The Reserve Bank of India (RBI) should look at eventually reversing the expansionary policy pursued in the wake of the global economic crisis, Governor Duvvuri Subbarao said on Saturday.
"All of you would agree around the world also there is concern, there is attention being paid to reverse these expansionary policies," Subbarao told students at a banking institute. "In the Reserve Bank of India, we will be looking at reversing the expansionary policy at an appropriate time."
Subbarao did not say how or when the policy will be reversed but said he will not do it right now or in the near future.
In its efforts to stimulate the economy, the RBI has cut its key lending rate by 425 basis points to 4.75 percent since the collapse of Lehman Brothers last year. The rate at which it absorbs surplus cash from the banking system has been cut by 275 basis points to 3.25 percent.
As well, it has cut the ratio of cash that banks must deposit with the central bank to 5 percent from 9 percent in the middle of last year.
Subbarao said the stimulus measures of both the government and the central bank have worked to some extent. "Certainly we are seeing our own versions of green shoots in certain sectors like cement, steel and coal," he said.
He also said growth in vehicle sales as well as a pick up in rail freight traffic were encouraging. "But as I said, this is not a complete picture and there are a number of sectors of the economy which have to see a significant revival," he said.
In April, the RBI said it expected Asia's third largest economy to expand by about 6 percent in the fiscal year 2009/10 ending in March, below last fiscal year's 6.7 percent.
Many private sector economists forecast growth of between 5.8 to 7.2 percent. The head of prime minister's economic advisory council predicted on Saturday that growth would match at least last year's level.
Subbarao said although the wholesale price index fell in the first week of June, food and primary articles inflation was significant. Consumer price index inflation was 9 percent, he said.
The governor said the central bank looked at a number of variables of inflation including an assessment of inflationary expectations to formulate its policy.
India's wholesale price index fell 1.61 percent in the 12 months to June 6, compared with the previous week's annual rise of 0.13 percent, government data showed on Thursday. The fall was the first in at least three decades.
"There are definite trends coming through although the headline index is negative ... Oil prices are firming up and commodity prices are increasing around the world. Food production is below the trend level," Subbarao said.
Subbarao declined to comment on whether he expected the government to increase the borrowing programme at its final budget to be unveiled on July 6.
The government has stepped up the pace of its borrowing in recent weeks. It is scheduled to borrow 150 billion rupees via bonds next week compared with 120 billion indicated in the auction calendar. This will be the sixth straight week where the government will be borrowing 25 percent more than originally scheduled.
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Portugal winger Cristiano Ronaldo, who is set to leave Manchester United for Real Madrid in a world record transfer, said he wanted to quit the Old Trafford club 12 months ago.
"After we won the European Cup (in 2008) I thought there is no more I can achieve here," Ronaldo told Sunday's News of the World in an interview. "When you have done all you can, you know it is time for a new challenge.
"I stayed one more season and it was nice to make it three (Premier League) titles in a row but it was my dream to play for Madrid."
Earlier this month, United accepted a record bid of 80 million pounds ($130.9 million) for Ronaldo, who is sorting out personal terms with Real.
"Of course I have not gone for the money," he said.
"To go down as the greatest, it will take lots of work but that is my target. If you go down as the greatest at Madrid it means you are one of the greatest of all time."
United beat Chelsea on penalties to win the 2008 Champions League in Moscow but lost 2-0 to Barcelona in last season's final in Rome.
Our Indians' Money - 70,00,000 Crores Rupees In Swiss Bank
1) Yes, 70 lakhs crores rupees of India are lying in Switzerland banks. This is the highest amount lying outside any country, from amongst 180 countries of the world, as if India is the champion of Black Money.
2) German Government has officially written to Indian Government that they (German Government) are willing to inform the details of holders of 70 lakh crore rupees in their Banks, if Indian Government officially asks them.
3) On 22-5-08, this news has already been published in The Times of India and other Newspapers based on German Government's official letter to Indian Government.
4) But the Indian Government has not sent any official enquiry to Germany for details of money which has been sent outside India between 1947 to 2008. The opposition party is also equally not interested in doing so because most of the amount is owned by politicians and it is every Indian's money.
5) This money belongs to our country. From these funds we can repay 13 times of our country's foreign debt. The interest alone can take care of the Centre's yearly budget. People need not pay any taxes and we can pay Rs. 1 lakh to each of 45 crore poor families.
6) Let us imagine, if Swiss Bank is holding Rs. 70 lakh crores, then how much money is lying in other 69 Banks? How much they have deprived the Indian people? Just think, if the Account holder dies, the bank becomes the owner of the funds in his account.
7) Are these people totally ignorant about the philosophy of Karma? What will this ill-gotten wealth do to them and their families when they own/use such money, generated out of corruption and exploitation?
8) Indian people have read and have known about these facts. But the helpless people have neither time nor inclination to do anything in the matter. This is like "a new freedom struggle" and we will have to fight this.
9) This money is the result of our sweat and blood. The wealth generated and earned after putting in lots of mental and physical efforts by Indian people must be brought back to our country.
10) As a service to our motherland and you contribution to this struggle, please circulate at least 10 copies of this note amongst your friends and relatives and convert it into a mass movement.
Share prices of Indian companies seem to get a boost from the amount of FII money being pumped in. An extensive research done recently by CNI Research Ltd, a BSE (^BSESN : 11403.25 0
Scrips of 44% companies where FII raised stakes showed a significant rise, compared to 29% where their holding was below 5% and 23% where their holding was above 5% after selling.
The study was conducted when the stock markets were on a continuous downward spiral for the entire fourth quarter after the fantastic rally in December 2008. Of the 394 companies studied, FIIs' stake dropped below 5% in 121 while 164 companies saw FIIs selling but the holding was still above 5%, and in 109 companies FIIs increased their stake.
"This study should act as precursor for investors to decide on stocks they should be investing in. Share prices of companies in which FIIs were raising stakes have a greater probability of seeing a rise as against others. The drop in scrips of 56% of the companies where FII stake went up was purely on account of period discrimination. The market trend reversal started from March 17, and the effect of the buying in these companies was not reflected in the share prices due to lesser timespan," said CNI Research CMD Kishor P Ostwal.
The analysis also suggests that the prices have shown a downward trend in companies in which FII holdings have dropped. The drop is 71% in cases where the FII holding has come down below 5% and 77% in cases which saw selling but the holding was above 5%.
"The former represents a safe zone for investors as there is very little left with FIIs for selling and hence the price reversal will be sharp and very soon. This will help investors interested in bottom fishing", Ostwal added.
The only segment which poses a high risk is where FII holding is still above 5%. While this may not hold true if the market itself goes up substantially, but if for any reason there is a trend reversal and the markets start correcting, this segment faces the maximum risk as any negative outlook could mean fresh FII selling to generate cash, he said.
Thus, the study concludes that investors in companies which are in strong sectors and with visible growth, and those which have seen a steady rise in FIIs holding, should go all out. The bottom fishing should be done in the category where FIIs holding is below 5% or almost nil, eg. Century Textiles, Bombay Dyeing, CCL Products all these stocks have shown marked recovery from its low prices on FII selling.