China Currency Bill passed by the US Senate

US has been voicing its concern for a long time over the way China has been using unfair means and manipulating its currency to the disadvantage of US businesses. It is said that the Chinese businesses have a 30% pricing edge over their US competitors due to the low yuan.

US lawmakers have reacted to this by proposing a bill that will allow them to punish Beijing for the manipulation.

The US Senate voted 63-35 passed the legislation to punish Beijing's currency manipulation that is often blamed in that country for the high rate of unemployment. Those against the bill have voiced their concern that the bill could go against the provisions of World Trade Organization. However, nobody has disputed the fact that the way China keeps its yuan low is unfair.

The bill needs to be passed in the House of Representatives before going to the US President.

Experts believe that if cleared the bill will trigger a large-scale trade war that will have large-scale consequences, especially in the economically troubled US and Europe.

Cabinet clears new mining bill

The Union Cabinet has today approved a new bill for mining in the country, in which the miners will have to share 26% of their profits.

The new bill which will have be presented in parliament for its approval, proposes that the coal companies must share 26% of their profits with the local folks. Other mining companies will have to share an amount equal to their royalties.

The proposal will help local communities implement ambitious development plans which could change the face of rural India like never done before, that is if the government can come up with an effective anti-corruption bill.

Rupee declines against the US Dollar

Trading currently at Rs 49.76 per dollar, the rupee has declined significantly over the recent months to its 28 month low.

RBI Governor D. Subbarao has said that the movement of the rupee has nothing to do with fundamentals the Indian economy. He added that the rupee declined due to the fall in confidence in the global markets. He said that the Reserve Bank of India will intervene only there is volatility or potential disruption to macroeconomic situation.

Rural and urban poverty lines - 781 and 965 respectively

A rural person needs Rs 765 per month while his urban counterpart requires Rs. 965 per month to live.

An affidavit to this effect was filed by Planning Commission in the Supreme Court in which it defined the poverty line at June 2011 price levels. It has said... the poverty line at June 2011 price level can be placed provisionally at Rs 965 per capita per month in urban areas and Rs.781 per capita per month in rural areas.

The affidavit by Planning Commission was filed in response to an order by a division bench of the Supreme Court requiring it to revise the norms of per capita amount looking at the price index of May 2011 or any subsequent dates.

Ban on Onion Export Lifted

The government of India, on 20-Sept-2011 bowed down before the protesting farmers in Maharashtra and lifted the ban that it had imposed on the export of onions.

The ban had been imposed on 9-Sept-2011 in a move to help curb the soaring prices of onions in the Indian market. The move faced stiff resistance from the farmers in Nashik and neighboring regions of Maharashtra.

The political impact of the roll-back on the already fragile credibility of the UPA-government is another issue, but on the economic front experts believe that the prices of onion could head north-ward in the immediate future, adding to the common man's inflationary worries.

Impact of Credit

Even as stock markets in India began giving indications of stabilization, IMF has bowled another googly.

IMF has raised an alarm over the debt situation in Europe and lowered growth projections for the 17-nation Eurozone to 1.6% in 2011 and 1.1% in 2012, from its earlier predictions.

The old saying in India - चितनी चादर उतना पैर पसारो (spread your feet depending on the amount of space available), in other words spend only what you can afford.  Taking loan to buy luxuries is the sure-shot recipe for disaster. US has experienced it, now the Europe is going through the same experience.

Excessive loan leads to non-repayment - causing either the borrower or the lender to suffer.

We can only hope that the Indian government takes note and exercises caution with its policy of targeting growth on borrowed money.

RBI hikes interest rates - Will it fight corruption

The "most popular inflation" control mechanism of the Government of India has been deployed once again. The decision of the 12th successive rate hike was announced by RBI on Friday 16-Sept-2011.

In line with common expectation - RBI has announced an interest rate hike of 0.25% (25 basis points). After today's rate hike the repo rate has become 8.25% while the reverse repo rate has become 7.25%.

Lets hope this works, because the government has lost a lot of credibility in recent times on several fronts including - combating corruption, good governance and internal security. If inflation does not come down quickly, it faces the risk of losing public sympathy even on the financial front.

Financial stability of the common has been compromised drastically in the past few months. The government can give as many excuses as it wants, but the common man is seriously and directly effected by inflation and the failure of the government (even if for reasons beyond its control) could easily effect the vote appeal of the ruling coalition in the forthcoming elections.

Fuel for inflation - Petrol becomes dearer

Adding to the woes of the common people, the price of petrol has been raised by more than Rs. 3 per liter from today - 16-Sept-2011.

The common man is surely in for a big financial beating for the forthcoming festival season, because this increase in fuel cost will ensure that the prices of other commodities also head northward.

Let us see what rest of the day has in store...

RBI is expected to announce a interest rate hike.
eGOM is expected to announce a hike in LPG prices.

Inflation on the rise - is interest hike the proper tool to tackle it

Inflation in India refuses to let go. The wholesale price index for the month of August rose 9.78% compared 9.22% for the previous month.

The measures taken by the government to curb the rising prices do not seem to be working. Reserve Bank of India (RBI) has raised interest rates 11 times in 18 months and the current rise in inflation is pointing to one more interest hike in the coming days. So much so, Indian Industry has begun to show signs of suffering from the effect of the interest rate hikes.

