Reserve Bank of India Increased the Repo Rate by 25 Basis Points to 7.75 %from 7.50%

The Reserve Bank of India (RBI) on 29 October 2013 released the Second Quarter Review of Monetary Policy 2013-14.According the released statement by the RBI, the Repo rate increased by 25 basis points from 7.5 percent to 7.75 percent.

The highlights of the Second Quarter Review of Monetary Policy 2013-14

• RBI reduced the marginal standing facility (MSF) rate by 25 basis points from 9.0 percent to 8.75 percent with immediate effect.
• RBI also increased the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.5 percent to 7.75 percent with immediate effect.
• The liquidity provided through term repos of 7-day and 14-day tenor has been increased from 0.25 percent of net demand and time liabilities (NDTL) of the banking system to 0.5 percent with immediate effect.
• Cash Reserve Ratio (CRR) unchanged at 4 Percent
• Repo rate hiked due to upturn of inflation and other factors. 
• Food price pressures may ease with the arrival of summer crop harvest and seasonal moderation. 
• RBI downward FY14 GDP growth to 5 percent from 5.7 percent. 
• Both WPI (wholesale price index) and CPI (consumer price index) inflation may stay range-bound around the current levels that remain above comfort levels.

About the Repo (Repurchasing operation) rate

Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. This is called repurchase rate because when they borrow money from the RBI, they keep government securities with the central bank as collateral. When they pay the money back to RBI, they take the collateral back.
Repo rate is used by monetary authorities to control inflation.

When inflation is high, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation. The central bank takes the contrary position in the event of a fall in inflationary pressures. 

About Reverse repo

Reverse repo rate is the rate at which commercial banks lends to RBI. Repo rate is always higher than the reverse repo rate.

About Cash reserve ratio (CRR)    

Cash Reserve Ratio (CRR) is the amount of funds that all Scheduled Commercial Banks (SCB) excluding Regional Rural Banks (RRB) are required to maintain without any floor or ceiling rate with RBI with reference to their total net Demand and Time Liabilities (DTL) to ensure the liquidity and solvency of Banks.

About Statutory Liquidity Ratio (SLR) 

 SLR stands for Statutory Liquidity Ratio. Apart from CRR, every bank is required to maintain in India at the close of business every day, a minimum proportion of their Net Demand and Time Liabilities as liquid assets in the form of cash, gold and un-encumbered approved securities. The ratio of liquid assets to demand and time liabilities is known as Statutory Liquidity Ratio (SLR). At present SLR is 23 percent.

About Marginal Standing Facility (MSF) 

Marginal Standing Facility (MSF) is a new scheme announced by the Reserve Bank of India (RBI) in its Monetary Policy (2011-12) and refers to the penal rate at which banks can borrow money from the central bank over and above what is available to them through the Liquidity Adjustment Facility window.

China`s economic growth bounces back to 7.8 per cent

China’s economic growth rebounded to 7.8 percent in the latest quarter after a boost in government spending to reverse a sharp downturn. Growth of the world’s second-largest economy accelerated from the previous quarter’s two-decade low of 7.5 percent, according to the National Bureau of Statistics. Communist leaders want to steer China’s economy to a slower, more sustainable level based on domestic consumption instead of exports and investment. The unexpectedly abrupt decline in global demand for Chinese goods prompted Beijing to reverse course temporarily and take targeted steps to prop up growth and avoid job losses. Factory output in the three months ended September rose 10.1 percent from a year earlier, up 1 percentage point from the growth rate in the first half of the year, the bureau spokesman said. Growth in investment in factories and other fixed assets edged up, growing 20.2 percent in the first three quarters of the year, compared with 20.1 percent for the first half, the data showed. Retail sales also accelerated but only marginally, rising by 12.9 percent in the first three quarters.

What: China's economic growth When: 17th October 2013

World Bank slashes GDP forecast to 4.7%

Close on the heels of the IMF, the World Bank on Wednesday slashed India’s economic growth forecast for the current financial year to 4.7 per cent from an earlier projection of 6.1 per cent.

“The report (India Development Update) expects real GDP to expand by 4.7 per cent (at factor cost) this fiscal year before accelerating to 6.2 per cent in FY2015,” said Martin Rama, the World Bank’s chief economist for South Asia. In April, the World Bank had projected India's GDP would grow at 6.1 per cent in the current financial year and at 6.7 per cent the following year.

