Reserve Bank of India Gives "All Clear" Sign

Thursday, June 09, 2005

The governor of the Reserve Bank of India (RBI), Venugopal Reddy, has given an all clear sign for India's economy. According to a story on Reddy said the Indian economy is largely insulated from episodes of global financial instability and the country has built resilience to shocks and is less vulnerable to output volatility. "Barring supply shocks, in particular, those due to the international oil prices, inflation, especially the core inflation has been fairly low," Reddy said at Bank of International Settlements meeting in Pune, India, last Wednesday.
"The enactment of Fiscal Responsibility and Budget Management Act by the Parliament provides further flexibility in conduct of monetary policy, he said.
India raised the reverse repo rate 25 basis points to 5 per cent in April, but left its bank rate unchanged at 6 per cent.
Leading interest rates should stay stable, he indicated, "we reiterate the position there are no unexpected circumstances that have occurred since then to warrant any review." This stance is supported by fiscal discipline. "The enactment of Fiscal Responsibility and Budget Management Act by the Parliament provides further flexibility in conduct of monetary policy, he said.
In April the RBI estimated GDP growth in the fical year 2005-06 at 6.0 to 6.5 percent after a growth rate of 6.9 percent in the previous period. Inflation is seen returning to 5 percent after 6.4 percent last year when money supply M3 grew at rate of 12.8 percent.
The fiscal budget deficit is expected to decline to 4.3 percent from 4.4 percent a year earlier. India has significantly reduced its net borrowing in 2004-05 to 460 billion Rupees from 800 billion Rupees a year earlier. One dollar buys 43 Rupees.Total budget expenditures for the running fiscal year are officially estimated at 5.143 trillion Rupees.
India and Pakistan to cooperate on energy issues
India and Pakistan announced on Wednesday that the two former political rivals have agreed to cooperate on energy issues,according to Indiadaily.
The visiting Indian Petroleum Minister, Mani Shankar Aiyar, today said Pakistan has agreed to work with New Delhi for accessing vast oil and gas reserves available in "our extended neighbourhood".
"We agreed that our common interest lies in accessing low-cost energy and affordable fuel from our extended neighbourhood," Aiyar said after a first round of talks between the technical experts of the two countries on how to pursue a proposed Iranian gas pipeline to India via Pakistan.
The Indian minister who had one-to-one meeting earlier in the day with his Pakistani counterpart Amanullah Khan Jadoon said the pipelines from Iran as well as Turkmenistan were an immediate focus.
Iran had first proposed the project in 1994, but no progress was made because of the traditional rivalry between India and Pakistan. The 2,700-kilometre pipeline project is valued at 4.5 billion dollars.
Iran has 27.5 trillion cubic metres of gas reserves, while India currently requires 90 million cubic metres a day and this is projected to increase by more than four times over the next two decades. Pakistan has proposed a tri-nation gas pipeline from Iran even as it is negotiating with Qatar and Turkmenistan for imports of natural gas.
The energy demands of India, the world's second-most populous nation, are high and growing. India produces only about half the natural gas it uses. Its crude oil imports are as high as 70 per cent.


Wikinvest Wire