Today's current affair

Today's news date April 17,2012
The Hindu
Rate cut to boost investment: Pranab.

• The Reserve Bank’s decision to cut lending rate by 0.50 per cent will encourage investments, Finance Minister Pranab Mukherjee said on Tuesday, while assuring the government will also take additional steps to boost growth and control price rise.
• “The growth, which has weakened in past months, should now improve,and The monetary policy announcements should help in investment revival and contribute to strengthening of business sentiments. In the coming weeks we will take some additional steps to further reinforce focus on growth,”
• In its annual monetary policy statement for 2012-13, RBI, after a gap of three years, cut interest rate by 0.50 per cent making credit cheaper.
• After clocking over 8 per cent economic growth for two years, India’s GDP expansion is estimated to have declined to 3-year low of 6.9 per cent in 2011-12 on account of high cost of borrowing that slowed investments.
• RBI had hiked policy rates 13 times between March 2010 and October 2011 to control persistently high inflation.
• It has projected the GDP growth for this fiscal at 7.3 per cent, which is lower than the government estimates of 7.6 per cent for the period.
• Mr. Mukherjee said moderation of core inflation rate for four months in a row, coupled with the sharper decline in inflation for manufactured products from 7.6 per cent in December to 4.87 per cent in March, has facilitated the change in monetary policy stance.
• “However food and primary inflation has shown signs of hardening. This is a cause for some concern. We intent to continuously monitor the situation and take the required steps to manage the short term supply constraint for those food items which contribute inflation,” he said. The government will do everything possible to maintain price stability.                                         RBI cuts lending rate, loans to become cheaper .
• After a gap of three years, Reserve Bank Governor D. Subbarao on Tuesday slashed short term lending rate by 0.50 per cent to 8 per cent, a move that will reduce the cost of home, auto and corporate loans.
• The reduction in the repo rate at which RBI lends to banks, has been prompted by deceleration in growth and softening of inflation.
• The cut is aimed at spurring growth to 9 per cent levels, seen before the global financial crisis that began in 2008, Mr. Subbarao said while unveiling the annual credit policy in Mumbai.
• “The reduction in the repo rate is based on an assessment of growth having slowed below its post-crisis trend rate, which, in turn, is contributing to the moderation in core inflation,” the Governor said.
• RBI has pegged the GDP growth rate for 2012-13 at 7.3 per cent. It is expected to be 6.9 per cent in 2011-12.
• After two consecutive cuts since January, the Governor, however, retained the cash reserve ratio at 4.75 per cent.
• Mr. Subbarao, however, ruled out further reduction in policy rate in the immediate future citing persistent upside risks to inflation and possible fiscal slippages driven by higher oil subsidies. It expects the inflation to be around 6.5 per cent by March 2013.
• “It must be emphasised that the deviation of growth from trend is modest. At the same time, upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates,” he said.
• The decision is likely to prompt the banks to cut lending rates for home, auto and corporate loans, experts said.
• The RBI has raised lending rates 13 times between March 2010 and October 2011 to contain inflation that had been hovering near double-digit.
• This had led to clamour by industry to cut rates and spur industrial and economic growth that has slowed down considerably during the past few quarters.
• In order to ease tight liquidity situation, Mr. Subbarao announced doubling the borrowing under the Marginal Standing Facility for banks to 2 per cent of their deposits with immediate effect. It also permitted banks to borrow under the MSF even if they have excess government securities holdings.
• On the growth front, RBI expects FY’13 to be moderately better than the fiscal gone by. It has pegged GDP growth at 7.3 per cent, which is 0.3 per cent lower than the government projection for 2012-13. Growth in 2011-12 is seen at a 3-year low of 6.9 per cent.
• Even though spurring growth has taken the priority at the Mint Road, the RBI continues to be worried about the inflation scenario, calling it as “challenging” due to the sharp spikes in crude prices and food articles in the recent months.
• Noting the moderation in manufacturing inflation, the Governor pegged the annual overall inflation target at 6.5 per cent for FY’13 (which is 0.5 per cent lower than its projection for FY’12), saying the price rise will be range-bound through the year.
• Inflation was the key driver that guided the Reserve Bank to tighten money supply, and later hold rates during the past 36 months.
• The period also saw it inflicting 13 simultaneous hikes, by 3.75 per cent in repo rates over the 19-month period, making it one of the most aggressive central banks in the world.
