Gold and Silver: Is your investment safe?

James Turk, a renowned authority on gold and the precious metal markets and co-author of "The Collapse of the Dollar," is founder and chairman of GoldMoney®, a patented gold-based electronic money, transferred over the Internet. Here he discusses how GoldMoney works, and why it’s better than storing physical metal in a bank or purchasing an ETF
Can you explain what "GoldMoney" is? And what is the difference between buying gold bullion and GoldMoney?

JT: GoldMoney is a very convenient, economic and safe way to buy gold and silver on-line and have that gold and silver stored for you in vaults in Zurich or London. A Swiss company called VIA MAT International, which is a major European secure storage and transport company, operates the vaults. And they have specialized bullion vaults where our customers’ gold is stored. Then, you can use GoldMoney as a form of payment or just let it sit there in your account as a form of savings.

There are two ways to view it: it’s like on-line banking but your account is denominated in goldgrams and mills, rather than dollars and cents. In contrast to banking, where the bank has an obligation to you, there’s no liability created by GoldMoney. You do not ‘deposit’ your gold, as you deposit money in a bank. We’re just simply storing in a secure vault gold that you own.

It’s also like PayPal in the sense that you can click gold from your account to someone else’s account, if you want to use it as currency. But you do not need to use that feature and can just use GoldMoney as a savings account, but where you are saving real, sound money – gold and silver.

The key behind GoldMoney is the governance procedures that we put in place. People often ask me what three questions they should be asking before they buy gold. It’s always: "Is your gold safe?" "Is your gold safe?" "Is your gold safe?" You do not want to take risks with your bullion, which should be viewed as the bedrock asset in your portfolio. So what we have done with GoldMoney is that we’ve taken all the steps necessary to provide customers assurances of integrity that, in fact, their gold is safe.

These governance procedures are disclosed on the website. One the most important of these is the regular audits by one of the Big-4 auditing firms, which establishes that the weight of gold and silver in the vault is exactly the amount recorded in customers’ accounts and that there is always this one-for-one relationship. It means that we’re actually storing gold and silver that you own. This audit report is available to our customers upon request.

And regarding your question about the difference between buying gold bullion and GoldMoney, there is no difference. When you buy gold bullion, there are two ways of doing it. You can buy gold in bars and coins and store them yourself, or you can buy them in GoldMoney and have the gold stored for you in vaults in Zurich and London. It’s just a question of diversification, convenience, and economics.

Because of our economies of scale, you get more gold for your money when you’re actually buying it in GoldMoney, plus you have the opportunity to store it in countries where you don’t live. And I do recommend that geographic diversification. However, I also recommend that people consider having some gold where they live, too, because a little bit of gold on hand never hurts just in case.

I do not recommend putting your gold or silver in a bank, however, because you want to keep it some place safe. Banks are not a safe place to store gold and silver, because when gold was confiscated in 1933, the federal government went right to the banks and took all the gold and silver that was stored there.

TGR: With GoldMoney, is there a 1099?

JT: No, because we’re not a U.S. company; we operate in the British Channel Islands, and there’s no reporting outside of the British Channel Islands. In our User Agreement, we say that our user is responsible for complying with any rules or regulations from wherever he accesses GoldMoney. We have customers in over 100 different countries around the world. We couldn’t possibly comply with reporting requirements in all those different countries. So, what we do is comply with the laws in Jersey, Channel Islands, where we operate.

Jersey is a major financial center. It is located in the English Channel, so it’s located in a politically safe jurisdiction. It’s a sovereign country, and we comply with the laws of that country.

TGR: James, whether it’s an ETF or GoldMoney, this is all co-mingled. It’s not like there would be a separate account that had X amount ounces of gold and silver in my name?

JT: Well, let me first of all deal with GoldMoney, and then I will deal with the ETF. All the gold and silver stored in GoldMoney is allocated. What that means is VIA MAT has one account—the account is in the name of the customers of GoldMoney. VIA MAT doesn’t know who those customers are, but they know it is the customers of GoldMoney, and it’s allocated. There are bars with refinery serial numbers specifically allocated sitting in the VIA MAT vault, clearly distinct from other gold and silver sitting in the VIA MAT vault.

And we report those bar serial numbers on the GoldMoney website, so that if you have enough gold or silver in your account to take up a whole bar, you can go to the GoldMoney website and say I want this bar with this serial number. It will be taken out of your account for free, and then VIA MAT, at your expense, will ship it to wherever you want in the world. So, all the gold and silver is allocated, and it is allocated on behalf of GoldMoney’s customers.

