16.04.2008

• PMLA to cover insider trading
• Insider trading and market manipulation are being included in the Prevention of Money Laundering Act (PMLA) as ‘scheduled’ offences and this could result in stricter punishment for these crimes. Acting on suggestions from officials of the finance ministry, all offences covered under Section 12 A of the SEBI Act, read with Section 24 of the same act, are being included in the schedule to PMLA. Offences related to human trafficking, smuggling of migrants, piracy and environmental crime are also being included.
• Grains output to touch 208 mn tonnes
• India’s foodgrains output is expected to touch 208.08 million tonne this year, up from 174.63 million tonne in the drought-hit 2002-03. However, the overall production, including 73.39 million tonne wheat against 65.1 million tonne last year, has fallen way below the targeted 220 million tonne, according to government’s second advance estimates. Rabi foodgrains output, at 99.46 million tonne, has just failed to touch the 100 million mark and is lower than the targeted 108.32 million tonne. Kharif output is pegged to rise to 108.62 million tonne from 87.93 million tonne. Total rice production is also expected to be a disappointing at 86.11 million tonne though higher than last year’s 72.66 million tonne.
• Cause for more jitters on the inflation front for the government?
• Centre to plough Rs. 25000 crore into farms
• AMIDST growing concerns over depleting food stocks and slowed down agriculture, the Centre has undertaken a Rs 25,000-crore plan to pump in more funds into farms to improve agriculture production across the country.
• The step will encourage states to make more investments in the agriculture sector. Under the scheme, the Centre will sanction matching grants to states that make additional allocations for agri sector. The scheme is a part of the Food Security Mission for which around 16 states so far have approached the Centre and disbursement have already begun.
• The whole exercise is aimed at achieving 4% growth in the agriculture and allied sectors. The scheme envisages raising the production of rice by 10 million tonne, of wheat by eight million tonne and of pulses by two million tonne during the next four years.
• Indian gem business growth
• The Indian gem and jewellery industry has witnessed a growth of 22.27% amounting to a total export of $20.8 billion (Rs 84.058 crore) for the period between April 2007 and March 2008. This is well above the target of $18.5 billion set by the commerce ministry for the year. In the previous year, between April 2006 and March 2007, the exports were to the tune of $17.1 billion.
• The performance is good despite the fact that the rupee showed a steady gain over the US dollar for most part of the year. Also, India no longer enjoys the benefits of generalised system of preferences (GSP) with the US. India graduated out of the system in July 2007, under which US provided duty free access to products from countries whose exports are below a threshold limit. This considerably reduced the prospects of jewellery exports to US, which is the largest market for jewellery.
• The reduction of import duty on cut and polished diamonds to 0% has helped India to be at par with other international manufacturing centres. This will enable India to transform from the largest manufacturing centre to the global trading hub.
• The food vs. fuel debate
• A thing which I have been imagining for the last couple of months has come (true) to haunt us much sooner than expected. That’s why I think we should never be having pessimistic thoughts in the first place. Looks like the pessimistic thoughts (or fears) come true more quickly than the positive ones!!!
• Don’t miss today’s ET editorial on this debate. It is here.
• Food prices at global level have increased by as much as 57% in the past one year.
• The Wold Bank fears that there could be civil disturbances in at least 33 countries inhabited by the largest number of the poor.
• The volume of grains used for biofuel equivalent to a full tank of a SUV (Sports Utility Vehicle) could easily be the food supply for a person for a whole year!!
• India disproves Friedman on inflation
• Can’t miss such an article; can we?
• But what did Friedman say about it in the first place? His argument was that for a given money supply, a rise in the price of any one item will be offset by a fall in the price of another item. But as usual SSA Aiyar argues forcefully that it cannot be true in all cases as has been proved by India.
• What is the ‘bank in a box’ model being experimented in Andhra Pradesh?
• The RBI in collaboration with Union Bank of India and Corporation Bank has done this. This involves a local business correspondent who opens and maintains accounts for the rural population. The experience has been that the number of deposit accounts have outnumbered the loan accounts, thus making it easier for banks who may not have to worry much about replenishing funds with the correspondent.
• An early singal of the success of micro-deposit system?
• Can a strong rupee fight inflation?
• You might have noticed that we have been noting about the three options that a monetary authority has in fighting inflation for the last couple of weeks in our blog. One of them was allowing the country’s currency to appreciate to tame inflation. But can this really help?
• Assuming that rupee appreciation is allowed, this could result in a much wider current account deficit. A wider deficit is not desirable especially when there are signs that global risk appetite is on the retreat. Other side effects include the Dutch disease — where the non-tradable sector loses competitiveness. It is interesting to note that in many countries especially in Asia, currency appreciation has not lead to lower inflation. In India, the circumstances today are quite different from 2007 when the rupee appreciated by almost 10%. The increase in commodity prices since early this year could be described as a terms of trade (TOT) shock for India. A TOT shock implies a big increase in the price of imports relative to the price of exports. Ideally the policy response should be a weaker real rupee rate to offset the TOT shock which is getting aggravated by inflation. The way to square the requirement of a weaker real rupee rate through lower domestic inflation is via a tighter monetary policy. Hence linear responses of rupee appreciation to manage inflation are wholly inappropriate.