• Apart from hurting investment activity, the rate hikes severely hurt the retail borrowers as higher loan repayments put household budgets for a toss.
• The RBI made a conscious effort at placating this class by reiterating that banks should not charge prepayment penalties from home loan borrowers. It also announced to set up a working group to assess the possibility of having long-term fixed interest products which will not be exposed to interest rate changes.                                                                           Sensex spurts 222 points after RBI rate cut.  
• The BSE benchmark Sensex spurted by over 222 points in late morning trade on Tuesday after the Reserve Bank cut short-term lending rate to support the economic growth.
• The 30-share index spurted by 222.33 points to trade at 17,373.28 soon after the RBI announced cut in short-term lending rate, repo rate, by 0.50 percentage point.
• Similarly, the National Stock Exchange Nifty index shot up by 67.20 points to 5,293.40 points.
• The upsurge was mostly lead by interest rate sensitive stocks such as banking, realty and auto.
• Realty major DLF was trading higher by 1.55 per cent at Rs. 202.60, while banking behemoth SBI gained 1.58 per cent to trade at Rs. 2,301.10.
• Private lender ICICI Bank rose by 1.13 per cent to Rs. 883.30.
• Among the sectoral indices, the BSE realty index gained the most jumping by 1.67 per cent to 1,811.25 points.                                                                                                                         RBI wants Govt to hike prices of petroleum products.                  
•  Making a case for raising prices of diesel, kerosene and LPG, the Reserve Bank on Tuesday said hike in rates of petroleum products is necessary to arrest fiscal slippages.
• “Overall from the perspective of vulnerabilities emerging from the fiscal and current account deficits, it is imperative for macroeconomic stability that administered prices of petroleum products are increased to reflect their true costs of production,” RBI Governor D. Subbarao said in the Annual Monetary Policy Statement for 2012-13.
• While petrol prices are market-linked, the government fixes the rates of LPG, kerosene and diesel, which results in a large budgetary expenditure on subsidies.
• Global crude oil prices have surged since the beginning of 2012 on account of geo-political concerns in the Middle East and abundant global liquidity. The price of Brent crude rose to USD 120 a barrel in mid-April from $111 in January.
• RBI said the Budget estimate of oil subsidy is likely to fall “significantly short of the required amount“.
• High subsidies are putting pressure on the country’s fiscal deficit, which touched 5.9 per cent of GDP last fiscal and is pegged at 5.1 per cent in 2012--13. India imports about 80 per cent of its crude oil requirement.
• The government targets to bring down the subsidy bill to below 2 per cent of GDP this fiscal and 1.75 per cent in the subsequent years. Government has made a provision of Rs 40,000 crore towards fuel subsidy for 2012-13.
• “...Several upside risks to the budgeted fiscal deficit remain. Containment of non-plan expenditure within budget estimates for 2012-13 is contingent upon the government’s ability to adhere to its commitment of capping subsidies,” Dr. Subbarao said.
• Dr. Subbarao said any slippage in fiscal deficit would have implications for inflation. “Upside risks to inflation persist. These considerations inherently limit the space for further reduction in policy rates,” he said.
• Persistent demand pressure emerging from inadequate steps to contain subsidies, as indicated in the recent Union Budget, will further reduce the space for rate cut, he added.
• Fuelled by gold demand, crude oil prices and decelerating growth in emerging economies, India’s current account deficit (CAD), widened to 4 per cent of GDP in April-December 2011, up from 3.3 per cent a year ago.
• CAD is the difference between inflow and outflow of foreign exchange into the country.
• In its Macroeconomic and Monetary Developments in 2011-12 report, the RBI had on Monday said, “The policy design to achieve macro-objectives hinges on deregulation and the upward adjustment of oil prices by letting the demand effects work towards diminishing fiscal and external risks”.                                                                                                                            Tax issue: Vodafone issues notice to Centre.   
•  Vodafone on Tuesday threatened to drag the government to international arbitration over retrospective tax legislation under the bilateral investment treaty (BIT) between India and the Netherlands.
• Dutch subsidiary Vodafone International Holdings BV (VIHBV) on Tuesday severed a notice of dispute on the Indian government regarding proposals in the Finance Bill 2012 which it claimed violated the international legal protections granted Vodafone and other international investors in India.
• In a regulatory filing to the London Stock Exchange, Vodafone has asked the Indian government to abandon or suitably amend the retrospective aspects of the proposed legislation as Vodafone would prefer to reach an amicable solution to this matter.