With ETFs, on the other hand, because of the absence of the audit, you don’t really know that it’s allocated, and I have some serious reservations about whether it is, particularly with the silver ETF. I have read the custodial agreement, and it is not an allocated bullion storage agreement; it’s a metal account. A metal account is a depository relationship that the ETF would have with the custodian. That’s very different from an allocated bullion storage account agreement. So I have some serious reservations as to whether the silver in the SLV ETF is allocated or not.
There’s a lot of uncertainty about storage when you’re involved in storing metal, as I discussed earlier in regard to the banks, and there’s still a lot of uncertainly with ETFs whether the gold and silver really are there. But even if they are there, you don’t own gold or silver with an ETF. You own shares in a fund that supposedly owns the gold and silver.

That’s different from owning the gold and silver yourself. With GoldMoney, you own the gold and silver; you have access to it 24/7 through your account on-line, and you can have that gold and silver sent to you, if you want, if you have enough gold and silver in your account to take delivery of a bar. Or you can use that gold and silver and go to KITCO and buy small bars or coins with it if you want to have something in hand. But you cannot do that with an ETF.

TGR: Can you give me a rough idea of the number of public companies—gold companies—that use GoldMoney? Do you have a sense of that?

JT: Not a lot, and there’s a specific reason for that. Our operating system isn’t really very friendly from a company point of view, and this is actually something we’re working on over the balance of this year and next year. For example, companies want access with dual passwords, and we do not have that capability. We have been operating for seven years, and we have focused primarily on the retail market rather than the corporate market.

The reason is that the retail market opportunities made more sense in trying to build GoldMoney from scratch the way we have. We’re now storing about $350 million dollars in gold, silver, and recently we have added currency too, because people can put money into segregated funds accounts at our banks in Jersey and earn interest on their money until they’re ready to buy gold and silver.

What we are going to do later this year and next year is what I call corporate enhancements. What this means is we’re going to make GoldMoney more friendly to corporate chief financial officers. It will be more bank-like in that we will have A & B signatures, and dual passwords and those types of things that will make it easier for a corporation to fit it into their treasury function.

Once we have done this additional software development, we will then be talking to gold mining companies about using GoldMoney as a way of paying suppliers, i.e. paying their contractors in gold, rather than by going the expensive way by paying with bank wire transfers.

Recently one of our customers wrote to me and said they had done a wire transfer that ended up costing $55 to do the transaction, which is pretty outrageous. In GoldMoney you can click gold from your account to someone else’s account, and a maximum it will cost you is $2.50 at current exchange rates. And it’s efficient; you can make a goldgram payment 24/7, and payments are completed outside the banking system.

So, the idea is once we have these corporate enhancements in place, we’re going to begin actively marketing GoldMoney among the mining companies, and then eventually among the natural resource companies of all sorts.

Crude Shock: Get ready for Rs 75 per litre of petrol

The impact of zooming crude oil prices that is the most talked about issue across the globe these days is going to hit you soon in India. Fill in more petrol in your cars soon; for the Indian government is all set to hike the prices of petroleum products.

It will not be a simple hike of a few rupees. If officials in the Ministry of Petroleum are to be believed, petrol prices will be hiked anything between Rs 10-Rs20 per litre soon.

If it is hiked so, it will be the first time in history that Indians will get such a huge increase in their fuel bills. In a city like Mumbai, this would mean that you will have to shell out nearly Rs 70 per litre of petrol.

In the past few months, India’s state-owned oil companies have been reeling under the rising crude oil prices across the globe. Companies like Indian Oil, ONGC and Bharat Petroleum have been incurring losses of several hundreds of crores as they continue to dole out subsidsed petrol, diesel and cooking gas to the people.

But now, officials said, the impact of the rising oil prices is such that there is no option but to decontrol petrol prices, a move that may see rates being hiked anything between Rs 10-20 a litre.

In India, petrol is currently being sold at a loss of Rs 16.34 a litre and diesel at Rs 23.49 per litre. Officials said deregulating petrol price would mean that its prices would move in tandem with global crude oil prices.

The rise in global oil prices that last week touched an all time high of $135 a barrel has forced the government to consider options to save state-run firms that expect a revenue loss of Rs 200,000 crore (Rs 2000 billion) this fiscal on sale of petrol, diesel, domestic LPG and kerosene.

