NEW DELHI l FRIDAY l MARCH 16 l 2012 V O L X X X V I I I N O 1 4 2 4 P A G E S I R s 4 . 0 0 READ TO LEAD PUBLIC SECTOR SAVINGS ARE A PROBLEM... ...WITHOUT SAVINGS / INVESTMENT RISING CAN’T GET HIGHER GDP... Growth in % 9.5 6.5 05-06 06-07 07-08 08-09 09-10 10-11 11-12 P U B L I S H E D ៊ With savings levels falling from a high of 36.8% of GDP in 2007-08 to 31.6% in 2011-12, GDP growth has fallen commensurately F R O M : % of GDP 31.6 Savings 32.4 Investments as % of GDP 35.3 05-06 06-07 07-08 08-09 09-10 10-11 11-12 A H M E D A B A D B A N G A L O R E ៊ Apart from savings levels falling, higher amounts are being invested in assets like gold, reducing the amounts available for productive investment C H A N D I G A R H HOPES ON GDP, FEARS ON DEFICIT In the news INDICES BSE Sensex Closing Up/down 17,675.85 ▼243.45 S&P CNX Nifty 5,380.50 ▼ 83.40 Sensex falls 243 pts on RBI rate stance, political unease The Sensex lost 243.45 points to end at 17,675.85 on Thursday as the RBI refrained from cutting key rates and investors turned cautious ahead of Friday’s Budget. The uncertain political scene due to Trinamool chief Mamata Banerjee seeking railway minister Dinesh Trivedi’s removal also hit markets. ■ P15 India could face US sanctions on Iran oil imports US officials say they are concerned that India may run afoul of a new American law restricting payments for Iranian oil, forcing the White House to impose sanctions on India by June 28. ■ Page 3 World Bank okays $4.3-bn aid to India The World Bank has given $4.3-billion aid to India through a new innovative and flexible financing arrangement to fight poverty. ■ P23 ■ India growing despite global slump: IMF, P3 one and a half percentage points since 200708. The survey pitched ■ GDP growth in 2011-12: 6.9%; ’12-13: 7.6%; ’13-14: 8.6% N a day when the for raising the ratio to Reserve Bank of 13% by 2016-17 from ■ ’12-13 industry growth: 4-5%; India chose to 10.5% now. foreign trade to boost growth leave interest rates unSpending on subsi■ Fiscal deficit likely at 4.1% in changed and warned of dies alone is expected 2012-13 and 3.5% in 2013-14 resurgentinflationrisks, to surpass the budget ■ Fiscal deficit at 3% by 2nd half of finance minister Pranab estimate by a whop12th Plan; no room for expansion Mukherjee’s key adviping R1 lakh crore. The ■ Inflation at 6.5-7% by March; sorsurgedhimtodowhat question is if Mukhermay cool with RBI, fiscal steps thecentralbankhasbeen jee will bite the bullet ■ Financial consolidation, savings saying all along — bring given “the pressures of & capital formation to increase discipline back to the democratic politics” ■ Likely rate cut to encourage Centre’sfinances. which the survey writinvestment, aid growth “ large (fiscal) deficit A ersarenotobliviousto. ■ Agriculture, services, industry overalongperiodtendsto Much more guarded expected to perform well squeeze out the private in their predictions ■ Concerted efforts through G-20 sector from the credit than a year ago, the auneeded to restore stability space,” the Economic thors of the survey led Survey presented in Parby chief economic adliament on Thursday visor Kaushik Basu enINSIDE said.Onlyarevivalof pridorsed the Central Sta■ Basu’s last act calls for easier vate corporate investtisticalOffice’s advance money, tighter fiscal policy, P4 ments can salvage the estimate that growth in ■ Govt guarantees mooted to economy which is wit, 2011-12 would be just make infra projects viable, P5 nessing a continuous fall 6.9%. They however, , ■ Inflation to dip further in FY13 ininvestmentrate,itsaid. said the economy might on base effect, global slump, P6 As he rises to present expand by 7.6% in 2012■ Every sick person will count, Budget2012-13onFriday , 13, an optimistic view thanks to UID programme, P7 Mukherjee can oblige accordingtomanyecon■ Survey mum on LIC head! P10 his advisors only by raisomists. Basu himself, ing taxes and cutting however,discountedhis wasteful subsidies on diesel, forecast later in a media LPG and fertilisers. The Centre is expected conference as he said savings and investto miss the fiscal deficit target of 4.6% for ment rates could continue to slow down for the current fiscal by a wide margin. another year. India's tax-to-GDP ratio has fallen by ■ Continued on Page 2 TAKING NOTES O DIFFERENT STROKES ■ Inflation ■ Growth ■ Fiscal situation RBI: Upside risks to inflation have increased from the recent surge in crude oil prices, fiscal slippage and rupee depreciation RBI: Most indicators suggest the economy is slowing, the performance in Q4 of 2011-12 is expected to be better than that in Q3. RBI: Credible fiscal consolidation, therefore, will be an important