CRR unlikely to be tweaked further

The cash reserve ratio (CRR) cannot be presumed to be the preferred tool to address liquidity tightness in December, Reserve Bank of India (RBI) Governor D Subbarao said on Wednesday.

He was speaking to analysts a day after cutting the CRR, or the share of deposits banks must maintain with the central bank in cash, by 25 basis points to 4.25 per cent.
RBI Deputy Governor Subir Gokarn said on Wednesday that assessing inflation has become more uncertain.

On Tuesday, the RBI had said that it expects inflation -- which hit a 10-month high of 7.8 per cent in September -- to rise before easing in the final quarter of the fiscal year.

Fiscal deficit rises

India's fiscal deficit during the April-September period rose to Rs 3,37,000 crore, or 65.6 per cent of the full fiscal year 2012-13 target, government data showed on Wednesday.

During the same period in the previous fiscal year, the deficit was 68 per cent of the budget target.

Net tax receipts during the April-September period stood at Rs 2,94,000 crore and total expenditure was about Rs 6,94,000 crore.

New Delhi is aiming to keep the deficit at 5.3 per cent of GDP this fiscal year, a revision from the previous target of 5.1 per cent outlined in the March 2012 budget.

Sept infra output up 5.1%

The infrastructure sector output grew 5.1 per cent in September from a year earlier, higher than an upwardly revised annual growth of 2.3 per cent in the previous month, government data showed on Wednesday.

The infrastructure output for eight sectors - coal, crude oil, oil refinery, natural gas, steel, cement, electricity and fertilisers -- grew at 3.2 per cent in the April-September period from 5 per cent a year earlier.

The infrastructure sector accounts for 37.9 per cent of India's industrial output.

5.3% fiscal deficit target challenging: FM

Containing fiscal deficit at 5.3 per cent this financial year will be a "challenging" task, Finance Minister P Chidambaram said in New Delhi on Wednesday. Just a day after announcing a five-year road map for fiscal consolidation, Chidambaram told the Parliamentary Consultative Committee attached to his ministry on Tuesday that "the target of 5.3 per cent is a challenging one, yet it is doable".

Chidambaram said the strategy to achieve the target would be to maximise revenue collections and control expenditure, according to a finance ministry statement released on Wednesday.

The finance minister had announced fiscal consolidation road map Monday, targeting to almost halve the deficit by 2016-17 from 5.8 per cent of gross domestic product registered during the last fiscal. As per the plan he outlined, the fiscal deficit will come down to 4.8 per cent in 2013-14, 4.2 per cent in 2014-15, 3.6 per cent in 2015-16 and three per cent in 2016-17.

Chidambaram told the committee that utmost effort would be made to contain the fiscal deficit at 5.3 per cent during this fiscal even though the Kelkar Committee has said that on the current economic trends it could be 6.1 per cent.

The government has also accepted the Kelkar Committee recommendation that calls for more discipline in government spending.

The Kelkar Committee has suggested rationalisation of schemes and strict control and monitoring of expenditure.

During the meeting, several members of the committee, representing different political parties, emphasised the need to review the functioning of various centrally-sponsored schemes and plug the leakages in the distribution of subsidies. Chidambaram said his ministry was in favour of "fewer Centre-sponsored schemes with larger amount so that desired objectives and targets are achieved."

Bank loan growth slows

Indian banks' advances and deposits grew at a slower pace so far this fiscal year that started in April, compared with the similar period last year, as a sluggish economy dampened demand for credit.

As of October 19, credit grew 2.6 per cent to Rs 48,15,938 lakh crore since the start of April, compared with a growth of 4.9 per cent in a year earlier, data from the Reserve Bank of India showed on Wednesday.

Bank deposit growth was 4.8 per cent at Rs 63,88,609 lakh crore, lower than 5.5 per cent in the last fiscal year.

On Tuesday, the central bank cut its non-food credit and deposit growth projection for 2012-13 by 1 percentage point each to 16 per cent and 15 per cent respectively.

It also cut banks' cash reserve ratio (CRR), or the share of deposits they have to maintain with the central bank in cash, by 25 basis points to 4.25 per cent, to enhance liquidity in the banking sector.

The cut in CRR will inject around Rs 17,500 crore of primary liquidity into the banking system, but bankers said higher provisioning requirement for lenders will offset benefit of the CRR cut. The RBI increased the provisioning for restructured standard accounts to 2.75 per cent from 2 per cent.