Officials said deregulating petrol would lower the revenue losses by just Rs 20,000 crore (Rs 200 billion). Half of the current estimates are on account of diesel rates.

Monsoon, fuel price decision to dictate market trend

The forthcoming week will be keenly watched by market players, not just for news on hike in fuel prices and advance tax declaration from corporate but the onset of monsoon.

If rains hit Mumbai in a couple of days, it will not only give relief to the financial capital which is reeling under hot and humid conditions, but boost stock prices, especially of the FMCG sector.

India Meteorological Department had earlier forecast that the southwest monsoon will hit the Kerala coast on May 29, four days ahead of its normal June 1 onset. Kerala has already experienced a spell of rain but the IMD was waiting for the weather system to be more fully entrenched to declare the onset.

"Traders would probably be looking at two triggers which will decide the trend for the June future & options series--one being the monsoon and second the advance tax figures. The markets should remain positive on these expectations,” said an analyst with a Mumbai-based brokerage firm.
This week, the BSE Sensex and Nifty moved in a narrow range. The 30-share Sensex ended 1.41 per cent lower at 16,316.26 while the 50-share Nifty closed 1.5 per cent down at 4946.55 from the previous week.

On Friday, surprisingly strong economic growth of 8.8 per cent in the Jan-March quarter outstripped forecasts of 8.2 per cent, indicating the country’s momentum still remained intact.

The strong data comes in at a time when the government is debating whether to raise fuel prices to tackle mounting losses of state oil firms -- a move which would also put pressure on prices. The impending decision on fuel price hike is expected to weigh on sentiment, say analysts.

"The market will remain rangebound with a negative bias next week with the decision on fuel price hike dominating sentiment. Also, the market is waiting for the onset of monsoon," said Ambareesh Baliga, head of research at Karvy Stock Broking.

Inflation in the 12 months to May 17 rose 8.1 per cent, up from 7.82 per cent a week earlier. The finance minister expressed his concern on inflation. He said there was no sign of inflation declining and more steps would be taken if needed to arrest inflation.

Meanwhile, the cooling of crude oil price provided some solace to equities across the globe. Crude oil price fell towards $125 a barrel, after having traded near $135 a week ago.

US stock index futures edged up, signalling that Wall Street may extend the previous session’s gains, with the focus on lower oil prices and economic data.

India's food inflation lowest among 15 nations

India has been better off in managing food inflation compared to several other developing countries in 2007-08, even as the government faces public and political anguish over sharp rise in prices.

Prices of food articles rose by 5.8 per cent in India, the lowest increase among 15 developing countries for the period ending February 2007-08, a joint report of the Organisation for Economic Cooperation and Development (OECD) and Food and Agriculture Organisation (FAO) has said.

Food prices showed the highest increase at 25.6 per cent in Sri Lanka, followed by Kenya at 24.6 per cent and China 23.3 per cent, the report entitled ’Agriculture Outlook 2008’ said.

A record foodgrain production estimates at 227.32 million tons during 2007-08, against 217.28 million tons last year has helped India keep food inflation under control, experts said.

However, recent negative yield shocks in key food commodities like pulses and oilseeds have contributed to the price increase, they said, adding that global price rise had a spill-over affect on domestic rates as well.

However, India’s food inflation still remains higher than the developed countries like the US and Japan during the review period, the report said.

Rate of rise in food prices stood at 1.4 per cent in Japan, at 5.1 per cent in the US and at 5 per cent in France, it noted.

For developed countries, where the price rise in food items is moderate and the share of food in the total consumer basket is small, the contribution of food price inflation to overall inflation is correspondingly moderate.

But as would be expected, the impact of food price inflation on overall inflation in developing countries is much larger, the report added.

Bill Gates signals end of computer mouse era

Microsoft is developing a system that could spell the end the use of computer mouse, Microsoft Chairman Bill Gates has said.

"The way you interact with the system will change dramatically," the billionaire said at a conference in Canada, according to a report in The Daily Telegraph.

He said that computer users of the future will control their machines by voice and pen as well as touch.

Users of Windows 7 will issue commands by touching the screen rather than by the traditional keyboard and mouse combination that has dominated since the 1970s.

Windows 7 is due to be released in 2010 and is Microsoft’s attempt to catch up with Apple, whose touch screen iPhone has proved popular.