Last week, the International Monetary Fund (IMF), in its World Economic Outlook, projected an average growth rate of about 3.75 per cent in market prices for India in 2013-14, which is expected to pick up to 5.1 per cent next year. India’s GDP growth slowed to 5 per cent in the year ended March from an average of 8 per cent over the past decade.

The World Bank said the pace of economic activity in 2013-14 will be hampered by a weak outturn during the first quarter.

In addition, two consecutive months (July-August) of negative business sentiment and higher interest rates may curb the potential for recovery in the second quarter of 2013-14 even after manufacturing output rebounded in July.

“Although output growth in the first quarter fell to 4.4 per cent, growth is expected to rebound strongly in the second half of 2013-2014,” Rama added. 

IMF cuts India growth forecast to 3.8% in 2013 on weak demand; world growth forecast cut to 2.9%

India suffered the steepest cut in the International Monetary Fund's (IMF) revised growth forecasts for the year, warning of the need to keep spending in check amid high inflation. The pessimistic outlook comes against a gloomy prediction for global growth, which IMF sees slumping to its lowest since the financial crisis. In its flagship World Economic Outlook report, the multilateral lender said that India will grow only 3.8% in the 2013-14 financial year against 5.6% projected in its July forecast, a cut of 1.8 percentage points.
In terms of factor cost, IMF sees the Indian economy growing 4.25% in 2013 and 5% in 2014, which is in line with private estimates. Goldman Sachs had last month cut the growth forecast for this year to 4% from 6%. BNP ParibasBSE 2.34 % expects the Indian economy to expand just 3.7%. In the year to March, growth had slipped to a 10-year low of 5%.

The finance ministry expects the economy to expand 5-5.5% in the current year, despite hitting a four-year low of 4.4% growth in the April-June quarter. The Reserve Bank of India also has the same range for 2013-14 growth. Finance Minister P Chidambaram said last week he expects growth to pick up in the second half of the year and pointed to core sector growth, higher exports and credit expansion as signs that this could happen, providing enough of a lift to lead to a revival.

IMF sees the Indian economy recovering to 5.1% in the next financial year, down from its earlier estimate of 6.2%. 

RBI reduced the MSF Rate to 9 Percent from 9.5 Percent

The Reserve Bank of India (RBI) on 7 October 2013 reduced the Marginal Standing Facility (MSF) rate to 9 per cent from 9.5 per cent to improve liquidity in the system. In a release issued from Mumbai the RBI stated that the decision was taken after a review of evolving liquidity conditions. MSF allows banks to borrow money from RBI at a higher rate when there is a significant liquidity crunch.

The RBI further stated that it conducted open market purchase operations of 9974 crore rupees with the aim of injecting liquidity into the system.

This is the second reduction in the rate since the September 20 mid-quarter monetary policy review, when it was lowered to 9.5 per cent from 10.25 per cent.

Direct Tax Collection increased by 10.66 Percent to 301250 Crore Rupees

As per the data released by the Union Ministry of Finance, Government of India on 7 October 2013, Gross collection from direct taxes that include personal income tax and corporate taxes, increased by 10.66 percent to 301250 crore rupees in April-September period in 2013 as compared to 272221 crore rupees recorded in the same period in 2012.

Collections from personal income tax increased by 16.15 percent to 106231 crore rupees in the first half of the current financial year as compared to 91463 crore rupees recorded in the same period last year.

However, there was a sluggish increase in corporate taxes due to slowdown in growth that has hit general demands in the country. Gross collections of corporate taxes increased by 7.93 percent to 192308 crore rupees during the period under review.

Net direct tax collection was registered at 250959 crore rupees for the first six months of the current financial year 2013-14 as compared to 226653 crore rupees recorded in the same period last fiscal 2012-13, registering an year-on-year increase of 10.72 percent.

Difference in gross and net tax collection is due to refunds. Wealth tax collection increased by 5.27 percent to 499 crore rupees during the period under review, while the collection of Securities Transaction Tax (STT) dropped by 6.45 percent to 2210 crore rupees.

ADB cuts India's growth forecast to 4.7 percent

The Asian Development Bank (ADB) on Wednesday sharply lowered its forecast on India's economic growth to 4.7 percent for this year from its earlier projection of 6 percent.

