Inflation to fall in a few months - Ahluwalia

The deputy chairman of India’s planning commission, Montek Singh Ahluwalia, on Wednesday said inflation would fall within a few months.

The latest government data showed annual wholesale inflation at 7.83 percent on May 3, a 3-½ year high, continuing a sharp rise that has been fuelled largely by food and metal prices.

The ruling coalition, under pressure to check prices ahead of state and national polls this year and next, has lowered import duties on a series of items, and curbed some exports to keep domestic prices down and supplies adequate.

Current inflation level totally unacceptable’

The target for inflation expectation is in the range of 4-4.5 per cent Dr Y.V. Reddy, RBI Governor.

Terming the current high level of inflation as “totally unacceptable”, Dr Y.V. Reddy, Reserve Bank of India Governor, today indicated further measures to rein in inflation.

The central bank had hiked Cash Reserve Ratio by 25 basis points to 8.25 per cent last month.

Speaking at a seminar in Singapore today, Dr Reddy said, “The current high level of inflation is totally unacceptable, especially in terms of impact on inflation expectations.”

Inflation has touched 7.83 per cent as on May 3.

Dr Reddy said “Monetary policy in India accords appropriate priority for price stability in recognition of its significance for the large segment of the poor who have no hedge.”

Going ahead, the target for inflation expectation is in the range of 4-4.5 per cent, so that it is possible to achieve a medium term inflation of 3 per cent.

“In the event of new adversities emanating in the domestic and global economy at any point of time, RBI is in readiness to respond swiftly and appropriately,” he said.

Mr D.K. Joshi, Principal Economist, Crisil, felt that dealing with the current inflationary situation would call for a closer co-ordination of fiscal and monetary policy.

While the central bank could use interest rate and other monetary weapons to constrain demand pressures, the Government, through a prudent fiscal policy, should ensure no runaway increases in its spending that would boost consumption.
Customs duties

The Government could also use fiscal policy to remove supply-side bottlenecks through reductions in customs duties. “The reductions in import duties has to some extent worked in edible oils and even steel and cement.”.

Mr Joshi was, however, sceptical about a third option of ‘physical policy’, involving ban on exports and futures trading, imposition of stock limits, price controls, etc.

“Price controls on petro-products, for instance, have sent wrong signals by boosting consumption. If the sector had been de-controlled, prices would have gone up gradually and, at the same, consumers would have got the right signal to conserve energy”, he added.

Mr Saumitra Chaudhury, Member of the Prime Minister’s Economic Advisory Council, said that the Government should concentrate on improving efficiency of its utilities and cutting down on procedural delays impeding creation of new production capacities.

“In cement, the coming up of additional capacities towards the end of last fiscal has had a sobering impact on supplies.

“Similarly, by expediting coal linkages to power projects and also augmenting availability of electricity from the grid, it can help manufacturers to reduce costs by relying less on expensive genset-based power at Rs 8-9 a unit”, he noted

India's highest paid CEOs

Mukesh Ambani

Reliance Industries Ltd has given its chief Mukesh Ambani, the country’s richest person, a hefty pay hike of about 45 per cent to take his annual remuneration to over Rs 44 crore or ($10 million).

Mukesh Ambani, chairman and managing director of Reliance Industries, got a total payout of Rs 44.02 crore (Rs 440.2 million) in financial year 2007-08, marking an increase of about Rs 13.5 crore (Rs 135 million) from the previous fiscal.

In fiscal 2006-07, Ambani’s annual remuneration had increased to Rs 30.46 crore (Rs 304.6 million), from Rs 24.77 crore (Rs 247.7 million), previously.

However, a large part of Ambani’s full-year pay cheque comes in the form of commissions that the company pays to select executives as a ratio of its net profits.

According to the company’s annual report being sent to shareholders, Ambani got a salary of Rs 60 lakh (Rs 6 million -- Rs 500,000 per month -- and another Rs 48 lakh (Rs 4.8 million) -- Rs 400,000 per month -- in the name of ?perquisites and allowances.?

In addition, he got Rs 18.75 lakh (Rs 1.875 million) under the head of ?retiral benefits? and Rs 42.754 crore (Rs 427.54 million) toward commission on net profit, taking his total to Rs 44.021 crore (Rs 440.21 million) for 2007-08

Indian rupee nears 13-mth lows, trade gap in focus

The partially convertible Indian rupee fell towards 13-month lows on Wednesday as record oil prices raised worries of a deteriorating trade deficit against a backdrop of slowing capital inflows.

At 9:38 a.m. (0408 GMT), the rupee was at 42.75/76 per dollar, 0.3 percent weaker than Tuesday’s close of 42.635/640. It hit 42.92 last Friday, its weakest since mid-April 2007.

"Dollar/rupee opened up today because of oil, but there seems to be some good selling at higher levels. Exporters may come in later," said Indrajit Sengupta, a currency dealer at state-run Canara Bank.

"It seems to be an interbank play for now. The rupee should be in a 42.60-42.80 band for the day, and if it breaks above 42.80, then the rupee may easily fall to 43 per dollar."

Oil CLc1, India’s biggest import, has surged to record highs over $129 a barrel, raising the risk of a widening trade deficit which could put downward pressure on the rupee.

India imports more than two-thirds of its oil needs, and crude refiners are the biggest buyers of dollars. The country’s oil import bill shot up by more than a third in 2007/08 because of soaring oil prices, and the trade deficit widened by a similar percentage.

Added to that, capital inflows into stocks have slowed down significantly, with foreigners being net sellers of $2.7 billion of shares so far in 2008, after buying a record $17.4 billion in 2007.

