Inflation is on a high of 6.68% on 15th March 2008.
It was 5.11% on 1st March and 5.92% on 8th March.
Finance minister announced on the TV that inflation is to be contained and some growth has to be sacrificed in order to do it.
Friday, March 28, 2008
Monday, March 17, 2008
RBI unlikely to lower rates as inflation soars: India Inc
Sunday, March 16, 2008
RBI unlikely to lower rates as inflation soars: India Inc
Indian businessmen have voiced concern that the Reserve Bank of India (RBI) is unlikely lower interest rates as inflation rate soared to a nine-month high of 5.11 percent.
According to a survey by the Associated Chambers of Commerce and Industry of India (Assocham), though the economy started showing early signs of a possible slowdown, the RBI would abstain from cutting the interest rate.
'The government is confronted with the dilemma of keeping the inflation rate low and prevent further hardening of the interest rates, hence they are left with little elbow room,' said Venugopal N. Dhoot, Assocham president and chairman of Videocon Group.
In the week ending March 1, inflation reached a level of 5.11 percent, compared to 5.02 percent in the previous week, according to the data released by commerce and industry ministry.
This is for the second time that inflation breached the 5 percent benchmark, set by the central bank for 2007-08. The rise has been mainly due to high prices of wheat, rice, pulses and edible oil.
The prices of primary articles have increased by 6.9 percent over the corresponding week of the last month while fuel prices have risen by 5.4 percent as a result of increase in the retail prices of petrol and diesel, Assocham said.
Almost 67 percent of the 130 chief executive officers surveyed indicated that the government's foremost priority should now be to tame the spiralling inflation while keeping an eye in maintaining the growth rate of 9 percent.
Finance Minister P. Chidambaram proposed to reduce the CENVAT rate from 16 to 14 percent and lower excise duties of auto, pharma sectors and some items of mass consumption in the union budget for 2008-09.
Such measures, the survey showed, would do no good in checking the galloping inflation as some of the companies might not even pass the benefit to consumers to maintain their own profit margins.
With major players like the US, Europe and China also fighting intense inflationary pressures, it is extremely difficult for India to insulate itself from such happenings, the chamber said.
'The world over, inflation in the first nine months of current fiscal on account of increase in the petroleum prices has been 17 percent. The pressure on the energy prices is expected to further intensify as the crude oil prices have crossed $110 per barrel mark,' the industry body said.
India's industrial production in the month of January has grown by merely 5.3 percent as compared to 11.6 percent growth in previous year. The growth in manufacturing sector has halved to 5.9 percent in January of this fiscal compared to 12.3 percent growth in same month in 2006-07.
(indiaenews)
www.indiaenews.com
RBI unlikely to lower rates as inflation soars: India Inc
Indian businessmen have voiced concern that the Reserve Bank of India (RBI) is unlikely lower interest rates as inflation rate soared to a nine-month high of 5.11 percent.
According to a survey by the Associated Chambers of Commerce and Industry of India (Assocham), though the economy started showing early signs of a possible slowdown, the RBI would abstain from cutting the interest rate.
'The government is confronted with the dilemma of keeping the inflation rate low and prevent further hardening of the interest rates, hence they are left with little elbow room,' said Venugopal N. Dhoot, Assocham president and chairman of Videocon Group.
In the week ending March 1, inflation reached a level of 5.11 percent, compared to 5.02 percent in the previous week, according to the data released by commerce and industry ministry.
This is for the second time that inflation breached the 5 percent benchmark, set by the central bank for 2007-08. The rise has been mainly due to high prices of wheat, rice, pulses and edible oil.
The prices of primary articles have increased by 6.9 percent over the corresponding week of the last month while fuel prices have risen by 5.4 percent as a result of increase in the retail prices of petrol and diesel, Assocham said.
Almost 67 percent of the 130 chief executive officers surveyed indicated that the government's foremost priority should now be to tame the spiralling inflation while keeping an eye in maintaining the growth rate of 9 percent.
Finance Minister P. Chidambaram proposed to reduce the CENVAT rate from 16 to 14 percent and lower excise duties of auto, pharma sectors and some items of mass consumption in the union budget for 2008-09.
Such measures, the survey showed, would do no good in checking the galloping inflation as some of the companies might not even pass the benefit to consumers to maintain their own profit margins.