Touch screens are appearing on a host of other devices, including sat-navs, mobile phones and remote controls. A touchscreen BlackBerry is expected shortly.

CPI(M) says to protest any fuel price increase

India’s main communist party, an important government ally, said on Friday it would protest in the streets if ministers agree to raise retail fuel prices to help ease mounting losses of state oil firms.

India is debating how best to bail out oil retailers and refiners losing tens of millions of dollars a day due to crude oil’s record run while having to sell petrol and diesel at cheap, government-set rates.

The ruling Congress Party-led coalition is widely expected to raise prices over the weekend, but wary of upsetting voters in a year dotted with important elections, the size of the hike is likely to far less than the 15-20 percent increases sought by the oil ministry.

"We will go to the streets if the government does not listen, we are totally opposed to any price rise," said Prakash Karat, head of the Communist Party of India (Marxist), the largest among the left parties.

Congress has lost a string of state elections and has been widely criticised by opposition parties and the left for fast rising food and other commodity prices which pushed inflation over 8 percent in mid-May to a new 3-½ year high.

The country’s oil minister, Murli Deora, said on Thursday some communist leaders had been helpful and cooperating on the issue of raising petroleum prices but Karat ruled out any negotiations over the issue.

The left has proposed a cut in excise and import duties on crude oil and petroleum products to tide over the crisis.

Yusuf Pathan, Ojha in one-day squad

Indian selectors named uncapped Yusuf Pathan and Pragyan Ojha on Friday in a 15-player squad for next month’s one-day tri-series in Bangladesh and the Asia Cup in Pakistan.

The 25-year-old Pathan, who joins younger brother and all-rounder Irfan in the squad, is a hard-hitting batsman and off spinner while Ojha, 21, is a left-arm spinner.

Master batsman Sachin Tendulkar will miss the trips due to a persistent groin injury while leading off spinner Harbhajan Singh has been banned for five one-dayers after being found guilty of slapping compatriot Shanthakumaran Sreesanth in a domestic Twenty20 game.

The selectors ignored former captains and experienced batsmen Rahul Dravid and Saurav Ganguly, who also missed the victorious tri-series campaign in Australia in January.

The Bangladesh tri-series, also involving Pakistan, will be played from June 8-14, with the six-team Asia Cup scheduled from June 24-July 6.

India squad: Mahendra Singh Dhoni (captain), Virender Sehwag, Gautam Gambhir, Robin Uthappa, Yuvraj Singh, Rohit Sharma, Irfan Pathan, Suresh Raina, Praveen Kumar, Piyush Chawla, Yusuf Pathan, Pragyan Ojha, Shanthakumaran Sreesanth, Ishant Sharma, RP Singh.

Malaysia issues new visa rule for Indians, Bangladeshis

Malaysia is introducing new visa rules for Indian and Bangladeshi tourists in an effort to curb illegal immigration, The New Straits Times reported Friday.

Visitors from the two countries will have to obtain a two-week pass and a return ticket before they can enter Malaysia, the report said, quoting Home Minister Syed Hamid Albar.

"The social visit pass replaces the visas-on-arrival (VOA), which was discontinued in April," Syed Hamid said, adding the social visit pass must be obtained in advance from the tourists’ home country.

Malaysia first introduced the visa-friendly programme, allowing visitors from 24 countries to stay for one month when they arrived, in 2006 to boost its tourism industry.

But immigration officials last year called for the programme to be scrapped after many visitors were found to have overstayed.

Media reports have said that most of the overstayers are Indians who remained in Malaysia to work in restaurants and on plantations.

India's per capita income moves up to Rs 32,299

Per capita income of Indians for the first time breached Rs 30,000 mark and has reached to Rs 32,299 during 2007-08 indicating their growing purchasing power.
The revised estimates, which were released by the government today, indicate that per capita income at current prices rose by 12.3 per cent from Rs 29,642 to Rs 32,299 during the year.
At constant prices (1999-2000 prices), which is worked out after taking into account the erosion in purchasing power of rupee, the per capita income moved up to Rs 24,321 representing an increase of 7.8 per cent during 2007-08.
"This is an important aspect of growth... More money is available in the hands of people. It is a very good sign," Finance Minister P Chidambaram told reporters soon after release of the data.
However, there has been a deceleration in the growth of per capita income at current prices, which rose by 12.3 per cent during 2007-08 as compared to an increase of 14.2 per cent during the previous fiscal.
Similarly, in case of per capita income at constant prices, the rate of increase decelerated to 7.8 per cent as compared to 8.1 per cent in the previous fiscal.
According to the estimates, India’s population at the end of 2007-08 has been estimated at 113.8 crore, up from 112.2 crore at the end of the previous fiscal.

