India needs a correct fiscal plan

The Central government's budgetary fiscal deficit has surged nearly twice to 2.70-lakh crore during the first five months of the current financial year (April-August 2011-12 from Rs.1.50-lakh crore in the corresponding period last year. In the earlier times, government borrowings were treated as part of receipts. In the budget for 1984-85, total receipts were estimated at Rs.40,501 crore, including market loans of Rs.4,100 crore, and total expenditure at Rs.42,536 crore with an uncovered deficit of Rs.2,035 crore (Rs.1,762 crore after taking into account the effect of new taxation proposals). But numerous problems still remain in arriving at the correct figure of fiscal deficit and drawing up a credible fiscal plan. This has assumed special importance now when we are grappling with inflation, slower economic growth and volatility in the world economy. Excessive government borrowings put the Reserve Bank of India in a difficult position with no option but to raise interest rates frequently to control money supply and inflation without slowing growth. If any fiscal stimulus is envisaged the details of tax concessions and specific expenditure schemes in the stimulus package have to be highlighted along with expected outcomes. The actual outcomes of the last fiscal stimulus package done, including the loan waiver of Rs,70,000 crore, should be indicated.

RBI another hike in interest rate hurt demand and pull down growth-corporate India

Members of Corporate India have told the Reserve Bankd of India (RBI) that another increase in interest rate would hurt demand and pull down growth. They also urged the monetary authority to intervene in the currency market as a depreciation rupee could stoke inflation till now RBI has raised rates 12 times since march 2010. Even as interest high rates and commodity prices squeezed profit margins of companies, imports became expensive, with the rupee declining 10% against the dollar since August. While many felt that RBI should have sold dollar heavily to arrest the fall, the central bank preferred a wait and watch policy with the US currency gaining amid safe haven buying by institutions across markets. " Interest rate hikes are working in reversal at this point of time and adding to the inflationary pressure. Credit availability for businesses as well as consumers drying up; this may push the economy into recession.

India's forex reserves dropped

Foreign Reserve Exchange

India's foreign exchange (forex) reserves dropped by $1.22 billion at $311.48 billion for the week ended Sep 30, registering a sharp decline for the second straight week largely due to revaluation of non-dollar assets, official data showed. The country's foreign exchange reserves kitty has shrunk by $9.30 billion in the last four weeks after wselling to an all-time high of $320.78 billion for the week ended Sep 2. Foreign currency assets, the biggest component of the forex reserves kitty fell by $1.23 billion to $275.69 billion during the week under review, according to the weekly statistical supplement of the Reserve Bank of India (RBI), the country's central bank.

Rupees fell by 59 paisa to Rs.49.55 per US dollar

In line with weakness in the equity market, the Indian rupee fell by 59 paise to Rs.49.55 per US dollar in early trade today amid persistent dollar demand from banks and importers in view of dollar firmness in overseas markets. The rupee had ended 2 paise lower at Rs.49.45/46 against US dollar in the previous session due to strong dollar demand from importers amid weak stock markets.

Greece crisis

Oil rose to near $78 a barrel on Wednesday in Asia amid hopes that Europe will contain the debt crisis that has engulfed greece and threatens to destabilize other countries that use the Euro. but sentiment recovered on Tuesday following reports that Europe was talking steps to bolster its banking sector, which is thought to be heavily exposed to Greek debt and could face crushing losses if the country defaults. Wall Street ended higher after a day of wild gains and losses. The Dow gained 1.4 per cent, while the Standard and Poor's 500 rose 2.2 per cent and the Nasdaq composite rose 3 percent. Investor concerns about Greece were heightened when the debt-strapped country said over the weekend it will miss its lower budget deficit targets even after severe cost-cutting. Despite the shortcoming, Europe pledged to loan Greece money to help pay its upcoming bills, but that failed to reassure stock and commodity markets. European markets tumbled on Monday after Greece said it wouldn't be able to reduce its budget deficits as much as it had agreed to as part of a deal to receive more emergency loans.

Asian Stock Market extended a sell - off

Asian stock markets extended a sell-off on Tuesday, following a dismal session on Wall Street that was sparked by the revelation that debt-strapped Greece would not be able to reach a target for reducing its budget deficit. Asian markets tumbled sharply in early trading on Monday, hurt by data suggesting debt-strapped Greece attempts at austerity were not yileding results and a weakening economic picture in Europe. Japan's Nikkei 225 fell 2.3 per cent to 8,503.88, with a government survey showing an improvement in business confidence among Japanese manufacturers doing little to nudge markets back to life.

Inflation and interest rate keeps market fluctuate

Inflation

Apart from concerns over a slowdown of the US economy and the euro zone debt crisis, high domestic inflation and fears of an interest rate hike will keep the stock market volatile this week, say experts. Headline inflation stood at 9.44 per cent in June, while weekly food inflation shot up to 9.9 per cent at the end of July, sparking fears of a further round of interest rate hikes to tame prices.

NBFC stocks rally as RBI unveils new banking norms

RBI on Tuesday disallowed credit enhancements in transactions where banks buy loans from NBFCs (Non-Banking Financial Company). The regulator has proposed that banks follow the pass-through certificate (PTC) route instead. Currently, most priority sector portfolio sales by NBFCs to banks are done through the credit enhancement route. "For NBFCs, if the buyouts happen through PTCs rather than assignments, capital requirements will rise Shares of non-banking finance companies (NBFCs) such as Bajaj Financer, Reliance Capital, M&M Financial Services and Srei Infrastructure Finance Ltd posted gains for the second day after the Reserve Bank of India (RBI) released draft guidelines for licensing of new banks in the private sector. The RBI has proposed new regulations for non-banking finance firms (NBFCs), mostly centered on minimizing the regulatory arbitrage opportunities available to NBFCs as compared to banks. One of the major changes proposed by the RBI is to bring the capital adequacy requirements and asset classification and provisioning norms for NBFCs in line with the banks.

RBI reports show the imparting a downward bias

The Annual Report for 2010-11, a statutory publication of the Reserve Bank of India's central board, covers two broad areas — assessment of macro economy in 2010-11 as well as prospects for 2011-12 and working and operations of the RBI and its financial accounts. The economy returned to a high growth path in 2010-11. However, there were significant challenges: investment slowed, fiscal consolidation was achieved through one-off and cyclical factors and inflation remained sticky on the back of new pressures. In response, the RBI has raised the policy rates by 475 basis points (on a cumulative basis) since March, 2010. The central bank's medium-term target for inflation has been 3 per cent. After growing slightly above its recent trend in 2010-11, the economy can be expected to decelerate this year. But quite significantly, the growth rate will still be around 8 per cent. However, there is a possibility of global problems getting magnified and imparting a ‘downward bias' to India's growth rate. Indian equities may have shrugged off the latest increase in policy rates, but the outlook for the markets remains cautious amid concerns over stubborn inflation and the Reserve Bank of India's continued hawkishness

The Reserve Bank of India(RBI) raised the key policy rate by 25 basis points

The Reserve Bank of India (RBI) is likely to maintain its hawkish stand and further increase key policy rate up to January 2012 to tame inflationary pressures, say experts. The Reserve rate increase by RBI may have some impact on economic growth.

RBI sells US Dollors

RBI (Reserve Bank of India) sells US dollors to save the rupees from a sharp slide as investors fled for safety amide crisis in Europe.

RBI hike repo rate to eliminate  to inflation accelerator it makes credit costly. According to C. Rangarajan there is no other option for RBI. Housing price raise upto 15 to 20 percent. Automobile and housing loan became costly.

According to Union Finance Minister Pranab Mukherjee RBI hike rate only to control the inflation.