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India’s stock markets crashed by 769 points on August 16, as investors reacted to good news in the US and bad news at home. Stock markets fell and the rupee has crossed the Rs 62-mark, as the RBI’s capital control and gold import restriction measures appear to have caused panic.
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Speculation that the government may want a more pliant governor at the helm of the central bank proved to be bunkum. The government announced that D Subbarao would be the governor of the Reserve Bank of India, for two more years, providing continuity on the monetary policy front. He will now retire as the RBI governor on September 4, 2013.
Continue ReadingShort term borrowings are a part of any company’s life. These are needed to tide over temporary cash shortages or even to meet normal working capital needs. Since the needs are temporary, companies do not mind paying a slightly higher rate of interest. But when governments start dipping into the till to meet short term requirements, the consequences can be interesting, if not disruptive.
Income Tax
This was a big disappointment to those expecting a bagful of goodies from the Indian government, that the Union Budget 2009-10 would cut dividend distribution tax, corporate tax rates will be cut and so on. There was no change in the corporate tax rate.
These are some of the highlights from the speech given by the Finance Minister Pranab Mukherjee, presenting the Budget in parliament. Part One deals with the state of the economy and key policy announcements while the second part will deal with tax proposals.
Continue ReadingThe petroleum ministry announced that public sector units in the oil sector –like Gail, HPCL, ONGC, BPCL and IndianOil- have resolved to spend at least 2% of their net profits on corporate social responsibility projects. There was a joint meeting of the Minister for Petroleum & Natural Gas, Murli Deora, chairmen of oil PSUs and the petroleum secretary, RS Pandey.
The government gave oil marketing companies something to cheer before they prepare the third quarter’s results. They have got bonds to compensate them for the losses incurred on selling retail petroleum products like PDS kerosene and LPG. Indian Oil Corporation, Hindustan Petroleum Corporation and Bharat Petroleum Corporation have been issued bonds worth Rs 22,000 crore, with the companies getting 54.4%, 24.2% and 21.3% respectively.
The Indian government has been attempting several measures to boost economic growth. From today, petrol and diesel prices have been reduced by 10% and 6% respectively due to a sharp fall in crude oil prices. The Indian government is in the midst of putting together a package to prevent a recession.
Already, inflation is resulting in the government taking steps that don’t seem logical. The Finance Minister has for long been cheering the growth story and cautioning the central bank taking any monetary steps, which might hit growth. And, he has helpfully been ‘requesting’ public sector banks not to increase interest rates, for good measure. Though the RBI is an autonomous body, the pressure on it to ignore the warning signals of rising inflation was evident.
One drawback of the Indian corporate bond market is the absence of credit derivatives. Regulatory reluctance was a main reason for this phenomenon. This had changed over the years with strong lobbying from all interested parties and the government giving a go-ahead from its side. The government had made announcements to that effect in the 2006-07 Budget and even commissioned a report on making Mumbai a regional financial centre.