India will unveil a new monetary policy framework by the end of January 2015, a finance ministry official said on Tuesday (7 October), making it easier for the Reserve Bank of India (RBI) to focus on tamping down persistently high inflation.India has long struggled with prices rising at double digit levels annually, causing most distress for the poor.Consumer price inflation slowed to 7.8 per cent in August, making the central bank more confident that a near-term target of 8 per cent inflation in January would be met.An RBI panel this year proposed moving to a medium-term inflation target of 4 per cent, with a band of 2 per cent on either side, when setting monetary policy, sharply below current levels.The recommendation had stirred concern about a potential clash with the traditionally more pro-growth government. Although the RBI is not statutorily independent from the government, it has long enjoyed wide latitude in policy-making.The reforms foresee a panel-based approach that is standard international practice but, as in Britain, would require the RBI to adhere to an inflation target set by the government, known in the jargon as operational independence.Finance Minister Arun Jaitley, in his maiden budget in July, promised to revamp the monetary policy framework to meet the challenge of an increasingly complex economy."It has to be put in place not later than December-January because it is a budget announcement," the official, who asked not to be identified because of the sensitivity of the matter, told reporters."We have completed our internal work. And the (RBI) Governor and the finance secretary had some conversations."The finance ministry and the RBI are soon expected to sign a formal agreement on the issue, the official said.RBI Governor Raghuram Rajan has already said he wanted to bring down consumer price inflation to 8 percent in January 2015 and a more difficult 6 percent the following year, in line with the "glide path" recommended by the central bank panel.However, the official said it was up to the government to set the new inflation target."What is the appropriate inflation target for India, cannot be decided by the RBI. It has to be decided by the government," he said, adding it could consult with parliament and the central bank before setting the target.This effectively means the RBI would not enjoy the independence enjoyed by the US Federal Reserve, which has latitude to set an inflation target as part of a broader legal mandate to achieve full employment and stable prices.Rajan sent a strong signal last week that he would refrain from cutting interest rates until he was confident the inflation target for January 2016 could be met.(Reuters)
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Indian Government has cleared 33 pending defence projects, including those of Reliance Aerospace, Bharat Forge, Mahindra Telephonic Integrated Systems and Tata Advanced Materials, a move that is expected to boost advanced manufacturing and attract huge investments.The Licensing Committee, chaired by Secretary in the Department of Industrial Policy and Promotion (DIPP), has cleared these long pending applications last week and granted industrial licences to them, an official statement said.The 33 projects include 14 cases whose applicants have been informed that licences were not required anymore as a vast number of defence items have been delicensed, it added."It has been possible to approve these cases as a consequence of the simplification of FDI policy," the release said, adding that the development would give a big boost to 'Make In India' campaign which seeks to make the country a hub for global manufacturing.The Narendra Modi-led government has liberalised the FDI policy in the defence sector by hiking the cap from 26 per cent to 49 per cent.India imports up to 70 per cent of its military hardware."It is expected that clearance of these 33 applications and the deregulation of defence product list excluding a large number of components from purview of industrial licensing will provide a major impetus to advanced manufacturing in defence sector," the statement said.According to sources, the decision is expected to result in investments of billions of dollars.The Licensing Committee also discussed the possibility of removal of stipulation of annual capacity in the industrial licence as also to permit sale of licensed items to other entities under the control of Home Ministry, state governments, PSUs and other defence licensed companies without requiring approval of the Department of Defence Production."It was agreed that the above stipulation would be relaxed subject to submission of bi-annual returns by the unit. The DIPP would be shortly notifying the above decision by issue of a Press Note," the release said.(PTI)
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Growth in services activity picked up pace in September as order books filled up at a faster rate, a business survey showed on Tuesday (7 October).The HSBC Services Purchasing Managers' Index (PMI), compiled by Markit, rose to 51.6 in September from 50.6 in August, reversing a slowdown seen in the previous two months.A reading above 50 signifies growth while anything below denotes contraction.The new business sub-index climbed to 52.4 from 51.9, signalling robust demand."Service sector activity bottomed out in September thanks to stronger new business flows," said Frederic Neumann, co-head of Asian economic research at survey sponsor HSBC.In what might also give some respite to an economy that has long struggled with high inflation, the sub-index measuring output price growth fell to a near four-year low.India's annual consumer price inflation eased in August to 7.80 per cent from 7.96 per cent in July. Wholesale prices also rose at a slower clip during that month.But the Reserve Bank of India doesn't appear to be in a hurry to ease monetary policy and hinted last week that it won't do so until it is confident that consumer inflation can be reduced to a target of 6 percent by January 2016.Activity in the private sector has expanded steadily since May, when Prime Minister Narendra Modi won a landslide mandate that created a wave of optimism over India's economic prospects.But the lack of sweeping reforms by Modi's government so far has taken the sheen off those hopes.The survey showed firms' confidence regarding future business grew at the slowest pace in a year last month."A pick up in reform effort is sorely needed to put growth on a firmer footing and address supply side risks to inflation," Neumann said.(Agencies)