• “However, if the Indian government is not willing to do so, Vodafone will take whatever steps are necessary to protect its shareholders’ interest, including investment treaty arbitration proceedings under the BIT against the Indian government,” the company said.
• In the Budget, the government announced a proposal to amend the Income Tax Act to bring overseas deals such as Vodafone’s purchase of Hutchison under tax net after the Supreme Court held that the UK firm was not liable to pay the Rs 11,000 crore in taxes.
• This is sought to be done through a retrospective amendment to the Income Tax Act which gives authorities powers to reopens cases as far back as 1962 under the Finance Bill 2012.The Vodafone statement said that the dispute arose from the retrospective tax legislation proposal which, if enacted, would have serious consequences for a wide range of Indian and international businesses, as well as direct and negative consequences for Vodafone.
• It said the proposed legislation would also countermand the verdict of the Supreme Court in January 2012, which ruled that Vodafone had no liability to account for withholding tax on its acquisition of indirect interests in Hutchison Essar Limited in 2007.
• Under the BIT, Vodafone said the Indian government is obliged among other things to accord fair and equitable treatment to investors, provide full protection and security, not breach the legitimate expectations of investors in making investments, not deny justice or breach previously provided assurances and not take steps to indirectly expropriate the investment.
• The statement said Vodafone believes that the retrospective tax proposal amount to a denial of justice and a breach of the Indian government’s obligation under the BIT to accord fair and equitable treatment to investors.                                                                                             ‘Adarsh land belongs to govt., not Army’ ,Court says.  
•  In a huge relief to the Maharashtra government, the judicial commission of inquiry looking into the Adarsh housing scam has held that the land on which the controversial building stands belongs to the State and not the Army.
• The two-member panel, which had submitted its interim report to the government last Friday, has also held that the building was not reserved for war heroes and Kargil widows.
• The interim report was discussed by the Maharashtra Cabinet on Tuesday, sources close to the development said, adding it is likely to be tabled in the legislature later in the day.
• The commission headed by former Bombay High Court judge J.A. Patil includes former State Chief Secretary P. Subramanian.
• The report, according to sources, has thrown light on the issues of ownership of the land on which the 31-storey high-rise stands in upscale Colaba, and if it was reserved for war heroes and Kargil widows.
• The allegations in the case are that the land was allotted by the State government to the Adarsh Society though it belonged to the Defence Ministry, and the building came up in violation of several civic and environmental norms.
• The State government had approached the commission a few months ago seeking an interim report on the points of title and reservation.
• The Maharashtra government had appointed the two-member panel to probe the Adarsh Society scam in January 2011.
• The panel has been tasked with probing all aspects of the scam, including ownership of the land and allotment, as well as alleged violations of rules in grant of various clearances to the building. The commission is also looking into violation of coastal zone regulations.
• A number of top civil and army officials and politicians, including former chief Minister Ashok Chavan, are alleged to have facilitated clearances for the building and got flats in it as quid pro quo.
• Nine of the 14 accused, including two senior IAS officers, have been arrested for their alleged involvement in the scam.                                                                                                  Upgraded Aakash tablet to be launched next month: Sibal.     
• A faster and enhanced version of low-cost tablet PC, Aakash, would be launched next month, Telecom Minister Kapil Sibal said on Tuesday.The second version of Aakash will be launched in May,” Mr. Sibal told reporters on the sidelines of World IT forum 2012 in New Delhi.
• The tablet will be produced domestically, and in this regard the government is talking to various manufacturers from across the world.After freezing the technology, we will start manufacturing it. We are calling people from across the world to manufacture it and some people have shown interest,” Mr. Sibal said.
• The new tablet would have a better 3200m AH battery with a three-hour backup, a 700 MHz Cortex A8 processor and a capacitive touch screen which would get over the earlier issues observed in the tablets, Mr. Sibal had said earlier.
• Recently, Datawind, the maker of Aakash, and Quad Electronics, which is the contract manufacturer of the tablet, have been trading charges against each other.Quad has said it has not been paid for its work by the tablet maker alleging the letter of credit issued by Datawind was dishonoured and it has not received any payment for its work.
• However, Datawind has been claiming that all the payments that was due to Quad have been cleared, except for the 600 units that remain unpaid by IIT-Rajasthan.
• Opinion  :-Three Cheers to Parliament
•                   Give The Professor a Raise