With major players like the US, Europe and China also fighting intense inflationary pressures, it is extremely difficult for India to insulate itself from such happenings, the chamber said.
'The world over, inflation in the first nine months of current fiscal on account of increase in the petroleum prices has been 17 percent. The pressure on the energy prices is expected to further intensify as the crude oil prices have crossed $110 per barrel mark,' the industry body said.
India's industrial production in the month of January has grown by merely 5.3 percent as compared to 11.6 percent growth in previous year. The growth in manufacturing sector has halved to 5.9 percent in January of this fiscal compared to 12.3 percent growth in same month in 2006-07.
(indiaenews)
www.indiaenews.com
Sunday, March 2, 2008
Sectoral Impact of Budget
Automobiles
Excise duty on two wheelers and three wheelers was reduced from 16% to 12%. If the benefit is passed on to customers, we may witness a increase in volumes from the current decreased volumes.
Excise rate for small passengers cars and for buses was lowered to 12% from 16%
Impact: positive
Companies: Two wheelers : Bajaj Auto, Hero HOnda, M&M and TVS Motor
Cars and Trucks: Maruti, Tata Motors, Ashok Leyland
Banking
Farm loan writeoff is good for banks if government contributes the entire amount as its share.
Financial conglomerates like Kotak Mahindra bank, ICICI Bank and State Bank get benefits from the provision of set-off of dividend distribution tax paid by subsidiaries toward DDT payable by parent company.
As the disposable income of people increases due to Income tax relief, savings will increase and it is als good for banking.
Overall positive impact
-----------
Cement
The excide duty on bulk cement (non-retail) is now higher of 14% ad-valorem or Rs 400/ton from Rs 400/ton earlier. This could result in higher excise of Rs. 5 to 6 per bag. Bulk cement sales are now 40% of cement sales. Cement producers have to recover this increase first before making any further increase in prices.
Impact negative
-------------
Engineering
Reduced excise duty on goods likely to boost demand.
Customs duty on project imports lowered
Impact positive
--------------
FMCG
Reduction in excise duty from 16% to 14% will help reduce prices by 1%. The reduction in income tax coupled with price decrease due to excise duty will provide a boost in volume growth for the sector.
In the case of cigarettes, due to increase of duty on nonfilter cigarette, consumer may upgrade to filter cigarette.
Reduction of excise duty on refrigeration equipment will encourage cold chain growth and thus help increase sales of processed food companies.
Reduction in excise on water purifiers will purifier companies.
Impact: positive
-----------------
Information Technology
Extension of STP scheme not granted.
On packaged software excise duty is increased from 8% to 12%.
IT education companies may benefit due to higher allocation in the budget for skill development
Impact: Neutral
--------------------
Infrastructure
The budget made allocations to infrastructure development programs
Bharat Nirman - Rs. 313 billion
J Nehru NURM - Rs. 69 billion
Acclerated irrigation benefit program Rs.200 billion
Rural infrastructure development fund Rs.140 billion
Continued thrust on infrastructure spending is good news.
Impact positive
------------------------
Media
Ministry and broadcasting has an allocation of Rs.1,910 cr (Rs.1,610 cr last year). Government has removed customs duty on specified parts of set top boxes and its components from the current rate of 16%
Expect cheaper set top boxes and growth of direct to home operators
impact positive
------------------------
Oil and Gas
Withdrawal of customs duty on naphtha for petrochem production marginally negative for Reliance
impact neutral
Excise duty on two wheelers and three wheelers was reduced from 16% to 12%. If the benefit is passed on to customers, we may witness a increase in volumes from the current decreased volumes.
Excise rate for small passengers cars and for buses was lowered to 12% from 16%
Impact: positive
Companies: Two wheelers : Bajaj Auto, Hero HOnda, M&M and TVS Motor
Cars and Trucks: Maruti, Tata Motors, Ashok Leyland
Banking
Farm loan writeoff is good for banks if government contributes the entire amount as its share.
Financial conglomerates like Kotak Mahindra bank, ICICI Bank and State Bank get benefits from the provision of set-off of dividend distribution tax paid by subsidiaries toward DDT payable by parent company.
As the disposable income of people increases due to Income tax relief, savings will increase and it is als good for banking.
