Inflation eases to 4-month low of 5.43 per cent in June

After rising to a five-month high in May, inflation dipped to 5.43 per cent in June mainly on account of a decline in the prices of food items and vegetables with the exception of potato and onion.
It was at 5.16 per cent a year ago in June 2013.
As per the Wholesale Price Index (WPI) inflation, prices of vegetables as a category declined by 5.89 per cent during the month, while that of potato and onion soared by 42.51 per cent and 10.70 per cent, respectively in the wholesale market.
Inflation had soared to a five-month high of 6.01 per cent in May 2014.
Among other important items, the prices of sugar and edible oils fell by 2.09 per cent and 0.75 per cent, respectively during June.
The food items that became expensive during the month include fruits (up 21.40 per cent), followed by milk (10.82 per cent), egg, meat and fish (10.27 per cent) and rice (10.24 per cent).
The inflation of food items as a category, however, continued to remain high at 8.14 per cent during the month and will continue to be a cause for concern for the Government which is gearing up to meet the impact of poor monsoon on the price situation.

Onion prices may ease in a week

Experts say onion prices, which have risen sharply in recent days, will begin softening in a week, provided it does not rain.

Retail rates in the national capital shot back up to Rs 80 a kilo, from Rs 60 earlier this month. The uptrend during the harvesting season was caused by heavy rain associated with Cyclone Phailin.

"This year, excess rains have played spoilsport," says Rajendra Sharma, General Secretary of the Azadpur Mandi Traders Association. "Excess water is an enemy of the onion. This year, harvesting has been affected in states such as Andhra Pradesh and Karnataka due to the downpour that accompanied the cyclone. Prices will come down in the next few days only if there are no rains." Arrivals from the onion-growing states of Andhra Pradesh, Gujarat, Karnataka and Maharashtra have been affected.

Sharma said wholesale prices in Delhi have gone up by Rs 10 to Rs 30-45 per kilo over the past week. High onion prices in the country drove inflation based on the wholesale price index (WPI) to a seven-month high of 6.46 per cent in September. In the same month, WPI inflation for onions stood at 322 per cent.

In markets in Maharashtra, the country's biggest onion grower, wholesale prices are hovering around Rs 50 a kilo. However, R.P. Gupta, Director at the National Horticultural Research and Development Foundation in Nashik, said it was only last year's stock that was commanding higher prices. "The old stock is almost exhausted, and the new crop from the kharif season is selling for Rs 30-40 a kilo wholesale. The harvest will only gain momentum, and the price should come down by the month-end." He added that the holding capacity of farmers has gone up with a rise in incomes and they slow down the harvest when prices come down.

India produces about 16 million tonnes of onions a year but consumes only 10 to 11 million. Higher domestic prices had led to the resumption of onion imports after a two-year gap, and onions from countries such as China, Egypt and Pakistan have found their way to Indian markets. Along with stepping up imports, efforts have also been made to discourage exports by raising the minimum export price.

Top bankers hail work of outgoing RBI Governor D.Subbarao

RBI Governor D Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover

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Mumbai, Sept 2:  

Top bankers have hailed the contributions of the outgoing Reserve Bank Governor Duvuuri Subbarao saying he did his best during a tenure that was marked by difficult times for the economy.

“I think the Governor’s (five year) term has been in one of the most difficult environments globally and domestically.

“If you look at the world and our country today, there is so much change that you have to be at your feet and I can’t imagine anybody else doing a better job (than Subbarao),” Axis Bank Managing Director and Chief Executive Shikha Sharma said.

Subbarao demits office on September 4, after being at the helm for five years that saw the beginning of the global recession from which it is yet to recover.

Within a fortnight of him assuming office, global investment bank Lehman Brothers filed for bankruptcy and the hit pulled the global banking system down to an unprecedented credit crisis which eventually led to the worst recession since the Great Depression.

This was followed by a difficult period which saw RBI working in close coordination with the government and other financial sector regulators, as also other central banks, to ring-fence the economy.

While the fiscal and monetary stimuli ensured that the economy did not fall off cliff, this soon gave way to a spike in inflation. This saw rise in policy rates from October 2010 for a year or so even as growth started coming down.

As Subbarao’s term moved close to ending, worries over slowing growth and stubborn inflation complicated the matter for the central bank. His problems got compounded with the fall of the rupee beginning May-end. It declined to a low of 68.85 intra-day to the dollar early last week.

“I’ve the highest respect for him. He has been through difficult times and let’s put it this way: in hindsight, it’s very easy to judge anybody...I do believe he did a great job,” Aditya Puri, who heads the second largest private lender HDFC Bank, said.

“One thing that has not been fully talked about during his tenure is that he has reduced CRR and SLR by 4 percentage points, which to my mind, in a tenure of five years is very significant,” said Pratip Chaudhuri, the chairman of the country’s largest bank State Bank of India.

Chaudhuri, who favoured doing away with CRR, added that its reduction was one of the reasons for the economic buoyancy during early part of Subbarao’s stint.

“To some extent, the buoyancy which we saw in the economy in the previous two years, could be attributed to that,” Chaudhuri said