FE Editorial : Price in a rate cut
The Financial Express: Feb 16 2013, 02:09 IST
contracting 1.7% in the April-January period in FY12, wheat prices rose 14.5% in the same period in FY13—with this happening when the Food Corporation of India has wheat coming out of its ears, it is not clear why the government has not dumped wheat stocks in the market. Interestingly, and this should provide some comfort to the government, despite the hike in diesel prices—and the promise of doing this every month—the overall fuel index slowed from 9.4% in December to 7.1% in January, thanks to inflation coming down in other fuels like naphtha and aviation turbine fuel that are sold at free-market prices. For April-January FY13, the fuel index rose 10.1% as compared to 13.9% in the same period in FY12. While a repo cut will undoubtedly stimulate consumption, its role in stimulating investment is less certain since most projects that have stalled—the value of stalled projects is up around 3 times since FY10—have done so for other reasons ranging from lack of environment clearances to even defence clearances. Apart from the functioning of the Cabinet Committee on Investments (CCI), investors will be looking to the Budget for their cues. That includes not just what the finance minister will do in terms of compressing expenditure but also what he does in terms of redressing the retrospective tax imposed by his predecessor as well as what is announced by way of the slew of transfer pricing adjustments that industry has been hit with.
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