Giving relief to the employees of loss-making public sector units, the government on Wednesday decided to continue supporting distressed public sector units in meeting their wage bills and other statutory payments.
The shift was sudden, quite unlike Shukla's departure from North Block, which had been anticipated for some months even before Singh''s first Budget.
"We welcome the decision. This will provide adequate impetus to banks to lower their interest rates. Private banks will sooner or later will follow suit," Economic Affairs Secretary Ashok Chawla told reporters in New Delhi on Thursday. On Wednesday, the RBI cut short-term lending and borrowing rates -- Repo and Reverse Repo -- by 50 basis points each, while keeping the other key tool -- Cash Reserve Ratio -- intact.
The scheme is expected to activate the measures announced for the housing construction sector under the economic stimulus packages. It will increase the stock of houses ranging from 300 sq ft to 1,200 sq ft plinth area built at affordable rates on land provided by state governments.
"We are not looking at increasing FII (investment) limit in government securities," Department of Economic Affairs Secretary Ashok Chawla told reporters. Earlier in June, the government raised the FII investment limit in government securities to $5 billion from $3.2 billion.
'The target for next year is unlikely to be more than that of this year. The more you divest in any cycle, the less your potential pipeline for the next,' said an official. 'The first two issues we want to tackle and complete in FY20 are Air India and Hotel Ashok.'
"As FM, I granted approval in the normal course of business," he said in a statement.
Currency notes of lower denomination of Rs 100 and Rs 50 will continue to be the legal tender
This will help bridge the revenue-expenditure gap, which has been ballooning on account of the stimulus packages and tax concessions announced to spur the economy. Economic Affairs Secretary Ashok Chawla said the government has provided a stimulus of Rs 1,50,000 crore (Rs 1,500 billion) by way of excess expenditure and about Rs 50,000 crore (Rs 500 billion) by way of tax concessions to the industry to battle the economic slowdown.
With a clear eye on the coming Lok Sabha elections, the United Progressive Alliance government on Thursday showered a bonanza of projects and schemes that are impossible to be completed during its remaining life span of another 100 days, with many projects set to be achieved only by 2012 when the 11th Plan ends.
In this interview, Rakesh Mohan spoke on a range of issues about the challenges he faced during his stint at the central bank and the journey from handling the real economy sectors to monetary economics
The relaxation will apply to those sectors that have composite caps (foreign direct investment or FDI plus FII). "The move will not impact sectors like banking and insurance which are governed by Acts of Parliament. However, sectors with composite caps which see administrative control like telecommunication services, broadcast services like direct-to-home and FM radio will benefit," a Delhi based FDI policy expert told Business Standard.
The main difference of opinion between RBI and FinMin is over the transfer of the RBI's 'excess' capital reserves. The Jalan panel seeks to convince finance secretary Subhash Garg to soften his dissent note language. The move is aimed at maintaining the now-cordial relations between the RBI and the finance ministry.
Even with a clear mandate, the Congress-led United Progressive Alliance government is unlikely to allow foreign direct investment in sensitive sectors such as retail and may like to revisit the recently issued norms that give companies elbow room in dealing with the FDI norms.
Given the pressure from India Inc and the banking fraternity, it is surmised that the portfolio rejig will take place before April.
As a result of the downturn in commodity prices across the world, and the easing of supply constraints on most commodities because of good domestic production, there is hardly any incentive for over-stocking by trade or bulk consumers of agri-commodities. Also, it is amply clear that the imposition of storage limits on farm goods has had little impact on their prices or the overall rate of inflation. Even the ban on futures trading has proved ineffectual.
Lord Paul, a member of the Lords Economic Affairs Committee, said he had strong reservations about the Committee's recommendation that immigration should be measured by the impact on income per head of resident population. He said other peers had doubts about the proposal but had not been in a majority. "The report does really concentrate on the benefits of immigration per capita, which I don't really agree with myself.
The Union finance ministry on Thursday said the falling inflation rate would result in further lowering of interest rates. "The trend is clear for falling inflation and this will translate into lower interest rates," Economic Affairs Secretary in the Finance Ministry Ashok Chawla said while commenting on the inflation data.
