India's annual rate of inflation rose further to 12.44 percent for the week ended Aug 2, goading the finance ministry to say it was a "major disappointment".
Data on wholesale prices released by the commerce ministry Thursday showed that the inflation rate - the highest since May 1994 - has jumped to this level from 12.01 percent for the week ended July 26, and 11.98 percent the week before.
“After being nearly stable for four weeks, this rise has come as a major disappointment," the finance ministry said in a statement soon after the data was released.
"The annual rate of inflation calculated on point-to-point basis stood at 12.44 percent for the week ending August 2," stated the ministry of commerce and industry in the official data released Thursday for the wholesale price index (WPI) for all commodities.
The WPI, based on final data for the week ended June 7, stood at 236.5, as compared to 235.2 (provisional), taking the annual rate of inflation to 11.66 percent as compared to 11.05 percent (provisional).
The main reason for the increase in the inflation rate during the week was higher prices of food articles and fuel, both jumping 0.9 percent.
The index for food articles rose on account of higher prices of maize (which rose 4 percent), condiments and spices (3 percent), fruits and vegetables (2 percent). Non-food articles went up by 0.2 percent.
The index for fuel, power, light and lubricants rose due to higher prices of light diesel oil (16 percent), bitumen and furnace oil (8 percent each), and aviation fuel (3 percent).
The finance ministry said that in the primary articles group, the annual point-to-point inflation increased to 11.43 percent as compared to 10.32 percent for the week before.
"In the commodity group of fuel and power, the rate of inflation has risen to 17.99 from 17.12 percent."
C. Rangarajan, in an exclusive interview to IANS soon after stepping down as the Prime Minister's Economic Advisory Council (EAC) chairman Wednesday, said he did not rule out the possibility of inflation rate touching the 13 percent mark.
"Inflation may touch the 13 percent-mark," he said, even as the government projected inflationary trends to moderate to 8-9 percent by March 2009.
"The trends of moderation in inflation should begin in December," said Rangarajan, now nominated to the Rajya Sabha. He added: "Monetary tightening is needed to contain inflation."
The statement came a week after Planning Commission Deputy Chairman Montek Singh Ahluwalia said inflation would fall below the 10 percent mark by this fiscal-end.
"Inflation is expected to moderate below the double-digit mark by the end of the current fiscal," Ahluwalia said.
The latest increase in inflation rate comes on a day the central government revised the recommendations of the Sixth Pay Commission to grant substantial hikes to its five million employees.
However, Finance Minister P. Chidambaram said its impact on inflation was taken into account when the government cleared the recommendations.
“The payout is not a new development. It has been factored into when the Budget was prepared and the Prime Minister's EAC and the RBI (Reserve Bank of India) gave their estimates,” he said.
Government opens way to private provident fund to beat inflation
New Delhi, Aug 14 (IANS) Private provident and other retirement funds will be allowed to directly invest up to 15 percent of their investible funds in the capital market, giving fund managers a greater degree of flexibility.
A finance ministry notification Thursday also announced easing of other existing norms. These investment pattern norms were last revised Jan 24, 2005.
The new norms will come into force from the next fiscal starting April 1, 2009, it said.
The new norms have been finalized after taking into account feedback received on proposed norms that had been put up at the finance ministry website last September.
The notification said that provident funds, superannuation funds and gratuity funds can now "directly invest up to 15 percent of their investible funds in shares of companies on which derivatives are available on the Bombay Stock Exchange and the National Stock Exchange."
"This is a very healthy sign because in inflationary times, when the rate of interest is below the rate of inflation, then provident funds which are guaranteed return funds become guaranteed risk funds," Naresh Pachisia, managing director of leading securities manager and mutual funds distributor SKP Securities Ltd, told IANS.
"So if these funds can invest in equities which can provide a high rate of return then the overall returns on the funds can be maintained at a rate higher than the inflation rate," he explained.
"The 15 percent ceiling also seems just right because even if the equities investment goes wrong, the total capital is still protected," Pachisia said.
“If the fund loses, say, at the most by 50 percent, then 7.5 percent of the total funds will be lost. But it will earn at least 9 percent on the 85 percent that it will be forced to invest on debt instruments.
“Since 9 percent of 85 percent is 7.65 percent of the amount invested, it will cover the possible loss of 7.5 percent,” Pachisia explained.
The other norms announced are aimed at giving the fund managers "greater flexibility in terms of a wider variety of financial instruments as well as greater freedom to actively manage the portfolio," the notification said.
Highlight of the new norms:
* Central and state government securities and units of gilt mutual funds have been merged into a single category and trustees can invest up to 55 percent of the investible funds in them. Earlier, they had to invest 40 percent in central and state government securities only, and at least 15 percent in state government securities;
* A flexible ceiling has been provided for various instruments instead of fixed investment ceiling as at present;
* Providing new instruments, such as rupee bonds of multilateral funding agencies and money market instruments;
* Permitting investment in term deposit receipts of not less than one-year duration issued by commercial banks subject to specified criteria.
* Fund trustees can exit from a rated financial instrument when their rating falls below investment grade, as confirmed by one credit rating agency;
* The trustees can indulge in trading of securities provided the turnover ratio - the value of securities traded during the year, divided by the average value of the portfolio at the beginning and end of the year - does not exceed two;
* Trustees will be required to conform to the investment pattern norms only by the end of the financial year, although they are expected to do so throughout the year.
* Trustees can exceed the investment ceiling up to 10 percent of the limit prescribed during the year.