factor in shaping the outlook for inflation MoF: With the government showing signs of taking steps to restart reforms, the growth engine of India will be fired up soon MoF: Fiscal slippage this year has been a part of the cyclical process, so improvement is likely in the medium term Inflation tops RBI mind; rate reduction must wait ■ Change in stance pegged on fiscal consolidation fe Bureau Mumbai, Mar 15 EDIT P10 Healthy dose of realism Economic Survey argues against aggressive deficit reduction this year, to avoid compounding slowdown Sajjid Chinoy I N line with expectations, the Reserve Bank of India (RBI) on Thursday refrained from reversing its policy stance, leaving the key repo rate untouched at 8.5%. What was surprising, however, was the rather hawkish tone; although aware that growth was decelerating,theRBIappeared to be concerned more about inflationary pressures. The central bank made it clear that inflation trends, to which there were clearly upside risks, would “influence both the timing and magnitude of future rate actions”. It believes that while the economy is no doubt slowing, the performance in the March2012quarterwouldbe better than that in the three months to December 2011 when the GDP grew at 6.1% INSIDE D Subbarao, RBI governor ON GUARD ■ No further monetary tightening is required ■ Future actions will be towards lowering rates ■ Fiscal deficit slippage pressuring inflation ■ Inflation risks to decide rate actions year-on-year.Withchancesof a rate cut somewhat slim in the immediate future, the mood in the bond and equities markets turned a tad Banks in no rate cut rush P20 bearish; the yield on the benchmark bond rose to 8.32% from 8.26% before the announcement while the Sensex shed over 275 points atonepointduringtheday . Highlighting the ballooningfiscaldeficit,inflationary pressures in the economy and the fact that the higher crude oil prices have not beenpassedontoconsumers in the home market, the RBI noted:“Theslippageinfiscal deficit has been adding to inflationary pressures and a crediblefiscalconsolidation, therefore, will be an important factor in shaping the inflationoutlook.” As such, a cut in policy ratesmaybesometimeaway unless the government comes up with a workable plan to contain the deteriorating deficit when it presents the Union Budget for 2012-13onFriday . ■ Continued on Page 2 India Inc unhappy C H E N N A I H Y D E R A B A D K O C H I K O L K A T A % of GDP 12.1 10.3 04-05 05-06 06-07 07-08 08-09 09-10 10-11 L U C K N O W M U M B A I ៊ Investment levels of household sector are up but land, environment and other clearances have hit corporate investment badly P U N E ALL IN A DAY DA ■ Seeks cut in fiscal deficit to boost investment MoF: Inflation has eased over the last month or two ៊ High subsidies, such as those on oil, have contributed to a 2.3 fall in public savings. 1.7 Pvt corporate savings down a bit but that of 04-05 05-06 06-07 07-08 08-09 09-10 10-11 households steady % of GDP Trivedi remains for now as Congress & Trinamool try to find middle ground ■ Economic Survey sees growth at 7.6% in FY13 fe Bureau New Delhi, Mar 15 ...AS IS PRIVATE CORPORATE INVESTMENT P20 ■ Trivedi has not resigned: FM Railway minister Dinesh Trivedi has not resigned, finance minister Pranab Mukherjee told the Lok Sabha. The Prime Minister had received a communication from Mamata Banerjee which was under “active consideration”. ■ Will quit whenever Mamata or PM asks, asserts Trivedi “Nobody has sought my resignation,” he said on Thursday. ■ No one above party: Mamata “No one is above party discipline. Dinesh Trivedi did not consult me or Mukul Roy (party all-India general secretary),” Mamata Banerjee told Trinamool MLAs in Kolkata on Thursday. Nistula Hebbar New Delhi, Mar 15: Railway minister Dinesh Trivedi continued to hold his post despitereportshehadquitonWednesdaynight followinghispartyTrinamoolCongress’displeasureoverthefarehikeannouncedinthe budget. The Congress, meanwhile, appears to have made up its mind that no precipitate action was to be taken till Pranab Mukherjee’sBudgetspeechhadbeenreadout. ■ Continued on Page 2 EPFO CUTS RATE TO 8.25% fe Bureau New Delhi, Mar 15 A FTER last year’s 9.5% interest rate bonanza, the 4.7-crore subscribers of Employees Provident Fund will have to settle for a lower rate this year. The government has decided to reduce the interest rate on the employees’ provident fund to 8.25% for thecurrentfiscal,asadvisedbyEPFO’s financeandinvestmentcommittee. The finance ministry has approved the interest rate and the labour and employment ministry has directed the EPFO to take it forward. ■ Continued on Page 2 ■ See Edit: From Trivedi to EPFO, P10