Finance Fact and Gk

 

Headline inflation surges in March; rate hike seen  15 april

NEW DELHI (Reuters) - The headline inflation surged to nearly 9 percent in March, far above forecasts, on higher fuel and manufacturing prices, adding pressure on the Reserve Bank of India (RBI) to take bolder action despite raising interest rates eight times since March 2010.

The RBI had widely been expected to raise policy rates by another 25 basis points at its next review on May 3, but analysts said Friday's inflation figure and a steep upward revision of the January reading add to the case for a 50 basis point increase.

"The market was shocked to see this number and it's showing an increase across the board. The chances of a more aggressive policy action have increased," said Manish Wadhawan, director and head of rates at HSBC India.

The wholesale price index, the country's main inflation gauge, rose 8.98 percent from a year earlier, above the median forecast for an 8.36 percent rise in a Reuters' poll and higher than the annual rise of 8.31 percent in February.

The March reading was above the central bank's projection of 8 percent for the final month of the last fiscal year.

"With inflation numbers of this magnitude, especially core inflation, RBI may feel compelled to be a bit more aggressive next time around and move by 50 bps," wrote Credit Suisse economist Devika Mehndiratta.

Still, with economic growth moderating and the central bank's oft-stated preference for a "calibrated" approach to tightening policy, economists and traders still mostly expect another 25 basis point rise at the next review.

The 10-year bond yield rose 8 basis points (bps) on the day to 8.01 percent after the data, while the 1-year swap rate climbed as much as 19 bps to 7.70 percent. The 5-year swap rate moved up 12 bps on the day to 8.21 percent.

The 30-share BSE index extended its fall to 1.5 percent from 1 percent before the data. The partially convertible rupee weakened marginally to 44.53 per dollar from 44.51 just before the figures were released

UPWARD REVISION

In a worrying sign that monthly data may be understating price pressures, January's reading was revised sharply higher to 9.35 percent from 8.23 percent earlier, and traders said the March reading could eventually be adjusted upwards into double-digits.

"It seems that inflation trajectory has changed. The expected decline in inflation is just not happening and looks like we have underestimated the underlying pressure on prices," said Ashutosh Datar, an economist at IIFL in Mumbai.

"More monetary tightening is inevitable after today's data and the case for a 50 basis point hike in May is strengthened," he said.

The food price index rose an annual 9.47 percent in March, compared with a reading of 10.65 percent in the previous month, while the fuel price index rose an annual 12.92 percent from 11.49 percent in February.

Manufacturing inflation quickened to 6.21 percent in March, its highest since April 2010, compared with 4.94 percent recorded in the prior month.

Central banks across Asia are grappling with quickening inflation, even as high oil prices threaten to slow global economic growth.

Singapore tightened monetary policy on Thursday, while South Korea 's central bank revised its 2011 inflation forecast upward on Wednesday, after keeping interest rates steady.

Analysts expect China will again raise reserves requirements for banks and hike interest rates to put a lid on consumer prices after its inflation jumped to a 32-month high.

In India, manufacturing output, which makes up 80 percent of industrial production, grew an annual 3.5 percent during February, compared with 16 percent a year ago.

Several analysts have cut their India growth forecasts for the fiscal year that started this month, citing the risks from inflation, especially as rising global oil and commodity prices begin to hit the manufacturing sector. The economy is esxpected to have grown 8.6 percent in the year that ended in March.

Prime Minister Manmohan Singh's government, which faces potential erosion of support during ongoing state elections this month over various corruption scandals and rising prices, may have to live with high-level of inflation in coming months

FATF - financial action task force
is an inter-governmental body set up by the Group of Seven (G-7) nations for creating global policies and framework to combat moneylaundering and terror-financing. India became its 34th member last June. 

The year on year performance of the 12 major ports of the country has registered a mere 1.57% growth, according to data available with Indian Port Association (IPA), the umbrella organization representing the major ports.  


India has completed negotiations of ten new Tax Information Exchange Agreements with Bahamas, Bermuda, British Virgin Islands, Isle of Man, Cayman Islands, Jersey, Monaco, Saint Kitts & Nevis, Argentina and Marshall Islands out of 22 identified jurisdictions to facilitate greater exchange of information. These agreements became possible after the G-20, which took up issue of tax havens and tax evasion, threatened actions against such jurisdictions.  

There are currently 34 foreign banks operating in India as branches. Their balance sheet assets accounted for about 7.65 % of the total assets of the scheduled commercial banks as on March 31, 2010.  

ICICI and HDFC bank now do business as foreign bank.


The union cabinet will soon take up for discussion a proposal to create the Financial Sector Legislative Reforms Commission, or FSLRC, to rewrite and clean up the financial sector laws of the country.Several expert panels appointed by the government in the past on financial sector regulation, including the Raghuram Rajan Committee, the Percy Mistry Committee and the UK Sinha Committee, had emphasised on the need to rewrite India’s financial sector laws to bring them in line with the FSLRC will be headed by former Supreme Court judge, Justice BN Srikrishna. In
a paper published by the environment ministry, physicist and former chairman of the Indian Space Research Organisation, UR Rao, has argued that decreasing cosmic ray activity, a natural phenomenon, was contributing to global warming, much higher than adjudged by the
Intergovernmental Panel Climate Change (IPCC). The paper is part of Indian Network of Climate Change Assessment discussion that takes on the conventional position that it is human activity which primarily causes global warming. current needs.  

• Panel to rework Factories Act in a step towards labour reforms
• Prime
  minister Manmohan Singh has set up an expert panel to rework the
  archaic Factories Act of 1948, giving a big push to labour reforms to
  ensure the safety of workers.
• The
  committee led by Planning Commission member Narendra Jadhav has chief
  economic advisor Kaushik Basu as a member. The panel will submit its
  recommendations within the next four weeks.
• The
  Act defines factory as any premise where 10 or more workers are working
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• In addition, it lays down the following criteria:
• A factory that has more than 100 employees needs to take govt nod to sack any employee
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• No work period can exceed 5 hours without a break of at least 30 minutes
• No factory can be overcrowded to an extent injurious to the health of the workers
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• Factories with more than 30 women need to have a room for the use of children aged under 6