Economy News 21st Feb 2008

Economy News 21^st Feb 2008

• Rupee plunges to 5-month low of 39.90
• Budget may roll tax sops for power sector
• Budget likely to give relief to income tax payers
• Budget wishlist: Excise duty drop on steel
• Budget may cut excise duties to boost manufacturing
• Indian salaries rose an average 15.1% in 2007:Hewitt Associates

     

Rupee plunges to 5-month low of 39.90

The Indian rupee plunged by 13 paise against the greenback on Feb 19 to close at its five-month low of 39.90/91 as heavy demand for dollar continued to pour in from domestic banks amidst the US currency's scarce availability globally. At the Interbank Foreign Exchange (Forex) market, the Indian unit fell to the intra-day low of 39.94 a dollar after resuming steady at 39.75/77 a dollar. It had fallen by ten paise to close at 39.77/78 per dollar on Feb 18.

 

Budget may roll tax sops for power sector

The Union Budget is an opportunity both for populist as well as meaningful measures to kickstart various sectors and power is one such area, which could do with more incentives. Finance Minister P Chidambaram is all set to announce a new set of measures to add capacity in the sector. According to sources, there may be an excise cut on power equipments from 16 per cent to 10 per cent. The income tax exemption for investment of up to Rs 50,000 in power bonds may be allowed, sources said, adding that CFLs and Energy efficient ACs may get excise cut by 5-6 per cent. The appreciation of rupee may hold FM from making any change in customs duty currently at 5 per cent for non-mega power projects but the cut in excise duty rates may be sufficient for the industry as the cut will translate into lower operational cost for the companies in the business.

The power sector also feels there is a strong case for rationalization in duties as that will make the sector more attractive. "There is a case for excise duty cut," said Ravi Uppal, Chairman, ABB India. The electrical equipment companies have grown at a rapid pace in the last few years. However, going by the order inflows of these companies and with the sops expected in the budget, we can expect a much higher growth in the sector. With spiraling fuel prices, there is an urgent need to give incentive to renewable and non-conventional energy and the finance minister may do exactly the same.

 

Budget likely to give relief to income tax payers

Income tax payers are likely to get a major relief in the Budget 2008-09, as the government prepares itself to please the middle class in the election year.Finance Minister P Chidambaram can give a marginal but visible relief to personal income tax assessees this year, as tax collections have substantially improved over the past three years. With buoyant tax collections in 2007-08, there is significant pressure on Chidambaram to reduce the effective rates. The Minister himself has acknowledged that with better tax compliance, there could be a case for cut in rates. The minimum income threshold limit for income tax payer could be raised from Rs 1,10,000 to Rs 1,25,000 or Rs 1,30,000, sources said. Similarly, the income threshold for 30 per cent tax rate could be raised from the current Rs 2,50,000 per annum, sources said, adding that this had been kept constant since fiscal year 2005-06.

 

Budget wishlist: Excise duty drop on steel

First came the price rollback and now India's steel lobby wants the Finance Minister P Chidambaram to do his bit to bring down the price even more, a relief not just for the aam admi but also for the industry. The Union Steel Minister Ram Vilas Paswan has already flagged off the agenda seeking to halve the excise duty to 8 per cent but expectations don't stop here.Tax cuts The steel minister proposes to reduce excise duty on steel to half from 8 per cent, export tax to be up on iron ore and Import duty on iron ore to be nil besides cut in import tax on coking coal to nil from 5 per cent.The steel lobby also wants hike tax on iron ore exports and a simultaneous cut in customs on ore imports. The industry is also demanding to coke coal imports duty free and cut in customs duty on other raw materials like zinc, nickle, LNG.

The iron ore exports should be banned. Declining profits The steel sector has seen many ups and downs in one year since the last budget. Looking at the ups, yes the steel prices have gone up but they have not been able to catch up with the raw material price hikes and this has squeezed the margins of the steel players but those feeling the heat the most are the smaller steel producers.

