P Chidambaram: Architect of ‘Dream Budget’ is back

Palaniappan Chidambaram will move out of ‘Home’ and take over as the Finance Minister. This would be his third stint as Finance Minister. He first held the position in 1996 in the United Front government and later became finance minister in the United Progressive Alliance (UPA) government in 2004, led by Manmohan Singh. Power minister Sushil Kumar Shinde will replace Chidambaram as Home Minister. This reshuffle takes place in the wake of earlier Finance Minister Pranab Mukherjee moving to Rashtrapati Bhavan as the President. Earlier, he served as Finance Minister of India from May 2004 to November 2008. After the resignation of Shivraj Patil,in the wake of the Mumbai terror attacks in November, 2008, Chidambaram was made the Home Affairs Minister. He was a union leader for MRF and worked his way up in the Congress party.

Perhaps he may have some solutions for the union problems faced in the northern part of India. Chidambaram was first elected to the Lok Sabha (Lower House) of the Indian Parliament from the Sivaganga constituency of Tamil Nadu in general elections held in 1984. He was re-elected from the same constituency in the general elections of 1989, 1991, 1996, 1998, 2004 and 2009. He was the Tamil Nadu Youth Congress president and then the general secretary of the (TNPCC) Tamil Nadu Pradesh Congress Committee unit. He was inducted into the Union (Indian federal) Council of Ministers in the government headed by Prime Minister Rajiv Gandhi on 21 September 1985 as a Deputy Minister in the Ministry of Commerce and then in the Ministry of Personnel. His main actions during his tenure in this period was to control the price of tea.

He has been criticized by the Government of Sri Lanka for destroying the Sri Lankan tea trade by fixing the prices of the commodity in India using state power. He was elevated to the rank of Minister of State in the Ministry of Personnel, Public Grievances and Pensions in January 1986. In October of the same year, he was appointed to the Ministry of Home Affairs as Minister of State for Internal Security. He continued to hold both offices until general elections were called in 1989. The Indian National Congress government was defeated in the general elections of 1989...Read More

RBI maintains status quo on key rates…Cuts SLR to 23%

The Reserve Bank of India (RBI) on Tuesday at its First Quarter Review of Monetary Policy Statement 2012-13 maintained status quo on its key lending rates, keeping them unchanged, as it chooses to rein in inflation over growth. However, the apex bank has cut Statutory Lending Ratio (SLR) to 23% from 24% earlier. The RBI has reduced the SLR of scheduled commercial banks to 23% from 24% of their net demand and time liabilities (NDTL) with effect from the fortnight beginning August 11, 2012, the bank said. On the basis of an assessment of the current macroeconomic situation, the RBI has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8%. The CRR of scheduled banks has been left unchanged at 4.75% of their NDTL.

Consequently, the reverse repo rate under the LAF will remain unchanged at 7%, and the marginal standing facility (MSF) rate and the Bank Rate at 9%. Since the Monetary Policy Statement for 2012-13 in April 2012, macroeconomic conditions have deteriorated, the central bank said in a statement. Upside risks to inflation have increased as the first two months of the crucial four-month long monsoon season have been deficient in rainfall. This is making it difficult for the RBI to take any action. While India’s headline inflation stood at ~7.3% in June, food inflation, which is at more risk due to the deficient rains, were 10.8% in June. The deficient and uneven monsoon performance so far will have an adverse impact on food inflation, the RBI said. Although the headline inflation did cool in June, it is still above the RBI’s comfort level of 5%.