28 mn US citizens need food aid to eat

Nearly 28 million US citizens depend on Coupons to eat, a situation constantly increasing because of unemployment and the high price of food, said Virginia, US newspaper- USA Today.

USA Today said difficulties to subsist are so many, that even people with a high cultural level cannot escape from then. "It is inconceivable to see myself in such a condition, especially when you have a pride," said Ohio resident Philomena Gist, a woman with a Master Degree in Psychology.

The newspaper said no one of the millions of people needing help to eat, should be placed in such a category, and the number of needed people goes over the record established in 1994.

While these US citizens are fighting for taking their homes something to eat, politicians are discussing other topics and economists debate if they are on a recession or not, said the US influential newspaper.

The costs of food and fuel are increasing since 2006, and now these phenomena are combined with loss of jobs, and the standstill of salaries, which rocketed the number of US citizens urged on a support.

US citizens depending on coupons to eat, represent nearly 10 percent of the US total population

UTI plans to relaunch $500 mn IPO

UTI Asset Management, India’s second-largest mutual fund firm, plans to revive a roughly $500 million IPO that had been delayed from earlier this year, with management scheduled to meet investors next week to gauge market interest, according to people familiar with the deal.

UTI executives will meet investors on Monday in Mumbai and on Tuesday in Singapore, followed tentatively by presentations in Hong Kong, London and New York.

UTI had hoped to complete its domestic listing in April but delayed the deal as India’s stock market went into freefall, with the benchmark Sensex plunging 23 percent in the first three months of the year. Since the start of April, however, the index has risen 10 percent.

IPO volumes from India have nearly doubled so far this year from the same period last year, according to Thomson Financial data, although Reliance Power’s nearly $3 billion January listing accounts for most of the $3.8 billion raised from 18 offerings.

Citigroup, Enam Securities and JM Financial are sponsoring the deal. No terms or deal schedule were immediately available.

UTI managed 8.34 million accounts worth 568.54 billion rupees ($13.3 billion) as of the end of December.

RBI approves HDFC Bank's Centurion buy

India’s HDFC Bank said the central bank has approved its acquisition of Centurion Bank of Punjab, with effect from May 23.

The combined entity would have a nationwide network of 1,167 branches and a net advances of 890 billion rupees ($21 billion) and deposit base of 1.22 trillion rupees, it said in a statement issued late on Tuesday.

HDFC Bank agreed to buy smaller rival Centurion in February in all-share deal worth $2.4 billion at that time.

Indian shares open 0.96 pct lower

Indian shares opened 0.96 percent lower on Wednesday and quickly extended losses past 1 percent, with the fall led by Reliance Industries Ltd.

The markets have opened on a weak note following weak cues across the globe due to shot up in crude price and inflation worries in US. Profit booking has seen in banking, capital goods and technology. Midcap and small cap stocks are under selling pressure. Market breadth is weak.

Losers were HDFC, BHEL, Unitech, HDFC Bank, Maruti, ACC, Infosys, ABB, Wipro, Satyam, TCS, BPCL, Tata Comm, PNB and Zee Ent while Cairn India continued its uptrend (Nymex crude was trading above USD 129 per barrel).

At 9:56 am, the Sensex was down 163 points at 17,067 and the Nifty down 38 points at 5066. The CNX Midcap slipped 58 points at 6845. Market breadth is weak; about 1400 shares have advanced, 1521 shares declined, and 179 shares are unchanged.

Asian markets were trading sharply lower. Shanghai Composite was down 1.87% or 64.33 points at 3,378.83. Hang Seng fell 158.77 points or 0.63% at 25,010.69.

Nikkei 225 Average was down 259.25 points or 1.83% at 13,900.84. Jakarta Composite fell 27.46 points or 1.09% at 2,483.50. Straits Times fell 0.8% or 25.69 points at 3,174.19. Seoul Composite slipped 18.12 points or 0.97% at 1,855.03. Taiwan Weighted lost 15.65 points or 0.17% at 9,053.24.

US markets slid after oil prices jumped above $ 129 a barrel and a key inflation gauge rose more than expected. The Dow tumbled 199.48 points, or 1.53%, to 12,828.68. The Standard & Poor’s 500 index declined 13.23 points, or 0.93%, to 1,413.40, and the Nasdaq composite index fell 23.83 points, or 0.95%, to 2,492.26.

OPEC's Badri says worried by oil price speculation

OPEC Secretary General Abdullah al-Badri said on Tuesday he was "worried" because supply and demand factors were not behind high oil prices.

In an interview with Reuters during a visit to Venezuela, Badri said oil prices could keep rising if non-market factors such as the weakening dollar continue to put pressure on prices but that OPEC would only act when market fundamentals showed a need to do so.

Rupee drops towards 13-month lows, oil hurts

The Indian rupee headed towards 13-month lows on Wednesday as record oil prices raise concerns of a widening trade deficit, and losses in Asian stock markets raise concerns about foreign demand for local stocks.

* At 9:04 a.m. the partially convertible rupee was at 42.77/78 per dollar, weaker than Tuesday’s close of 42.635/640. It hit a low of 42.92 last Friday, its weakest since mid-April 2007.

* Asian stocks fell for a second consecutive day on Wednesday, feeding a rally in government bonds, as fears about consumer demand in the face of high oil prices rattled investors.

* Oil, India’s biggest import, has surged to record highs over $129 a barrel, raising the risk of a widening trade deficit. India imports more than two-thirds of its oil needs, and crude refiners are the biggest buyers of dollars.