 

Budget may cut excise duties to boost manufacturing

Concerned over the slump in industrial production and to maintain inflation around 4 per cent, the Government is likely to provide relief to the manufacturing sector by marginally cutting excise duty rates or sector-specific duties in the Budget 2008-09. Finance Minister P Chidambaram may announce cut in excise duty rates across the board from 16 per cent to 14 per cent or sector-specific duty cuts in the budget to be presented on February 29, official sources said. Sectors like pharmaceutical, textile machinery, food processing, paper and auto including two wheelers, tyres are expected to get relief in excise duty, but like last year Chidambaram could also prune excise duty exemptions to maintain revenue collections, sources said.

According to Finance Ministry, due to various excise duty exemptions the estimated revenue foregone touched Rs 9,690 crore in 2006-07 as against Rs 66,760 crore in the previous year. It includes area-specific tax exemptions of Rs 7,000 crore in 2006-07. With the approval of over 400 special economic zones, the revenue foregone figures could be much higher for 2007-08, although some tax exemptions were withdrawn in the last budget.

 

Indian salaries rose an average 15.1% in 2007:Hewitt Associates

According to a survey by human resources firm Hewitt Associates, Indian salaries rose an average 15.1% in 2007 with the highest increase coming from the real estate sector. Compensation in the real estate sector surged 25.2% in 2007. Salary rise for employees at junior, senior and middle management levels was higher than that for the top mangement.

Hewitt expects the momentum to continue in 2008, rising about 15.2%, but will stabilise at 9%-10% by 2012.

The report suggests the struggle for talent and sustainability is large and rapidly growing in India. However, it also forecasts a shortage of people with specialist and technical skills and lack of leadership talent in India.

Hewitt found that the attrition rate was at an all-time high, led by insurance industry, followed by IT-enabled services and hospitality sectors.

 

Direct tax collections surged over 40% in Apr 07-15 Feb 08.

Direct tax collections surged over 40% in April 2007-15 February 2008. Net direct tax collections jumped 41.4% to Rs 228745 crore from Rs 161776 crore in the corresponding period of the previous fiscal. It achieved over 85% of budgeted direct tax target of Rs 267490 crore.

Corporate tax collection advanced 38.78% to Rs 138073 crore in April 2007-15 February 2008 compared with Rs 99488 crore in the corresponding period of the previous fiscal. Personal Income Tax (including FBT, STT and BCTT) catapulted 45.64% to Rs 90356 crore from Rs 62040 crore.

Securities transaction tax (STT) leaped 84.64% to Rs 7878 crore as against Rs 4267 crore. Fringe benefit tax (FBT) scaled up 29.75% to Rs 5216 crore from Rs 4020 crore. Banking cash transaction tax (BCTT) rose 16.81% to Rs 478 crore compared with Rs 409 crore.

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The story of Rupee Appreciation & Depreciation and Forex Reserves

Re falls, yields at two-week high

The foreign exchange and bond markets witnessed volatile movements on Monday, propped by global concerns and dwindling cash conditions in local markets.

While the rupee ended the day at 39.77 levels versus the dollar, bond yields rose to a two-week high. Rates in the inter-bank call money market rose to 8%. The rupee, which had closed at 39.67 on Friday, fell against the dollar as sentiment was hit by risk aversion felt in Asian markets which increased the probability of capital outflows.

In the domestic market, there was considerable demand for dollars from oil companies, while foreign fund inflows remained stunted. In the government bond market, demand for bonds was largely affected as most traders were wary of a severe crunch in cash conditions going forward. The central bank has not been intervening in the forex market as the rupee has been on a weakening mode, given that there are no significance dollar inflows.

The yield on the benchmark paper, the 7.99% bond maturing in 2017, ended at 7.54%, above Friday’s close of 7.51%. It rose to as high as 7.57% levels during the day. The market is taking cognisance of the liquidity drying up, and where the rates are headed towards, depends on what kind of cash conditions we see in the market,” said a bond dealer. Another factor is that companies will be making advance tax payouts in March, which will further take a toll on liquidity. (Full Story)



Rupee falls on oil payment, global concerns
The rupee eased on Monday on import payments, while a bout of risk aversion across Asian markets raised the prospect of further capital outflows from local shares, dealers said.

The partially convertible rupee ended at 39.775/785 per dollar, off the previous close of 39.672/682.