Industrial output rose to nearly three-year high of 6.4% in August.
If India takes part in $500-billion resource raising programme of International Monetary Fund, as decided at the G-20 summit in London last week, it will cost the country up to $11 billion (Rs 55,000 crore).
She also hit out at the government for posting retired bureaucrats, who she alleged were its 'yes men', as head of institutions.
The approval to bring in the FDI is subject to compliance with RBI and SEBI guidelines, besides subjected to approval of the relevant high courts for the demerger of distribution business of Volvo India. The finance ministry had already approved the FDI proposal of Volvo to invest $30 million (Rs 123 crore) for induction of foreign equity up to 8.1 per cent by way of acquisition of shares in EML.
Government hits back, tells rating agency to introspect on processes.
The government on Thursday said it will borrow an additional Rs 1,40,000 crore (Rs 1400 billion) during the first half of next fiscal to fund its increasing public expenditure.
For the first time, the government is considering the merits of a tariff policy to contain prices that could include allowing external agencies to import commodities and cultivating some essential crops overseas. An inter-departmental team from the ministries of finance, food and consumer affairs and commerce has been asked to work out a strategy to this effect.The finance ministry's department of economic affairs has submitted its views and a final paper is under preparation
Central government employees and pensioners will get an additional 6 per cent dearness allowance from next month, putting a burden of over Rs 6,000 crore (Rs 60 billion) on the exchequer.
Finance Minister announced the approval of the scholarship scheme for students of minority communities. The scheme will be effective during 11th Five Year Plan.
Telecom companies have been desperately waiting for a bailout package from the government after a Supreme Court order put their statutory liabilities at Rs 1.47 lakh crore.
In a bid to encourage the fertiliser industry to increase its production volumes, the government has extended the system of actual freight reimbursement to all types of fertilisers. Currently, only urea enjoys this concession.
Retail, telecom, media and a host of sectors in which foreign direct investment is restricted stand to gain from changes in FDI policy that the Cabinet Committee on Economic Affairs cleared on Wednesday linking approvals to the concept of control for the first time.
Though public shareholding in Jet is already down to the mandated 25 per cent, the regulator wants its promoters to pare their stake further.
The government also sought approval from Parliament for equity infusion worth Rs 2,345 crore into struggling Air India and another Rs 1,300 crore for Air India Asset Holding.
FinMin does not expect tax or non-tax revenue to reach anywhere close to the targets set in the interim Budget. Sources say that the challenge before the new government will be either to accept the reduced projection and tailor the Budget accordingly or set a more ambitious target.
The government does not expect the stock markets to fall below the levels witnessed on Monday, which saw benchmark Sensex plunging by nearly 700 points during the intra-day trade.
"The prime minister asked the ministers to stay alert on the global financial situation," Rural Development Minister Raghuvansh Prasad Singh told reporters after a meeting of the Cabinet Committee on Economic Affairs.
According to the revised borrowing schedule the government would raise Rs 50,000 crore (Rs 500 billion), while the earlier borrowing programme was for Rs 35,000 crore (Rs 350 billion) in the last quarter. The Reserve Bank had revised its indicative calendar for the fourth quarter of 2008-09, superseding the borrowing programme announced on December 5.
The Union Cabinet on Thursday approved the implementation of the national policy on biofuels.
Former economic affairs secretary E A S Sarma has written to the Securities and Exchange Board of India questioning the delay in investigating Satyam Computer even after he had alerted the regulator 'well in advance' about certain irregularities in the company's books of accounts after the Maytas deal was called off last month.
"I wrote nearly eight letters to Sebi alerting them about Satyam's fraudulent practices and the company's connivance with local politicians but none of the letters elicited any response from the regulator. Sebi remained silent about the issue even while I mentioned to them that MCA launched a fact-finding probe. But the fact is that the MCA probe too was very slow and only on paper," Sarma said.
According to sources, the Department of Industrial Policy and Promotion and Ministry of IT have supported the reserve price of Rs 2,020 crore (Rs 20.2 billion) as was originally recommended by DoT. Last week, the finance ministry had asked the DoT to double the reserve price for pan-India 3G spectrum.