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Regretting that economic progress has thrown up a class of 'rent seekers', Comptroller and Auditor General Shashi Kant Sharma on Tuesday (13 May) said the CAG will continue to audit private companies and Private Public Partnership (PPP) projects in cases where revenue sharing with the government is involved. "Work on telecom audit is already in progress and I am hopeful that our first report would be ready before the year end. A report on gas and oil exploration will be presented to Parliament soon. We will be taking up performance audit of some ongoing PPP projects shortly," he said while speaking at a conference on corporate fraud. Noting that CAG audit will not cause any discouragement to investors, Sharma said, "in a mature market economy, where there is very little scope for manipulations and fudging, why should companies fear such audit if they have nothing to hide." Capitalism based on rent seeking, he said "is not just unfair, but also bad for long term growth. In such an environment, resources are mis-allocated, competition is repressed and dynamic new firms are stifled by better connected players". Rent seeking refers to instances when a company or individual use public resources to obtain economic gain from others without reciprocating any benefits back to society. "Many of the corporate tycoons, throughout the emerging economies, are today accused of making fortunes by "rent seeking". They want to grab a bigger slice of the pie rather than making the pie bigger," he said, adding the industries vulnerable to such abuses include banking, mines, telecom spectrum, utilities, oil and gas and public infrastructure. Although several private companies, specially in telecom, oil and power have resisted audit by CAG, the Supreme Court in its latest judgement had ruled that any entity using public resources in its business and sharing revenue with the government can be audited by the CAG. "Our stand has been the same since long," Sharma said. India, Sharma said, is a young and restless nation where youth and deprived sections are angry about corruption, which they feel is on account of "collusions between sections of government and select private players". "We must ensure that corruption and fraud doesn't spill out into becoming an issue that would unsettle the growth of the nation... The economic progress that has created a class of 'rent seekers' has also created its nemesis, a new, educated, urban, tax paying middle class that is aware of its rights and role, and pushing for a change for the good of the nation," he said. Sharma emphasised that there should "be no doubt that the principle (laid down by the Supreme Court) which is applicable to spectrum, applies to all natural resources which belong to public and where revenue is to be shared with Government; and CAG is duty bound to report to Parliament in all such matters". The CAG had earlier initiated an audit of private telecom companies after TRAI allegedly found they were under-reporting income to avoid sharing it with the Government. The telecom companies later approached the High Court against CAG audit, but their plea was rejected. Supreme Court too upheld the ruling of the HC. Similarly private power distribution companies resisted CAG audit, but their plea was rejected by the Delhi High Court. CAG is currently engaged in audit of these discoms. Elaborating on the need for auditing companies engaged in revenue sharing with the government, Sharma said "there is evidence to suggest that countries that do well to counter crony capitalism generally have better institutions. "Governments must aim to improve regulation and boost competition. Further, rules are to be enforced rigorously so that they are ignored less freely." (PTI)
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India needs to invest an estimated $250 billion over next 20 years for basic urban infrastructure offering a huge investment opportunity, Union Minister for Urban Development M Venkaiah Naidu said on Tuesday (7 October)."As per the estimates of a high-powered committee, we need to invest $250 billions over the next 20 years to put in place basic urban infrastructure relating to transport, water supply, sanitation and solid waste management alone.This offers a huge investment opportunity and we are committed to promote private domestic and foreign investment in a big way," Naidu said.There are ample opportunities for the international investors to come and invest in India and particularly in urban India, because the government has decided to allow FDI in infrastructure also, the minister said at the XI Metropolis World Congress that got underway here.At the current level of urbanisation itself, urban areas in India are contributing to around 60 per cent of the GDP which is estimated to rise to 75 per cent in another 10 to 15 years, he said."It is for this reason that urbanisation is seen as a driver of economic growth. It means urban areas are engines of growth and this is the reality," he said.Stressing the need for bringing in reforms in urban governance, transparency and accountability in the system, he said people must be able to have hassle-free administration, online registration, online sanction of plans and approvals."We must have digitisation of land records and property details of the cities. Hyderabad has shown the way in this regard. Because of digitisation of records, the revenue of Hyderabad has increased manifold and I am confident that other cities of the country will follow the same," he said.The Centre will fund the scheme of digitisation of the property details of every city that will go a long way in increasing revenue of urban bodies of the country, Naidu said.Urbanisation is a reality and it's a challenge, but Government of India wants to convert this challenge into a great opportunity and improve living standards of the people, he said."The states and the Centre, together we want to work as team India and see to it that people are provided with basic amenities both in urban as well as rural areas," he added. Globally, more people live in urban areas than in rural areas. 54 per cent of the world's population is residing in urban areas, as per the census of 2014. It is expected that 66 per cent of the global population could be urban by 2050, Naidu said.In India, as per the 2011 census, 31 per cent population (377 million people) is living in urban areas. The projected figure by 2050 is that more than 50 per cent of the Indian population would be urbanised."That is the reality that we have to prepare and gear up to this challenge and convert it into an opportunity," he said.As the world continues to urbanise, sustainable developmental challenges will be increasingly confronted in cities particularly in the lower and middle income countries where the pace of urbanisation is fastest, the minister said.The primary challenge that accompanies the growing urbanisation is to ensure 'inclusivity'."We need to ensure that every urban resident feels involved in the socio-economic and cultural landscape of the city that he had come to live in and thereby make him 'own that city' rather than being subjected to the feeling that he is 'not wanted and has no hope'.Efficient planning and effective urban management are very critical to enable urbanisation that is sustainable in social, economical and ecological terms, he said."It is in this context we have envisioned the development of 100 'smart cities' as satellite towns of larger cities and by modernising the existing mid-sized cities," Naidu said.A smart city is the effective integration of physical, digital and human systems in the built environment to deliver sustainable, prosperous and inclusive future of all its citizens.It delivers public and civic services to citizens and businesses in an integrated, resource efficient manner while enabling innovative collaborations to improve quality of life and grow the local and national economy, he added.Andhra Pradesh and Telangana Governor ESL Narasimhan and Telangana Chief Minister K Chandrasekhar Rao were among those who spoke at the inaugural ceremony. (PTI)
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