In an update of its flagship annual economic publication, Asian Development Outlook 2013, the ADB said the Indian economy has been under pressure with the recent depreciation of the rupee and capital outflows adding to structural constraints which are weighing heavily on its prospects for returning to a high growth path.

“With gross domestic product in the first quarter of 2013-14 expanding at its slowest pace since the global financial crisis, ADB revised down its growth forecast to 4.7 percent from 6 percent projected in April,” the Manila-based lender said.

It has also lowered the growth forecast for next financial year to 5.7 percent from its earlier projection of 6.5 percent.

Current account gap widens to 4.9% of GDP in Q1

High imports of gold and oil pushed Current Account Deficit (CAD) to 4.9% of GDP to $21.8 billion in the April-June quarter of the current fiscal, RBI said today.

CAD, the difference between inflow and outflow of foreign exchange, was 4.4 % or $16.9 billion in the same quarter of last fiscal, 2012-13. "The trade deficit, coupled with a slow recovery in net invisibles (income and services), led to widening of CAD to $21.8 billion in Q1 of 2013-14 from $16.9 billion in Q1 of 2012-13," RBI said in its Balance of Payments statement.

Net NPA of banks rises to 1.68 per cent in 2012-13: RBI

Reflecting deterioration in economic activities, net non-performing assets (NPA) of all banks have increased to 1.68 per cent of the total loan at the end of 2012-13, according to the Reserve Bank of India.

The net NPA of all banks was 1.28 per cent at the end of 2011-12, RBI said in report titled 'A Profile of Banks: 2012-13'. Net NPA of the 26 public sector banks, including State Bank of India (SBI), rose to 2.02 during the year as compared

Plan panel likely to cut average GDP growth in 12th Plan to 6%

 Planning Commission is likely to cut the annualaverage economic growth rate target of 8 per cent for the 12th Plan (2012-17) to around 6 to 6.5 per cent in its mid-term review of the five year policy document.

"It would be difficult to achieve the 8 per cent average economic growth in the 12th Plan period in view of slowdown. It is quite possible that the commission will cut the target substantially to around 6 per cent," an official said. 

As per the practice, the commission comes out with a mid-term review of plans during the third financial year of the policy period. 

In its last mid-term review, the commission had cut the annual average growth rate target of 9 per cent to 8.2 per cent for the 11th Five-Year Plan period (2007-12). But only 8 per cent average annual economic growth was achieved in 11th Plan. 

Reeling under the impact of slowdown, Indian economy grew by 5 per cent in 2012-13, the first year of the 12th Plan. The economic growth is expected to be flat this year. The first quarter (April-June) economic growth in this fiscal has slipped to 4.4 per cent from 4.8 per cent the previous January-March quarter. 

According to experts, with a presumption that the economic growth remains 5 per cent in first two years of the 12th Plan, the country has to maintain a rate of around 10 per cent in remaining three financial years of policy period to achieve the targeted 8 per cent, which was not possible. 

The plan itself talks about the different growth scenarios. The document said that in absence of sufficient action to promote economy, the average growth would range from 6 to 6.5 per cent.

RBI hikes repo rate by 25 basis points

RBI Governor Raghuram Rajan on Friday surprised the industry and shocked the stock markets by hiking the short-term policy rate by 0.25 per cent to keep .“worrisome” inflation under check, a move that may increase EMIs for home and auto loans in the medium term.

The RBI Governor, however, eased liquidity through a reduction in the marginal standing facility rate, at which banks borrow from the central bank, by 0.75 per cent to 9.5 per cent and eased the minimum daily maintenance of the cash reserve ratio (CRR).

The repo rate, or the short-term lending rate, has been increased by 25 basis points to 7.5 per cent from 7.25 per cent with immediate effect. Other policy rates will be adjusted accordingly.

He kept the cash reserve ratio (CRR), the portion of deposits that banks are required to maintain with the RBI in cash, unchanged at 4 per cent.

China to meet 7.5% growth target: World Bank chief

China is likely to achieve its growth target of 7.5 per cent this year despite planned structural reforms to re balance the world’s second largest economy, the World Bank president said.

Jim Yong Kim is making a four-day visit focusing on issues relating to carbon emission reductions and China’s urbanisation push.

“We think the growth for China this year will be at about 7.5 per cent,” Kim told a press conference in Shanghai on the first day of his visit.