Overall positive impact
-----------
Cement
The excide duty on bulk cement (non-retail) is now higher of 14% ad-valorem or Rs 400/ton from Rs 400/ton earlier. This could result in higher excise of Rs. 5 to 6 per bag. Bulk cement sales are now 40% of cement sales. Cement producers have to recover this increase first before making any further increase in prices.
Impact negative
-------------
Engineering
Reduced excise duty on goods likely to boost demand.
Customs duty on project imports lowered
Impact positive
--------------
FMCG
Reduction in excise duty from 16% to 14% will help reduce prices by 1%. The reduction in income tax coupled with price decrease due to excise duty will provide a boost in volume growth for the sector.
In the case of cigarettes, due to increase of duty on nonfilter cigarette, consumer may upgrade to filter cigarette.
Reduction of excise duty on refrigeration equipment will encourage cold chain growth and thus help increase sales of processed food companies.
Reduction in excise on water purifiers will purifier companies.
Impact: positive
-----------------
Information Technology
Extension of STP scheme not granted.
On packaged software excise duty is increased from 8% to 12%.
IT education companies may benefit due to higher allocation in the budget for skill development
Impact: Neutral
--------------------
Infrastructure
The budget made allocations to infrastructure development programs
Bharat Nirman - Rs. 313 billion
J Nehru NURM - Rs. 69 billion
Acclerated irrigation benefit program Rs.200 billion
Rural infrastructure development fund Rs.140 billion
Continued thrust on infrastructure spending is good news.
Impact positive
------------------------
Media
Ministry and broadcasting has an allocation of Rs.1,910 cr (Rs.1,610 cr last year). Government has removed customs duty on specified parts of set top boxes and its components from the current rate of 16%
Expect cheaper set top boxes and growth of direct to home operators
impact positive
------------------------
Oil and Gas
Withdrawal of customs duty on naphtha for petrochem production marginally negative for Reliance
impact neutral
Budget 2008-09 Critical Comments by Independent Observers
Budget 2008-09 Critical Comments by Independent Observers/Experts
N. Chandra Mohan
Hindustan Times 1 March 2008, page 20
Missed the woods and trees
A fast growing Indian economy provided a golden opportunity to tackle fiscal challenges decisively. But the opportunity was let off by the FM and the government.
---------------
---------------
Narendra Jadhav
Vice Chancellor of Pune University
HT, 1 March 2008, page 6
The waiver is necessary but not sufficient. If there is no comprehensive package of reforms in the farm sector, then history may repeat itself.
---------------
Means government has not shown imagination in coming out with an integrated plan to provide relief to the needy and provide a framework that would help in improving the economics of agricultural activity.
N. Chandra Mohan
Hindustan Times 1 March 2008, page 20
Missed the woods and trees
A fast growing Indian economy provided a golden opportunity to tackle fiscal challenges decisively. But the opportunity was let off by the FM and the government.
---------------
---------------
Narendra Jadhav
Vice Chancellor of Pune University
HT, 1 March 2008, page 6
The waiver is necessary but not sufficient. If there is no comprehensive package of reforms in the farm sector, then history may repeat itself.
---------------
Means government has not shown imagination in coming out with an integrated plan to provide relief to the needy and provide a framework that would help in improving the economics of agricultural activity.
Budget 2008-09 Criticism by People's Representatives
Yashwant Sinha
BJP
FM has done precious little for infrastructure.
HT 1 March 2008, page 14
For an economy which is slowing down, a thrust on infrastructure would have helped in two ways. It would have increased investment demand in the economy and also it would add to the efficiency of the economy when it is completed. The finance minister has failed to provide.
-----------
I agree with Mr. Sinha on this
At this point in time, instrastructure and public transport are the need of the hour. There is not need to provide excise duty reliefs to producers of cars and two wheelers. The revenue should have been spent on improving infraastructure and public transport.
-------------
Mr Sinha also pointed out that the Finance Minister made an announcement of loan waiver without a financing plan and working out details. Probably a government completing the last year of the term should not do such things. They should only announce programs that are properly developed and are implemented during their term of office.
------------------
------------------
D. Raja
CPI
HT 1 March 08, page 14
The budget lacks long-term perspective. The direction of the economic reforms is the same, which could be dangerous.