"Importer demand from oil companies which was not covered by the forward market caused the depreciation," said a trader with a foreign bank. "Plus, there were not too many inflows on the capital side," he added.

Inflows of foreign capital are a key driver of the rupee. Foreign funds have been net buyers of nearly $500 million of stocks so far this month, according to official data, after selling about $4 billion in January. (Full Story)


Rupee strengthens on strong Asian stocks, inflows eyed
MUMBAI: The rupee rose in early trade on Monday, with demand for the local unit bolstered by gains in Asian equity markets, which raised the prospect of higher foreign capital inflows, dealers said.

The partially convertible rupee was at 39.647/655 per dollar, a shade stronger than Friday's close of 39.672/682. (Full Story)


Dollar steadies as clues awaited to US econ health
TOKYO: The dollar steadied against the yen and the euro on Monday as many investors stayed on the sidelines ahead of US data this week waiting for further clues on the health of the economy.

The dollar slid late last week when US reports revived fears that the economy was slipping into a recession, but sentiment was improving slightly after a drop in Wall Street share prices on Friday was relatively limited, traders said. (Full Story)


Rupee weakens despite market rally; forward premia hit
MUMBAI: The bond market fell victim to uncertainty over a government official’s comments that special oil bonds could be used by banks to meet statutory liquidity ratio (SLR) requirements. The yield on the 10-year benchmark bond rose to a high of 7.54% during the day and closed at 7.51%, above its previous close of 7.45%.

Petroleum secretary MS Srinivasan had told mediapersons that the finance ministry had approved a move to allow oil bonds issued in the current fiscal year to be used by banks to meet their SLR requirements.

Banks reacted to the comment by selling bonds, only to hear that the finance minister had later clarified that he hoped the bonds, which are given to state-owned fuel retailers to compensate them for selling fuel at government-set prices, would be given SLR status. According to market sources, the minister’s comments resulted in a knee-jerk reaction by banks, which made considerable losses because of the rumour.(Full Story)



Forex reserves down $1.8 bn
MUMBAI: Bank credit has been showing signs of a gradual pick up over the past few fortnights. Data released by the Reserve Bank of India (RBI) in its weekly statistical supplement (WSS) show that bank-credit growth has risen to 22.8%. This figure has progressively risen over the past few weeks, from 21.5% in the second week of January this year. At current levels, the year-on-year bank credit stands at Rs 4.09 lakh crore.

Outstanding bank loans touched Rs 22,07,312 crore on February 1, up Rs 40,465 crore, from the previous fortnight’s levels. While food credit rose Rs 2,009 crore, non-food credit moved up Rs 38,456 crore during the fortnight. Simultaneously, outstanding deposits with commercial banks touched Rs 30,89,540 crore as on February 1, rising Rs 58,899 crore over the previous fortnight’s levels. While demand deposits rose Rs 57,794 crore, term deposits with commercial banks rose Rs 1,106 crore. Investments in government and other approved securities by banks dropped to Rs 9,50,589 crore as on February 1, down Rs 7,908 crore from the previous fortnight’s levels. (Full Story)

Source- Economics Times

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Market Round Up - 19th Feb 2008

Market Round Up - 19th Feb 2008

FIIs in buying mode

Foreign institutional investors (FIIs) bought shares worth net Rs 1147.50 crore on Friday, 15 February 2008, compared to their selling of Rs 1183.10 crore on Thursday, 14 February 2008.

FII inflow of Rs 1147.50 crore on 15 February 2008 was a result of gross purchases Rs 3898 crore and gross sales Rs 2750.50 crore. The 30-share BSE Sensex rose 348.62 points or 1.96% at 18,115.25 on that day.

FII outflow in February 2008 totaled Rs 315.40 crore (till 15 February 2008). FII outflow in calendar year 2008 totaled Rs 13,351.10 crore (till 15 February 2008).

There are a total of 1,290 FIIs registered with the Securities & Exchange Board of India (Sebi).

CRISIL net profit rises 291.74% in the December 2007 quarter

Net profit of CRISIL rose 291.74% to Rs 27.50 crore in the quarter ended December 2007 as against Rs 7.02 crore during the previous quarter ended December 2006. Sales rose 102.54% to Rs 84.68 crore in the quarter ended December 2007 as against Rs 41.81 crore during the previous quarter ended December 2006.