“The data from August suggests that China will reach its goal of 7.5 per cent.”

Earlier this month the government announced a series of better-than-expected indicators for August, including strong exports and industrial output, that pointed to a pick-up in the domestic economy.

China’s economy expanded 7.7 per cent last year, its slowest growth since 1999.

Growth eased to 7.5 per cent in April-June, from 7.7 per cent in the first quarter of this year and 7.9 per cent in the final three months of 2012.

Authorities have so far been reluctant to introduce large-scale stimulus measures. But they have pledged to push forward structural reforms to shift the economy from dependence on big-ticket investments and more to wards consumer demand as the key growth engine.

“The government is committed to financial-sector reforms and also fiscal policy reforms that we think will pave the way for meeting the long-term growth,” Kim told reporters in Shanghai.

“We think this is the right path.”

China is preparing an “experimental” free trade zone (FTZ) in its commercial hub Shanghai as it tries to promote economic reforms.

Unfettered exchange of the yuan currency will be allowed within the proposed zone, according to a draft plan seen by AFP.

“I think it’s a very positive development,” Kim said of the FTZ. “This free trade zone will allow China to become more competitive.”

UNCTAD forecasts India’s growth at 5.2% in 2013

As per the Trade and Development Report 2013 released by the United Nations Conference on Trade and Development (UNCTAD), Indianeconomy is likely to grow at 5.2% in 2013 calendar year on account of rising domestic demand.

UNCTAD’s India growth prediction at 5.2% for 2013 is however lower than the International Monetary Fund’s forecast of 5.6% for the same period.

For China, the report projected a moderate decline to about 7.6% in 2013 from 7.8% last year.
India’s economic growth declined to a decade’s low of 5% in 2012-13 fiscal. The RBI has projected a growth rate of 5.5% for the current fiscal.

As per UNCTAD, the global growth in 2013 is likely to marginally drop to 2.1% from 2.2% in 2011 and added that developing countries would be affected by slowdown in developed nations.

PM's key economic adviser lowers growth projection for 2013-14 to 5.3%

Prime Minister's key economic adviser C Rangarajan on Friday lowered the growth forecast for the current fiscal to 5.3 per cent from 6.4 per cent projected earlier and listed out host of measures including further liberalisation of FDI norms to improve economic condition.

"Economy will grow at 5.3 per cent in 2013-14," Prime Minister's Economic Advisory Council (PMEAC) chairman Rangarajan said while releasing the Economic Outlook for 2013-14.

The PMEAC had in April projected 6.4 per cent growth for Indian economy for current financial year. The GDP grew by 5 per cent in 2012-13. RBI too had earlier lowered its growth projection for this fiscal to 5.5 per cent from 5.7 per cent.

Railway Revenue Earnings up by 19.63 per cent during April 2012- March 2013

The total approximate earnings of Indian Railways on originating basis during 1st April 2012 to 31st March 2013 were Rs. 124814.87 crore compared to Rs. 104334.61 crore during the same period last year, registering an increase of 19.63 per cent.

The total approximate goods earnings have gone up from Rs. 69674.13 crore during 1st April 2011 – 31st March 2012 to Rs. 85869.02 crore during 1st April 2012 – 31st March 2013, registering an increase of 23.24 per cent.

The total approximate passenger revenue earnings during 1st April 2012 – 31st March 2013 were Rs. 31896.24 crore compared to Rs. 28645.55 crore during the same period last year, registering an increase of 11.35 per cent.

The approximate revenue earnings from other coaching amounted to Rs. 3137.92 crore during April 2012 – March 2013 compared to Rs. 2825.18 crore during the same period last year, an increase of 11.07 per cent.

The total approximate sundry earnings during 1st April 2012 – 31st March 2013 were Rs.3911.69crore compared toRs.3189.75 crore during the same period last year, registering an increase of 23.24 per cent.

The total approximate numbers of passengers booked during 1st April 2012 – 31st March 2013 were 8501.30 million compared to 8306.17 million during the same period last year, showing an increase of 2.35 per cent. In the suburban and non-suburban sectors, the numbers of passengers booked during April 2012 -March 2013 were 4489.62 million and 4011.68 million compared to 4383.18 million and 3922.99 million during the same period last year, showing an increase of 2.43 per cent and 2.26 per cent respectively.