-----------------
The direction implied is supporting big business. There is hardly any mention of achivements by government departments or public sector organizations in the budget. Do they not deserve recognition in the annual program statement of the government? Praise the big corporate business and criticize every other entity in the economy seems to be the motto of the government.
------------------
------------------
L.K. Advani
BJP
HT 1 March 08, page 14
The waiver of farm loans has come too late. I am surprised at the heavy communal overtones of the budget.
-----------------
-----------------
Mayawati
BSP
Mayawati criticized the union budget 2008-09 through advertisement.
National media seems to have ignored BSP leaders in its post budget papers. It seems as though politicians were sidelined and businessmen and stock market operators got the full coverage this time. Politicians have to take up the route of advertisements to communicate their view point.
NCP also advertised and talked favourably about the loan waiver scheme and the role of Sharad Pawar in getting it approved.
-----------------
-----------------
Atul Kumar Anjan
HT, 1 March 2008, p 15.
Atul Kumar Anjaan is the national general secretary of the Bhartiya Kisan Union (BKU). He is also a member of the National Commission on Farmers. He said provisions for agriculture in the budget are a mere eyewash. The loan waiver is the only silver lining. There is nothing in the budget that will take the agricultural growth ot four per cent.
-----------------
-----------------
Sitaram Yechury
CPM MP
HT 1 March 2008, Page 15
The budget contains nothing to contain inflation...Neither has anything been done to strengthen public distribution system
-----------------
-----------------
See the statement of CPIM on Budget 2008-09 on their site
http://www.cpim.org/
Inadequate allocation to education and health care are highlighted in the statment.
See the statements of L K Advani and Rajnath Singh on BJP website
http://www.bjp.org/
BJP
FM has done precious little for infrastructure.
HT 1 March 2008, page 14
For an economy which is slowing down, a thrust on infrastructure would have helped in two ways. It would have increased investment demand in the economy and also it would add to the efficiency of the economy when it is completed. The finance minister has failed to provide.
-----------
I agree with Mr. Sinha on this
At this point in time, instrastructure and public transport are the need of the hour. There is not need to provide excise duty reliefs to producers of cars and two wheelers. The revenue should have been spent on improving infraastructure and public transport.
-------------
Mr Sinha also pointed out that the Finance Minister made an announcement of loan waiver without a financing plan and working out details. Probably a government completing the last year of the term should not do such things. They should only announce programs that are properly developed and are implemented during their term of office.
------------------
------------------
D. Raja
CPI
HT 1 March 08, page 14
The budget lacks long-term perspective. The direction of the economic reforms is the same, which could be dangerous.
-----------------
The direction implied is supporting big business. There is hardly any mention of achivements by government departments or public sector organizations in the budget. Do they not deserve recognition in the annual program statement of the government? Praise the big corporate business and criticize every other entity in the economy seems to be the motto of the government.
------------------
------------------
L.K. Advani
BJP
HT 1 March 08, page 14
The waiver of farm loans has come too late. I am surprised at the heavy communal overtones of the budget.
-----------------
-----------------
Mayawati
BSP
Mayawati criticized the union budget 2008-09 through advertisement.
National media seems to have ignored BSP leaders in its post budget papers. It seems as though politicians were sidelined and businessmen and stock market operators got the full coverage this time. Politicians have to take up the route of advertisements to communicate their view point.
NCP also advertised and talked favourably about the loan waiver scheme and the role of Sharad Pawar in getting it approved.
-----------------
-----------------
Atul Kumar Anjan
HT, 1 March 2008, p 15.
Atul Kumar Anjaan is the national general secretary of the Bhartiya Kisan Union (BKU). He is also a member of the National Commission on Farmers. He said provisions for agriculture in the budget are a mere eyewash. The loan waiver is the only silver lining. There is nothing in the budget that will take the agricultural growth ot four per cent.
-----------------
-----------------
Sitaram Yechury
CPM MP
HT 1 March 2008, Page 15
The budget contains nothing to contain inflation...Neither has anything been done to strengthen public distribution system
-----------------
-----------------
See the statement of CPIM on Budget 2008-09 on their site
http://www.cpim.org/
Inadequate allocation to education and health care are highlighted in the statment.
See the statements of L K Advani and Rajnath Singh on BJP website
http://www.bjp.org/
Saturday, March 1, 2008
India Budget 2008-09 - A Critical Look
Is the government undertaking the right programs?