For the full year, net profit rose 89.06% to Rs 70.67 crore in the year ended December 2007 as against Rs 37.38 crore during the previous year ended December 2006. Sales rose 73.99% to Rs 255.32 crore in the year ended December 2007 as against Rs 146.74 crore during the previous year ended December 2006.

PM confident of sustaining 9% economic growth

On 15 February 2008, Prime Minister Manmohan Singh while addresing the annual meeting of the Federation of Indian Chambers of Commerce and Industry (Ficci) in New Delhi, expressed confidence on sustaining a 9% annual economic growth despite a possible global slowdown.

The minister also cautioned India must be aware that it cannot be completely insulated from chilly global winds that may blow in its direction.

He further said keeping the lid on inflation rate was a priority for his government, but controlling the price-line did not mean growth would be sacrificed.

Amid fears that a hike in petrol and diesel prices might fuel inflation, he said the government has taken an important policy stand to keep inflation under check and ensure that growth is more inclusive. The minister termed inflation as iniquitous tax explaining that it hurts the poor more than the rich. Therefore, it is essential to ensure that the poor are not adversely affected by high inflation, particularly that of basic items of consumption.

Inflation down 4.07% in the week ended 2 February 2008

Annual inflation, based on the wholesale price index, moved down 4.07% in the week ended 2 February 2008 compared with 4.11% in the week ended 26 January 2008. Inflation was 6.58% in the corresponding week a year ago.

The market estimate stood at 4.16%.

Prices of fruits and vegetables decreased 3% and those of arhar, masur and condiments and spicesn reduced 1% each. Prices of jet fuel also eased in the week.

Inflation figure for the week ended 8 December 2008 was revised upwards to 3.845 as against 3.65% reported earlier.

An eventful week for US Market

Lots of events dominated the US during the week that ended on Friday, 15 February, 2008. But the best part was that indices registered gains for the week after, each shedding more than 4% last week. Market closed higher in the first three days of the week but slipped in the later two.

The Dow Jones Industrial Average gained 166 points for the week. Tech - heavy Nasdaq gained 17 points. S&P 500 added 18.7 points.

On Monday, 11 February, it was reported that effective 19 February, 2008, Bank of America and Chevron will be added to the Dow Jones Industrial Average in place of Altria Group and Honeywell respectively. But on that very day, another Dow component AIG led to Dows downslide.

AIG was a major drag on the market on Monday after the company clarified its prior disclosures regarding CDOs saying that it has yet to determine the decline in value of its portfolio, and is still accumulating market data to update its valuation. The stock slipped by 12% and Dow would have ended the day higher, if not for AIG.

But the biggest news of the week was on Tuesday, 12 February, when it came to light that Warren Buffett's Berkshire Hathaway has made an offer to several flagging bond insurers. Berkshire Hathaway has sent an offer to reinsure the municipal bond holdings of Ambac, MBIA and FGIC. Berkshire offered to take a liability of $800 billion, adding $5 billion of its resources. Berkshire pledged there would be no distribution or management fees taken for 10 years. Dow ended the day higher by more than 100 points. (Full Story)

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News Round up- Economy (18th Feb 2008)

News Round up- Economy (18^th Feb 2008)

Insurance sector seeks 49% FDI

MUMBAI: The insurance sector has demanded a hike in foreign direct investment (FDI) limit from the present 26 per cent to 49 per cent and exemption of service tax for health insurances.

"For the growth of the insurance sector, the FDI cap of 26 per cent should be increased to 49 per cent. This will help to further deepen the Indian insurance market," Unison Insurance Broking Services' Managing Director, B K Sinha, said on the sidelines of an insurance seminar on Sunday.(Full Story)

 

 

HSBC hints at more investment in India

MUMBAI: Hoping to benefit hugely from the India-growth story, global banking major HSBC, hinted at more investments in the country once the regulatory environment permitted it.

The bank is understood to be open to adopting the inorganic route to grow in the Indian market as and when the regulatory environment become conducive for it.

