.9% in the March quarter compared with a10.6% expansion in the same year-ago period. The domestic demand-driven economy has been hit hard by high inflation, interest rates, rising global commodity prices, lack of economic reforms and delay in implementation of projects. This, in turn, has hit business confidence, forcing domestic players to explore investment options overseas.
Policymakers have consistently blamed the global economic environment and the lack of cooperation from the opposition in approving key economic legislations as reasons for the slowdown. The March quarter data came on a day when the opposition had called for a shutdown to protest the sharp increase in petrol prices. Analysts say the disappointing growth numbers could spoil the mood further and heighten the anxiety.
Finance Minister Pranab Mukherjee termed the March quarter data as disappointing but said the figures should be seen in the light of overall global developments. He attributed the slowdown to tight monetary policy and the weak global sentiment affected growth in domestic private investment. But economists pointed to two key risks which included uncertainty about the monsoons and the European debt crisis and said the need of the hour was to step up reforms and ease supply bottlenecks.
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