M A I N   N E W S

Inflation reverses trend; rises to 10.72 pc
Tribune News Service & PTI

New Delhi, November 6
Having continued its southward journey for five weeks in a row, inflation rose marginally to 10.72 per cent for the week ended October 25 from 10.68 per cent in the previous week.

The annual rate of inflation, measured by movement in the wholesale prices, was at 3.11 per cent in the corresponding period a year ago.

“Inflation of 30 essential commodities (taken together) marginally increased to 7.51 per cent as on the week ending October 25, 2008, from 7.47 per cent reported in the earlier week,” a finance ministry statement said, adding that prices of six out of 30 items increased during the week.

Although the index of the ‘fuel and power’ group remained unchanged, the primary articles group index increased to 11.41 per cent as compared to 10.92 per cent a week ago, the statement said.

Commenting on the inflation figure, Crisil principal economist D.K. Joshi said: “The declining trend would continue. The spike in inflation this week is just an aberration.”

The increase in inflation is not due to steps taken by the RBI to infuse liquidity in the system, he said, adding “the infusion in liquidity is non-inflationary as demand in the economy is coming down.”

Interestingly, broking house Edelweiss Securities said it expected the country to have near zero inflation in certain periods of the second half of 2009 on account of economic slowdown and falling commodity prices.

“Given the possibility of a further strong softening in commodity prices amid a marked global slowdown, domestic inflation can be zero or near zero during the second half of 2009,” the report said.

After declining for five consecutive weeks, the inflation showed a marginal increase as certain essential items like butter in the manufactured category became expensive.

The RBI in the last one month has infused liquidity to the tune of Rs 2,70,000 crore by cutting the cash reserve ratio by 350 basis points and statutory liquidity ratio by 100 basis points.

Among the primary articles, prices of rice increased by three per cent and tea by two per cent while vegetable prices were up almost one per cent. At the same time raw rubber was costlier by seven per cent, and raw cotton by three per cent.

Among other articles in the manufactured group, prices of gur increased, while woollen clothes became expensive by one per cent. Further, prices of automobiles, including motorcycle and auto-rickshaw, increased in the last week.

However, spices and cement prices showed a decline. Steel and fuel prices remained unchanged. The revised figure for inflation stood at 12.38 per cent for the week ended August 30 as against 12.10 per cent during the corresponding period last year.

Inflation was 9.32 per cent on May 31 and had surged into double digits in the first week of June after a hike in state-set retail fuel prices. In early August, the inflation rate had hit 12.91 per cent, the highest reading since annual numbers in the current data series became available in April 1995.




Banks cut lending rates
Tribune News Service & PTI

The Bombay Stock Exchange 30-share barometer settled the day at 9,734.22, a net fall of 385.79 points or 3.81 per cent from its previous close. The broader 50-share Nifty of the National Stock Exchange also dived by 102.30 points or 3.42 per cent to close at 2,892.65 from its last close.
European Central Bank (ECB) also cut rates as part of concerted efforts to revive world commerce and ward off deep recession. The ECB met market expectations by reducing its interest rate by 0.5 percentage point.
The Bank of England, faced with a slumping housing market, a decline in manufacturing and increased unemployment, astonished analysts by announcing a hefty 1.5 percentage point cut, the biggest since the Bank gained independence to set rates 11 years ago.

Mumbai, November 6
Days after assurances of cheaper funds by chiefs of public sector banks to finance minister P Chidambaram, public sector banks today announced reductions in their benchmark prime lending rate. All the banks have slashed their lending rates by 0.75 per cent.

Among the first to announce lower interest rates today was the State Bank of India, which promises to offer the lowest interest rates in the business. Its PLR is down to 13 per cent from 13.75 per cent earlier.

Making the announcement today, SBI chairman O P Bhatt hoped that the measure would improve credit off-take in the economy.

Other banks like Allahabad Bank and Oriental Bank of Commerce have also reduced their PLRs by 75 basis points from 14 per cent to 13.25 per cent. The changes come into effect immediately. The banks also said they would be reducing interest on term deposits by 50 basis points from December 1.

Meanwhile, Citibank became the first foreign bank to cut PLR by 50 basis points to 15 per cent.

The decision by Citibank comes a day after the meeting of leading foreign and private sector banks with finance secretary Arun Ramanathan wherein they had assured of reduction in lending rates.

It is expected that the remaining PSU banks and leading private sector lenders ICICI Bank and HDFC Bank would also announce reduction in lending rates in the next few days.



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