Against this backdrop of heightened global uncertainty and domestic macroeconomic pressures, the challenge for monetary policy is to maintain its priority of containing inflation and lowering inflation expectations, the RBI said in a statement. The central bank has also raised its FY13 inflation forecast to 7% from 6.5% earlier. Lowering policy rates right now will aggravate inflation, the RBI said. The RBI has changed FY13 GDP forecast to 6.5% from 7.3%. Reflecting the lagged impact of weak industrial activity and global slowdown, the services sector growth is also expected to slow down, the RBI said. In April, the RBI had cut key interest rates by 50 basis points as inflation seemed to be getting into control and the country’s growth was badly hit. However, at that time, the RBI had clearly stated that any further rate cut would entirely depend on inflation rate. As the multiple constraints to growth are addressed, the RBI will stand ready to act appropriately. Meanwhile, managing liquidity within the comfort zone remains an objective and the Reserve Bank will respond to liquidity pressures, including by way of Open Market Operations (OMOs), the central bank said. The next RBI Mid-Quarter Review of Monetary Policy for 2012-13 is scheduled for September 17, 2012.

First Quarter Review of Monetary Policy Statement 2012-13

CII's comments on recurrence of Grid failure across India

With one of the biggest power outages in the history of the world, almost half of India has been forced to go about their regular affairs without electricity supply for a significant part of the day today. This is a telling commentary on the situation of the power sector in the country. Losses to business have been in thousands of crores, which pales into insignificance when compared to the difficulty that the people of the country have had to face. Repeated occurrences of Grid failures carry a very negative image of India, when already sentiments about the country are low on account of the current economic situation and related developments. As one of the emerging economies of the world, which is home to almost a sixth of the world population, it is imperative that our basic infrastructure requirements are in keeping with India’s aspirations. The developments of yesterday and today have created a huge dent in the country’s reputation that is most unfortunate.

Coming on the heels of yesterday’s grid failure, today’s recurrence which impacted the Eastern region as well, drives home the point that the underlying issues behind the widening Demand–Supply gap for Electricity needs to be urgently addressed, said Mr Chandrajit Banerjee, Director General, CII. CII has consistently been highlighting that urgent steps need to be taken for addressing key issues ailing the Power sector, such as improving the supply of coal for thermal power plants, rationalizing tariffs and reforming the state distribution utilities. This should be seen as an opportunity for addressing these issues on priority said Mr Chandrajit Banerjee.

Northern Grid fails...Power supply affected in Northern states

PM resolves major land transfer bottleneck

The Prime Minister approved relaxations in the land transfer policy of the government for government owned lands so that infrastructure projects are not held up because of procedural delays. Early last year, a ban had been imposed on all transfer of government owned lands to any entity except in cases where land was to be transferred from one government department to another. In the meanwhile, the Department of Economic Affairs was to prepare a comprehensive land transfer policy for government owned land.

In case any department had to implement a project which required alienation of land either through lease, license or rent, it had to seek specific approval of the Cabinet. This was leading to long delays in awarding concessions for infrastructure projects, particularly PPP projects. All PPP infrastructure projects - roads, railways, ports, civil aviation and metros - have some element of land alienation as the project is often built on government owned land. The government continues to own the land which is leased or licensed out. Requiring Cabinet approval for each PPP project meant adding a few months to complete the processes for securing Cabinet approval.

The Prime Minister has now relaxed the ban for certain categories of projects by allowing land alienation for:

• All cases of land transfer from Ministries to statutory authorities or PSUs will be allowed, subject to the requirements of normal Government of India Rules;
• All cases of land transfer on lease or rent or license to a concessionaire which have been appraised through the PPPAC (Public Private Partnership Approval Committee) route and approved by the Finance Minister or by the Ministers concerned or by the Cabinet, as the case may be, depending upon the value of the project; and
• Development and use of railway land by Rail Land Development Authority (RLDA) as per provisions of Railways Amendment Act, 2005 and the Rules framed thereunder and in accordance with the prevalent policies and guidelines of the Railway Ministry and the Government.

This would speed up the award of PPP projects from this month onwards significantly.

Deficient Monsoon a major Concern: CII

Click below for the India Infoline Weekly Newsletter:
http://content.indiainfoline.com/Newsletter/wkly732.html

Read Leader Speak:
http://www.indiainfoline.com/Research/LeaderSpeak/

All the news on India Infoline:
http://www.indiainfoline.com/Markets/News/

To subscribe please send a mail to editor@indiainfoline.com