In budget, the programmes of the government are announced. Has it selected the right programmes.
1. Public transport systems - The required emphasis was not given.
In Mumbai we fear to travel in local trains nowadays even on a Sunday. The finance minister said that he is a lucky man and country progressed a lot under him and he got a lot more tax revenue.
Why is he still allowing Mumbai people to suffer. When times are good, if he forces us to endure the hardship when is the government going to improve things.
Not only travel in Mumbai, travel to many places is very difficult.
Recently I travelled by Devagiri Express to Secunderabad. On the way at most of the stations, persons enter the sleeper compartment and trouble long distance passengers. Why are they doing it? Because they cannot enter the compartment meant for short distance travellers so called general compartment.
Government pats itself saying that they had achieved great things. Have they made the correct choices?
Hyderabad is also having traffic problems and Bangalore is also in a similar situation or probably in a much worse situation.
2. Micro, Small and Medium Enterprises - As the growth agricultural production is meagre, there is a need to encourge micro enterprises in rural areas as well as urban areas and provide alternate means of employment and livelihood to people engaged presently in agriculture related occupations.
Has the budget recognised the issue and annouced any programmes? Item number 89 deals with it in the budget.
89. Micro, small and medium enterprises will continue to receive support from the Government. I wish to remove certain wrong perceptions about the sector. In the four years ending 2006-07, for which figures are available, there has been a secular rise in the number of registered units, the number of unregistered units, production, employment and exports. In order to give a fillip to the sector, I propose to create a risk capital fund in the Small Industries and Development Bank of India (SIDBI). As on January 31, 2008, the Credit Guarantee Trust with SIDBI had extended guarantees to 89,129 units for an amount of Rs.2,479 crore. SIDBI will reduce the guarantee fee from 1.5 per cent to 1 per cent and the annual service fee from 0.75 per cent to 0.5 per cent for loans up to Rs.5 lakh.
Does this statement convey any vision? Does it have any target in relation to growth of this segment and employment in this segment?
Budget 2008-09 Criticism by People's Representatives
http://indeco-news.blogspot.com/2008/03/budget-2008-09-criticism-by-peoples.html
In budget, the programmes of the government are announced. Has it selected the right programmes.
1. Public transport systems - The required emphasis was not given.
In Mumbai we fear to travel in local trains nowadays even on a Sunday. The finance minister said that he is a lucky man and country progressed a lot under him and he got a lot more tax revenue.
Why is he still allowing Mumbai people to suffer. When times are good, if he forces us to endure the hardship when is the government going to improve things.
Not only travel in Mumbai, travel to many places is very difficult.
Recently I travelled by Devagiri Express to Secunderabad. On the way at most of the stations, persons enter the sleeper compartment and trouble long distance passengers. Why are they doing it? Because they cannot enter the compartment meant for short distance travellers so called general compartment.
Government pats itself saying that they had achieved great things. Have they made the correct choices?
Hyderabad is also having traffic problems and Bangalore is also in a similar situation or probably in a much worse situation.
2. Micro, Small and Medium Enterprises - As the growth agricultural production is meagre, there is a need to encourge micro enterprises in rural areas as well as urban areas and provide alternate means of employment and livelihood to people engaged presently in agriculture related occupations.
Has the budget recognised the issue and annouced any programmes? Item number 89 deals with it in the budget.
89. Micro, small and medium enterprises will continue to receive support from the Government. I wish to remove certain wrong perceptions about the sector. In the four years ending 2006-07, for which figures are available, there has been a secular rise in the number of registered units, the number of unregistered units, production, employment and exports. In order to give a fillip to the sector, I propose to create a risk capital fund in the Small Industries and Development Bank of India (SIDBI). As on January 31, 2008, the Credit Guarantee Trust with SIDBI had extended guarantees to 89,129 units for an amount of Rs.2,479 crore. SIDBI will reduce the guarantee fee from 1.5 per cent to 1 per cent and the annual service fee from 0.75 per cent to 0.5 per cent for loans up to Rs.5 lakh.
Does this statement convey any vision? Does it have any target in relation to growth of this segment and employment in this segment?
Budget 2008-09 Criticism by People's Representatives
http://indeco-news.blogspot.com/2008/03/budget-2008-09-criticism-by-peoples.html
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