Only 3.6% households in India go in for cashless transactions: Survey

Shockingly, only about 11 pct households in urban areas undertake cashless transactions.

Just 3.6 per cent households in the country undertake cashless transactions, although the government and the Reserve Bank of India (RBI) have been taking steps to promote e-payment channels, says a report.

It cited poor acceptance of cards by sellers and lack of awareness about cashless systems/options as the two main reasons for such low penetration.

"Penetration of cashless transaction stands at measly 0.43 per cent. It has been seen that only about 3.6 per cent of the households in India make cashless transactions," said a report by India Development Fund and Internet and Mobile Association of India that was sponsored by Visa and ItzCash.

About 11 per cent households in urban areas undertake cashless transactions, while in rural India, only 0.43 per cent of the households make cashless transactions.

India’s fiscal deficit is around 63% of target

As per government data, India’s fiscal deficit during the April-July period was Rs 3.41 trillion ($50.91 billion), or 62.8% of the full-year target. Net tax receipts for the first 4 months of the current fiscal year to March 2014 touched Rs 1.45 trillion, while total expenditure was Rs 5.21 trillion. India’s fiscal deficit during the 2012-13 fiscal year ending March decreased to 4.9% of the country’s GDP, compared to 5.8% in 2011-12. The fiscal deficit target is 4.8% of GDP for the current fiscal year.

India to Achieve 80 Per Cent Literacy Rate by 2015, says HRD Minister Dr. Pallam Raju

India is to achieve 80% literacy rate BY 2015. This was stated by the HRD Minister Dr. M.M. Pallam Raju while inaugurating an International Conference on Achieving Literacy for All. The literacy rate of India is 73 per cent at present as per the 2011 Census. He said that more than 20 crore people have become literates since the last Census of 2001 out of which more than half of them are females. To achieve the goal of 80 per cent literacy by 2015, the HRM said that the HRD Ministry is restructuring the entire adult education system in the country with a paradigm shift to lifelong education. He announced that an appropriate administrative and if required legislative process will be initiated to integrate formal, non-formal and informal learning and to formally recognize forms of education other than formal. He clarified that recognition, validation and accreditation of learning obtained through adult education will be formalized by setting up equivalency framework.

Stressing on the fact that the Government is keen to continuously improve the quality of adult learning, the HRD Minister added that a Core Curriculum Framework for adult education has been developed and is currently undergoing consultative process. The Framework will address total quality management in adult literacy. Full support will be given to adult education by providing adequate resources including funding, research complemented by knowledge management systems and through other innovative means including use of computer ICT as a medium of instruction, he added.

Speaking on the occasion, the UN Resident Coordinator Ms. Lise Grande complimented India for fighting illiteracy and making achievements in the field of education sector. However, she said that India should continue with its struggle against illiteracy. More than seventy crore people globally do not know reading, writing and arithmetic and most of them are in India, China, Pakistan and Bangladesh.

The three- day International Conference will focus on effective, innovative approaches to scale up literacy, reduce gender disparities and create a literate world. The Conference has been organized by National Literacy Mission Authority (NLMA), India along with UNESCO and UNESCO Institute for Lifelong Learning (UIL).

DIRECT TAX UP BY 12% APRIL-AUGAST

It is about . 1,40,000 crore from across the country; Tax collected from Mumbai up 13.5% to . 40,200 crore

  India’s direct tax collection rose 12% year-on-year in the five months to August but remained far below the projected growth target of 20% for the fiscal, offering policymakers only a temporary respite in times of deepening economic gloom. 
Collection from across the country totalled about . 140,000 crore until August 29, according to data collated by the income tax department. Of this, corporate tax collection accounted for . 70,000 crore and income tax . 67,000 crore, the data showed. 

India's economic growth slows to four-year low in Q1

India's economy grew at the slowest quarterly rate since the global financial crisis in the three months through June, lower than expected and hurt by a contraction in mining and manufacturing, government data showed on Friday. 

Analysts polled by Reuters had forecast growth of 4.7 per cent. April-June's figure of 4.4 per cent was the slowest growth since the Jan-March quarter of 2009. 

The Indian economy has been steadily losing momentum in recent years. Economic growth virtually halved in two years to 5 per cent in the fiscal year that ended in March — the lowest level in a decade — and most economists surveyed by Reuters in the past week expect 2013/14 to be worse.