India's GDP beats forecasts, inflation still rising

Surprisingly strong Indian growth and a jump in inflation above 8 percent put an interest rate rise back on the agenda on Friday, although many analysts thought the Reserve Bank of India would remain focused on cash management.

The finance minister said there was no sign of inflation declining and more steps would be taken if needed after wholesale price inflation rose 8.1 percent in the 12 months to May 17, its highest in more than 3-½ years.

Annual growth of 8.8 percent in the Jan-March quarter outstripped forecasts for 8.2 percent, showing momentum remained strong in Asia’s third-largest economy in the fiscal second half despite policy tightenings, although economists expected it would lose height in 2008/09.

The strong data comes as the government is debating whether to raise state-set retail fuel prices to tackle mounting losses at state oil firms forced to sell fuel at discounted rates, a move which would also put pressure on prices.

"Monetary policy will continue to remain tight and it seems the Reserve Bank of India’s first priority is to target liquidity," said A. Prasanna, economist at ICICI Primary Dealership in Mumbai."But with inflation continuously surprising on the upside and a fuel price increase in the offing, a repo rate hike cannot be ruled out."

The RBI has left its key lending rate, the repo rate, unchanged at 7.75 percent for over a year. But it has been tightening cash conditions over the past 18 months, most recently in April and May when it raised the cash reserve ratio, the amount of funds banks must deposit with it, by 75 basis points to a seven-year high of 8.25 percent.

The rupee took both sets of data largely in its stride, edging up to 42.52 per dollar, while the benchmark 10-year bond yield rose to 8.11 percent from 8.08 percent shortly before the price data came through.

INFLATION

The WPI is India’s most widely watched price measure and the mid-May reading outstripped forecasts for an annual rise of 7.96 percent and the previous week’s 7.82 percent.

Finance Minister Palaniappan Chidambaram said on Friday price pressures stemmed largely from abroad, particularly oil, and there were no easy solutions. The government has already curbed some exports and lowered duty on some imports to keep domestic supplies up and import prices down.

"We will take more measures if needed," he said. "We will take corrective measures to control inflation."

He expected the economy would grow 8.5 percent in 2008/09 after data on Friday showed 2007/08 growth at 9.0 percent, higher than a first estimate of 8.7 percent.

"The current financial year appears even more difficult than the year that has come to an end, but I am confident we will maintain growth," he said.

Growth for the December quarter was revised up to 8.8 percent and the full-year reading gave India its third successive fiscal year of expansion at 9 percent or above, to be the world’s fastest-growing major economy after China.

"Even though the industrial sector has been hurt by past interest rate hikes, the services sector continues to grow at a fast pace," said Sonal Varma, economist at Lehman Brothers.Varma expected high oil prices, financial market turbulence and slowing world demand would provide headwinds to the economy in the fiscal year to the end of March 2009.

"The question is whether the services sector can sustain this pace, despite industry slowing down. We have our doubts," she said.

Manufacturing grew an annual 5.8 percent in the quarter, slowing from 9.6 percent in the December quarter, while services grew 11.2 percent in the quarter.Farm output grew an annual 2.9 percent in the March quarter compared with 6 percent in the prior three months.

Govt moves closer to fuel price decision

The government is expected to take a decision on whether to raise fuel prices in the next two to three days, with key political leaders expressing a willingness to tackle mounting losses at state oil firms, the oil minister said.

The cabinet was earlier scheduled to meet later on Thursday to discuss a response, which could involve raising fuel prices, cutting taxes on oil products and issuing more bonds to help state firms selling fuels below cost, but the minister, Murli Deora, told reporters the meeting had been postponed.

"Today’s cabinet meeting has been postponed ... The decision can be taken in two to three days," Deora said.

If India raises prices, it would be the latest Asian nation to decide it can no longer shield consumers from crude’s record run, following the likes of Taiwan, Sri Lanka and Indonesia.Deora said Prime Minister Manmohan Singh and Finance Minister Palaniappan Chidambaram were keen to rescue oil firms, which are selling fuel at low state-administered prices and losing tens of millions of dollars a day as a result.