Some experts argue that the route of interest hike by RBI is not working because possibly liquidity if not the cause of this inflation.

Here are some  reasons that have come forward in our discussions...

• a rise in the trend of unfair trade practices used to secure disproportionate and unreasonably high levels of profit.
  • The issue is more than evident in the pharmaceutical industry where medicines that leave the factory for Rs. 2 to 3 carry the MRP tag of more than Rs. 30-40.
  • Simple nuts and bolts for bikes and cars that manufacture for a few paise are sold to the consumers for fabulous prices.
  Where are the days when a decent profit of 10% to 15% was considered adequate? Can this not be controlled or should this not be controlled?
• improper implementation of government policies and schemes... There is a clear lack of coordination between different government departments and the way the departments work within themselves.
  for eg -
  • The government announces a ban to export of onion and the agriculture minister goes public that he is not party to the decision.
  • Foodgrains are rotting kept in the open - the government does not have enough capacity to store them properly, yet people are hungry - even the Supreme Court has voiced its opinion in this matter.
• oversupply leads to inflation - The quantity of medicines that expire is increasing year-on-year, because some of the manufacturers seem to think that they can produce the entire spectrum and conquer the entire market. This is just not possible - so what happens - the medicines expire on the shelves within the distribution chain at the cost of the manufacturer. The manufacturer is forced to compensate for the loss incurred in this by increasing the prices of the regularly selling products - that's inflation.
• Crude used to be available in the range of 20-30 dollars for a long time - surely the cost of extracting crude from mother earth has not gone up as much as the price it is selling for - is this much profiteering justified?
• Last but not the least - corruption. Corruption has made so much in roads in our day-to-day activities that it has become one of the major contributors to the runaway inflation. An event like the Commonwealth Games should have ideally required a few crores to organize, but thanks to the corrupt organizers have siphoned off thousands of crores of tax-money and probably stashed it off in some Swiss Account. Now the government will have to raise taxes which will in turn send prices north.

There are many such reasons for the inflation that the common man faces, the experts need to examine these and take proper steps before things go out of hand.

Inflation

Inflation remains a major concern in the Indian economic scenario. The Government has been under constant pressure for its failure to control prices of food and other items.

The Wholesale Price Index (WPI) figures for primary and food articles released today, peg food inflation at 9.55% for the period that ended on 27-Aug-2011, while the inflation of primary articles stands at 13.34%.

Talking to reports in New Delhi, Finance Minister Pranab Mukherjee said that food prices were expected to fluctuate during the forth-coming festive season after which he said there will be a moderating influence.

So, as far as the common man is concerned, the minister has acknowledged that there is no relief round the corner.

RBI raises repo and reverse repo rates.

Bogged with inflation concerns, RBI has raised its repo rate and reverse repo rates under the liquidity adjustment facility.

• Repo rate increased by 25 basis points to 6.0%, and
• reverse repo rate increased by 50 basis points to 5.0%

RBI says...

The measures undertaken in this review should:
- contain inflation and anchor inflationary expectations without disrupting growth.
- reduce the volatility in overnight call money rates, thereby strengthening the monetary transmission mechanism.
- continue the process of normalisation of the monetary policy instruments.

The decision was announced by the Reserve Bank of India at the Mid-Quarter Monetary Policy Review, today.

Reacting to the RBI's measures, some bankers have already said that they would have to raise their commercial lending and deposit rates.

Protectionism Round 2 - US passes 2 bills in favour of Made of America

In order to promote creation of jobs in the US, the House of Representatives has passed 2 bills that require the US Congressmen and Department of Homeland Security to only buy goods Made In America.

It seems, that the very promoters of concept of free-trade and demand-and-supply based economy have had to eat their words and move towards an "inferior" protected economy.

We hope these protectionist measure work and we see a speedy recovery of the world's largest economic power alongwith all countries of the world.

New WPI base prices announces

Anand Sharma, Union Minister of Commerce and Industry, announced a new serice of Wholesale Price Index (WPI), today.

He announced in New Delhi that the new series has been prepared by shifting the base year from 1993-94 to 2004-05 and added that WPI for the month of August 2010 has been released with base year 2004-05.

The policy makers expect the change in base to improve the accuracy and be more representative of the wholesale price index.

Resistance to outsourcing in the United States

In a major setback for the Indian IT industry when the US government reacted against outsourcing. The Indian IT industry has been a major provider of outsourcing services for American companies over the last decade.

Earlier in August, Ted Strickland, the Governor of Ohio state set a distrubing trend by passing and executive order to ban outsourcing of government projects and now last week Barack Obama, the President of US has indicated that he too is considering steps against the outsourcing. He said he was going to withdraw tax incentives of companies who outsource work that help create employment overseas (out of the US).

Two Union Ministers Kamalnath and Anand Sharma have reacted strongly to the developments in the field of outsourcing.

Indian Rupee gets new symbol

The Indian Rupee has got a new symbol. It has a unique and simple design due to which its origin can be attributed to both the Hindi and the English languages

It is the Hindi alphabet r - र - with a horizontal line across the upper part. Incidentally it is also English alphabet R without the stem and two horizontal lines - one at top and one across its round part

The design was submitted by D. Udaya Kumar, as an entry to a competition organized for this purpose. It was approved by the Union Cabinet of India on 15th July 2010.