Yesterday, the RBI said: Inflation continues to be at unacceptable levels
Today: Inflation fell further to 6.84% during the week ended Dec 6 from 8% a week earlier.
It is time to look forward and not backward...inflation will drop to 1 or 2% in a few weeks/months..India needs a sharp reduction in interest rates. We do not need to import deflation.
Last Friday, IIP for October was released and it was negative; on Monday, the advance tax paid number will be released. The prognosis is not good. With profits likely to come under increasing pressure Government finances will suffer...the 100,000 crores thrown away on farmer relief would have come in handy.
According to sources, corporate tax collections are also likely to go down to around 15%.
Corporates are postponing payment of advance tax resulting in a 10 per cent shortfall in collections in December compared to the same month last year. The overall growth in tax collections so far this year have also been slow compared to the targeted 35 per cent growth in tax collection for the fiscal.RBI projects further deterioration in government Finances
Mumbai tax officials pegged total advance tax collection in the circle, as of November, at Rs64,484 crore, up 16 per cent from the year-ago figure of Rs55,620 crore, but way below the 35 per cent target.
"While expenditure is slated to increase in the coming months, growth of tax revenue is likely to decelerate with the expected moderation in real economic activities following the global financial meltdown," RBI said in its monthly bulletin.Prepare yourself for continued high market volatility this coming week. I expect the end of week to be lower than last Friday's close of 2920...I know I am in the minority...but aside from selling exhaustion, there is nothing underpinning this over-valued market. Read more...
"The situation way forward is quite uncertain. The RBI will take appropriate action as and when required," Subbarao told reporters after a meeting of the bank's governing board.Situation quite comfortable: Subbarao
"We have to review the entire situation. The situation is quite comfortable. Everything is under control," said the governor, who returned from Washington on Tuesday morning.So am I to assume the future is bleaker today Dec 11, 2008 (post the rate cuts and the first stimulus package) than it was on Oct 15,2008? -Lee
First Stimulus--Not EnoughThe second stimulus package, Nath said, would be aimed at generating employment and ensuring that the credit needs of the companies are met. In the next package, the Minister said, "We will look at engineering sector, greater re-finance facility for exporters and textile and agriculture sectors."
As the business community's less-than-enthusiastic reaction to the package sank in, New Delhi sought to reassure investors. Kamal Nath, the Minister for Commerce & Industry, told a group of reporters outside his New Delhi office. "There is Step One, then there is Step Two, and then there is Step Three," he said.If you know what you are going to do then why don't you just tell us...what is this three step shuffle? Or are you making it up as you along ?- Lee Read more...
As I have said in two earlier posts:
RBI cut the Repo and Reverse Repo rate by 100 basis points to 6.5% and 5.0% respectively. Below is the full RBI announcement and it is refreshing given the nonsense that is printed in Headline newspapers and the nonsense mouthed by our Politicians..Highlights:
Prospects of emerging economies have most definitely been undermined by the ongoing crisis...transmission to emerging economies is taking place via both trade and financial channels...Outlook for India going forward is mixed.
It has been decided to reduce the repo rate under the LAF by 100 basis points from 7.5 per cent to 6.5 per cent and the reverse repo rate by 100 basis points from 6.0 per cent to 5.0 per cent, effective December 8, 2008.
since mid-September 2008...cumulative amount of primary liquidity made available to the financial system through these measures is over Rs.300,000 crore
it has been decided to provide refinance of an amount of Rs.7,000 crore to the Small Industries Development Bank of India (SIDBI...working on a similar refinance facility for the National Housing Bank (NHB) of an amount of Rs 4,000 crore
the Reserve Bank will consider applications for buyback of FCCBs out of rupee resources provided that: (i) there is a minimum discount of 25 per cent on the book value; (ii) the amount of the buyback is limited to US $ 50 million of the redemption value per company; and (iii) the resources for buyback are drawn out of internal accruals of the company as certified by the statutory auditor.
it has been decided to extend exceptional/concessional treatment to the commercial real estate exposures which are restructured up to June 30, 2009...(Now NPA's will be hidden...Lee)
a period of painful adjustment is inevitable...(Facing Reality...Kudos..Lee)Now for the fiscal stimulus....let us hope it is as well thought out...fortunately the spendthrift is busy elsewhere. Over to you Mr. Ahluwalia.
My namesake, Mr Leeladhar, Deputy Governor of RBI has asked banks to think long term and:
....recognize policy steps taken to counter the global financial crisis were temporary...
....measures are ad hoc in nature in response to a particular situation...
The banks would be well advised to ensure that their business strategies and decisions are guided by the longer-term perspective of the systemic and macroeconomic developments and are not unduly influenced by the current episode of the exceptional eventsWhat planet are these folks on right now...is the pressure from the government so intense that responsible, independent agencies are spouting nonsense. Is it necessary to play up the outlook for the economy both locally and globally? And play down the import and impact of cataclysmic global events?
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