State-run firms, Indian Oil Corp, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd, have said their borrowings were close to the maximum allowed, threatening their ability to import crude in a few months.India imports 70 percent of the oil it consumes.

India’s central bank raised borrowing limits for these companies late on Thursday, but the director for finance at IOC, S.V. Narasimhan, said this was only a short-term measure and the companies needed to reduce their debt in the long run.

Singh and ruling Congress Party chief Sonia Gandhi met in the evening for talks on the issue.India’s leftist parties, key allies of the federal government, have opposed a price rise, but Deora said some communist leaders had been helpful.

"I spoke to some of them. As far as this problem is concerned, they are very cooperative," he said.Congress and its coalition allies are worried that higher petrol and diesel prices could push inflation beyond current 3-1/2 year highs around an annual 8 percent, and upset poor consumers in a year dotted with elections.

But the scale of the losses at state-run oil refiners and retailers may force its hand.Oil ministry officials have described a rise in prices as "inevitable".Oil prices, trading just below $130 a barrel at 1115 GMT, have doubled since last year, but after earlier reductions Indian state oil firms have to sell fuels at prices lower than two years ago as the government is keen to tame inflation.

Wall Street to cut 25,000 jobs

New York City’s financial sector might only slice 15,000 to 25,000 jobs in the current downturn, which could prove shorter than the mayor has predicted, the city comptroller said on Thursday.

In contrast, the financial sector that is such a vital part of the city’s Economy slashed 40,200 jobs in the previous 2000 to 2003 retreat that straddled the September 11, 2001 air attacks, Comptroller William Thompson said in his report.

Battered by profit-gouging subprime mortgage loans, New York Stock Exchange member firms that do business with the public lost $7.3 billion last year, and the current job-losing cycle that began in August 2007 should run through March 2009, the Democrat added.

Though banks and brokerages employ less than 10 percent of the city’s workforce, they earn more than 30 percent of all wages and salaries, he said. And each Wall Streeter helps create 1.5 jobs in other sectors, from restaurants to shops.

The latest job-loss estimates were milder than several others. For example, Wall Street could shed one in five jobs if this cycle in an industry known for its volatility mirrors previous ones, according to a state labor department analyst. That works out to 36,000 of lay-offs.

Similarly, the city’s Independent Budget Office, predicted 33,300 job cuts.

If the comptroller’s new forecasts prove accurate, the city’s overall Economy will still gain a few jobs this year, with employers hiring 3,800 workers. In contrast, Mayor Michael Bloomberg has predicted a loss of 10,700 jobs.

Both politicians, however, see the city of over 8 million people losing lots of jobs in 2009. Some 49,800 people will lost their jobs, according to the comptroller, topping the independent mayor’s prediction of 46,300 cuts.

By 2010, Thompson and Bloomberg also agree that employers will resume hiring, with the comptroller predicting an increase of 29,800 jobs and the mayor forecasting 26,700 additions.

India's GDP Growth Holds at Slowest Pace Since 2005

India’s economic growth held at the weakest pace since 2005 as the highest interest rates in six years discouraged consumer spending and investment.

Asia’s third-largest economy expanded 8.8 percent in the three months to March 31 from a year earlier, matching the revised gain of the previous quarter, the statistics office said today in New Delhi. Analysts forecast an 8.1 percent increase.

Reserve Bank of India Governor Yaga Venugopal Reddy has kept borrowing costs high to slow inflation, which has doubled in the past four months. That’s hurt the nation’s economic expansion, prompting the finance ministry yesterday to ease companies’ overseas borrowing rules to spur investments.

``Both growth and inflation are causes of concern,’’ said Sanjay Peters, an economics professor at ESADE Business School in Barcelona. ``Reining in inflation at the cost of growth is an unviable justification -- growth is key to cutting poverty.’’

India’s benchmark Sensitive index was almost unchanged after the data was released, rising 0.5 percent to 16,404.75 at 11:10 a.m. in Mumbai. The key 10-year bond yield rose to 8.08 percent from 8.05 percent before the report.

India’s economy expanded 9 percent in the year ended March 31, the least in three years, today’s report said. Prime Minister Manmohan Singh wants to accelerate growth to 10 percent by 2012 and sustain that pace to reduce poverty in the world’s second most populous country. The World Bank estimates about half the nation’s 1.1 billion people live on less than $2 a day.

Electoral Losses

Still, India is unwilling to risk an inflation flare-up from lower interest rates at a time when the government is bracing for national elections due by May 2009, analysts said. Singh’s Congress party has already lost ground in nine of 11 provincial polls held since January 2007 amid rising prices.

