Saturday, July 22, 2000,
Chandigarh, India


M A I N   N E W S

CRR, bank rate up; Re at all-time low
PDS rice and wheat rates cut

MUMBAI, July 21 (PTI) — The rupee plunged against the US currency on heavy all-round dollar demand to close at an all-time record low of Rs 45.01/03 in volatile trade at the interbank foreign exchange market here today.

Opening around Rs 44.90/92 per dollar, the rupee nosedived to intraday low of Rs 45.07/09 on persistent heavy demand from both state-run and foreign banks in the absence of dollar-selling intervention by the central bank in support of the Indian unit.

But the rupee later recovered marginal ground on light profit-dollar sales and after the State Bank of India (SBI) lowered its dollar-offer quotes, dealers said.

Meanwhile, the Reserve Bank of India (RBI) announced a series of measures to arrest the rupee slide after the forex market closed for trading.

The apex bank raised the bank rate by one percentage point to 8 per cent and increased the cash reserve ratio (CRR) by 0.5 per cent.

The increase in CRR to 8.5 per cent in two stages and revision of the bank rate are part of the liquidity tightening measures initiated by the RBI to curb excessive speculation after the rupee today crossed the Rs 45 barrier against the US dollar and dipped to a new low.

The increase in the bank rate is effective after today’s close of business while the CRR increase is effective from the fortnights beginning July 29 and August 12.

The rupee reacted favourably to the liquidity tightening measures of the central bank and rallied smartly to be quoted at Rs 44.65/85 to the dollar in unofficial deals after trading hours.

The Associated Chambers of Commerce and Industry today said there was no justification in hiking the bank rate and CRR rate and the Reserve Bank of India’s decision would adversely affect the industry.

“There is no justification for hiking the bank rate and CRR (cash reserve ratio) since the depreciation of the rupee is normal. We do not support the RBI move as it will adversely affect the local industry,” Assocham President Shekhar Bajaj said PTI.

The government today announced a reduction in wheat and rice prices, distributed through the PDS both for below poverty line (BPL) and above poverty line (APL) categories.

The prices of wheat for BPL category has been reduced by 35 paise to Rs 4.15 a kg and that of rice by 25 paise at Rs 5.65 a kg.

The prices of wheat for APL category has been brought down to Rs 8.30 a kg from Rs 9 a kg and for rice from Rs 11.80 a kg to Rs 11.30 a kg.

The decision to effect a moderate cut in wheat and rice prices has been taken following acceptance of the Expenditure Commission report, which had suggested changes in the methodology of working out economic cost, Consumer Affairs Minister Shanta Kumar told reporters after a Cabinet meeting. During the Budget session of Parliament, the government had come under heavy criticism even from NDA allies for hiking the foodgrains prices.

Mr Shanta Kumar said at today’s meeting the Cabinet considered in detail the recommendations concerning determination of the FCI’s economic cost of wheat and rice and consequent issue prices of PDS items.

Mr Shanta Kumar said the government also decided to pass on the benefit of stocks procured in the previous years at a lower prices by pooling the cost of such grains with those procured at higher minimum support prices (MSP) in the subsequent year for working out the economic cost instead of the present method of calculating the economic cost and consequent issue prices on the basis of the MSP notified for the year.

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