IANS
Printed from www.mangalorean.com
Data on wholesale prices released by the commerce ministry Thursday showed that the inflation rate - the highest since May 1994 - has jumped to this level from 12.01 percent for the week ended July 26, and 11.98 percent the week before.
“After being nearly stable for four weeks, this rise has come as a major disappointment," the finance ministry said in a statement soon after the data was released.
"The annual rate of inflation calculated on point-to-point basis stood at 12.44 percent for the week ending August 2," stated the ministry of commerce and industry in the official data released Thursday for the wholesale price index (WPI) for all commodities.
The WPI, based on final data for the week ended June 7, stood at 236.5, as compared to 235.2 (provisional), taking the annual rate of inflation to 11.66 percent as compared to 11.05 percent (provisional).
The main reason for the increase in the inflation rate during the week was higher prices of food articles and fuel, both jumping 0.9 percent.
The index for food articles rose on account of higher prices of maize (which rose 4 percent), condiments and spices (3 percent), fruits and vegetables (2 percent). Non-food articles went up by 0.2 percent.
The index for fuel, power, light and lubricants rose due to higher prices of light diesel oil (16 percent), bitumen and furnace oil (8 percent each), and aviation fuel (3 percent).
The finance ministry said that in the primary articles group, the annual point-to-point inflation increased to 11.43 percent as compared to 10.32 percent for the week before.
"In the commodity group of fuel and power, the rate of inflation has risen to 17.99 from 17.12 percent."
C. Rangarajan, in an exclusive interview to IANS soon after stepping down as the Prime Minister's Economic Advisory Council (EAC) chairman Wednesday, said he did not rule out the possibility of inflation rate touching the 13 percent mark.
"Inflation may touch the 13 percent-mark," he said, even as the government projected inflationary trends to moderate to 8-9 percent by March 2009.
"The trends of moderation in inflation should begin in December," said Rangarajan, now nominated to the Rajya Sabha. He added: "Monetary tightening is needed to contain inflation."
The statement came a week after Planning Commission Deputy Chairman Montek Singh Ahluwalia said inflation would fall below the 10 percent mark by this fiscal-end.
"Inflation is expected to moderate below the double-digit mark by the end of the current fiscal," Ahluwalia said.
The latest increase in inflation rate comes on a day the central government revised the recommendations of the Sixth Pay Commission to grant substantial hikes to its five million employees.
However, Finance Minister P. Chidambaram said its impact on inflation was taken into account when the government cleared the recommendations.
“The payout is not a new development. It has been factored into when the Budget was prepared and the Prime Minister's EAC and the RBI (Reserve Bank of India) gave their estimates,” he said.
Government opens way to private provident fund to beat inflation
New Delhi, Aug 14 (IANS) Private provident and other retirement funds will be allowed to directly invest up to 15 percent of their investible funds in the capital market, giving fund managers a greater degree of flexibility.
A finance ministry notification Thursday also announced easing of other existing norms. These investment pattern norms were last revised Jan 24, 2005.
The new norms will come into force from the next fiscal starting April 1, 2009, it said.
The new norms have been finalized after taking into account feedback received on proposed norms that had been put up at the finance ministry website last September.
The notification said that provident funds, superannuation funds and gratuity funds can now "directly invest up to 15 percent of their investible funds in shares of companies on which derivatives are available on the Bombay Stock Exchange and the National Stock Exchange."
"This is a very healthy sign because in inflationary times, when the rate of interest is below the rate of inflation, then provident funds which are guaranteed return funds become guaranteed risk funds," Naresh Pachisia, managing director of leading securities manager and mutual funds distributor SKP Securities Ltd, told IANS.
"So if these funds can invest in equities which can provide a high rate of return then the overall returns on the funds can be maintained at a rate higher than the inflation rate," he explained.
"The 15 percent ceiling also seems just right because even if the equities investment goes wrong, the total capital is still protected," Pachisia said.
“If the fund loses, say, at the most by 50 percent, then 7.5 percent of the total funds will be lost. But it will earn at least 9 percent on the 85 percent that it will be forced to invest on debt instruments.
“Since 9 percent of 85 percent is 7.65 percent of the amount invested, it will cover the possible loss of 7.5 percent,” Pachisia explained.
The other norms announced are aimed at giving the fund managers "greater flexibility in terms of a wider variety of financial instruments as well as greater freedom to actively manage the portfolio," the notification said.
Highlight of the new norms:
* Central and state government securities and units of gilt mutual funds have been merged into a single category and trustees can invest up to 55 percent of the investible funds in them. Earlier, they had to invest 40 percent in central and state government securities only, and at least 15 percent in state government securities;
* A flexible ceiling has been provided for various instruments instead of fixed investment ceiling as at present;
* Providing new instruments, such as rupee bonds of multilateral funding agencies and money market instruments;
* Permitting investment in term deposit receipts of not less than one-year duration issued by commercial banks subject to specified criteria.
* Fund trustees can exit from a rated financial instrument when their rating falls below investment grade, as confirmed by one credit rating agency;
* The trustees can indulge in trading of securities provided the turnover ratio - the value of securities traded during the year, divided by the average value of the portfolio at the beginning and end of the year - does not exceed two;
* Trustees will be required to conform to the investment pattern norms only by the end of the financial year, although they are expected to do so throughout the year.
* Trustees can exceed the investment ceiling up to 10 percent of the limit prescribed during the year.
IANS
Printed from www.mangalorean.com
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