Higher fuel prices may also stoke inflation. India’s Cabinet is due to meet in coming days to seek ways to cut losses at state-run refiners that have risen to more than $1 billion a week as crude oil costs soar. The meeting will consider ``all options,’’ including an increase in fuel prices, Oil Minister Murli Deora said yesterday.

To boost growth, the finance ministry yesterday raised the limit on overseas borrowing by companies for domestic spending. Infrastructure companies can borrow as much as $100 million overseas, up from a previous limit of $20 million, while other companies can borrow as much as $50 million, compared with an earlier cap of $20 million.

Rising Incomes

India’s expansion, to be sure, is still the second-fastest after China among the world’s major economies, spurred by rising incomes. The South Asian country is growing at more than three times the pace of the U.S. and the nations sharing the euro.

The Reserve Bank of India, whose priority is to keep prices in check, has raised its key overnight lending rate seven times in the past 2 1/2 years and increased the cash reserve ratio, or the proportion of deposits lenders must set aside, seven times since December 2006 to slow money supply and cool inflation.

That’s yet to put a dent in India’s inflation rate, which stood at 7.82 percent in the week to May 10. The Federation of Indian Chambers of Commerce and Industry say relying on monetary tools isn’t the correct way to tackle inflation, which is ``largely driven by supply-side factors.’’

``It is supply shortage that is aggravating inflation in the case of food products, and the inflationary pressure in the case of manufactured products is the result of continuous cost buildups of raw materials and oil products,’’ the trade body said in a report on May 24. ``Rising interest rates, besides curtailing demand, are also adding to the cost of companies.’’

Cars, Motorcycles

Tata Motors Ltd.’s profit in the year ended March 31 gained at the slowest pace in at least five years as steel and other input costs increased and consumer demand diminished. Bajaj Auto Ltd., India’s second-biggest motorcycle maker, expects sales to remain sluggish this year. Industry accounts for a quarter of India’s $912 billion economy.

``The year ahead is a challenging year,’’ said C. Ramakrishnan, chief financial officer at Tata Motors, the Indian automaker that’s buying Ford Motor Co.’s Jaguar and Land Rover units. ``High interest rates, raw material costs and credit availability continue to be challenges.’’

As industry slows, demand for services such as travel and banking, which make up 55 percent of the economy, may also wane. Airbus SAS, the world’s largest planemaker, said this week that India is among the weakest airliner markets right now and the country’s carriers may cancel or delay plane orders in the next 12 months.

The Business Confidence Index, prepared by the New Delhi- based National Council of Applied Economic Research, fell 3.4 percent in the current quarter ending June 30, because of concerns over accelerating inflation hurting the investment climate and slowing the economy.

Reliance Power goes ex-date; share tumbles

India’s economy grew 8.8 percent in the March quarter from a year earlier, led by strong expansion in the services sector, and the pace of growth was faster than market expectations.

The annual growth for India’s fiscal fourth quarter was higher than the median forecast in a Reuters poll of 8.2 percent, and matched an upwardly revised 8.8 percent in the October-December quarter.

That left full fiscal-year growth at 9.0 percent and showed growth was still robust despite tightening of monetary policy and strengthening of the currency in 2007.

The government had earlier estimated annual growth of 8.7 percent for the whole of 2007/08.

Reliance Power goes ex-date; share tumbles

Shares of Reliance Power plunged on Friday as it began to trade ex-date. The street was expecting the stock to quote around Rs 270 per share post bonus issue. However, contrary to market expectation, the stock tumbled even further.

At 10:28 am, the stock was trading at Rs 248.45, down 39.34 per cent from its previous close of Rs 409.55 on the BSE. It may look like a sharp fall, but factoring in the issue of 3 bonus shares for every 5 held, the slide is just 3 per cent.

The cost of 5 shares at Thursday’s closing price would be Rs 2,047.75. Adding 3 bonus shares for every 5 held, the average price of a Reliance Power share turns out to be Rs 256.

For retail investors, who had bought the shares at IPO price of Rs 430, the average price post bonus would have been around Rs 270 per share. However, the stock is down around 8 per cent from the IPO price.

"Since it will take a couple of years for the facilities to become operational, we expect the stock to remain rangebound for the next 6-8 months between Rs 240-Rs 270 per share," said an analyst from a local brokerage firm.