"We are waiting for the right market opportunities in India and will increase our investment here, as and when the regulator allows us," HSBC's Head of Personal Financial Services, Asia-Pacific, Nicholas G Winsor, said. (Full Story)

 

 

New UK rules for money transfer to India

LONDON: The British government has introduced new rules for money transfer companies to ensure that the money, which is transferred from Britain overseas including India, are delivered safely and to the right person.

Annually, about 2.3 billion pounds are transferred from Britain overseas, most of it to 50 developing countries.

A large chunk of it, about 300 million pounds, is transferred to India every year, followed by Pakistan (200 million pounds).

However, individuals who transfer the money to India and other places face worries about the amount reaching the destination, and reaching the right person. (Full Story)

 

 

SEBI warns investors against 'Art Funds'

MUMBAI: The Securities and Exchange Board of India has sought to caution investors with regard to investing in Art Funds, funds/schemes launched by companies formed for the purpose.

The market regulator Wednesday said at present, no entity was registered with it under the SEBI (Collective Investment Schemes) Regulations.

At the same time, SEBI has threatened actions, civil and criminal, against such funds / companies and warned against launching of "Art Funds" or schemes without registration. (Full Story)

 

 

Tax collection needs to be balanced: Supreme Court

NEW DELHI: The Supreme Court has rejected the Kerala government's plea, seeking disallowance of tax exemption benefits to an assesee saying a balance should be struck between revenue collection and business-friendly approach.

"Tax administration is a complex subject. It consists of several aspects. The government needs to strike a balance in the imposition of tax between collection of revenue on one hand and business-friendly approach on the other," a bench comprising Justices SH Kapadia and BS Reddy said. (Full Story

 

 

Small investors expect populist budget

The UPA's Finance Minster is expected to deliver a populist budget and so the demands are running high. The small investors are hopeful of a tax cut. At present, income up to Rs 1,10,000 for men and Rs 1,45,000 for women attracts no tax. Experts feel that this threshold can be increased by another Rs 40,000. Since incomes have also risen significantly, the highest tax rate of 30 per cent should be applicable to salaries above Rs five lakh against the current Rs 2,50,00. This could translate into a cool saving of Rs 40,000.

Another way to save on tax is to invest up to Rs one lakh into tax saving instruments. Investors want their limit to be hiked but they are also demanding that the government should extend tax saving sops to a wide variety of options. Investors are also demanding that interest on fixed deposit savings should become tax free and MFs across the board should get a tax saving waiver instead of restricting this option only to ELSS schemes.

"Even if you increase tax slab, it will definitely help. Secondly, mutual fund as a method of saving is becoming more popular. It is an opportunity to create wealth and not just an avenue for savings or short-term speculation. Having burnt their fingers in the recent market correction, small investors would be looking for a silver lining in this year's budget. A cut in income tax rates is what everyone is expecting but at the same time, more money in the hands of investors, whether invested or spent, will also help spur growth

 

Rupee appreciates 15 paise

Mumbai: Overcoming the weakening trend of the past few days, the Indian rupee on Thursday appreciated by 15 paise against the U.S. currency at 39.61/62 in sync with the surge in domestic as well as Asian stock markets amid increased availability of dollar. The rupee moved between 39.60 and 39.73 at the interbank foreign exchange market. It had closed at 39.76/77 on Feb 13, its lowest level since November 28 last year.

The rupee premiums on forward dollar also recovered sharply on fresh paying pressure from banks and corporates. Foreign exchange dealers said anticipation of fresh capital inflows, the key driver for the Indian unit, in view of the rise in equity markets and expectations of foreign institutional investors turning active once again boosted rupee sentiment. A record FII inflows had pushed the rupee up by about 12 per cent against the dollar last year.

 

Other Stories

FM may cut duty to spur growth

Industry bodies like the Consumer Electronics & Appliances Manufacturers Association have sought a cut in excise duty from 16 per cent to 8 per cent. The general consensus, however, is that a moderate duty cut to 12 per cent could be in the offing.

 

Petro price hike just a drop in ocean for PSUs

IOC chairman said the increase in prices of diesel and petrol will substantially reduce the bonds in the next financial year.

 

India, China are not immune to crisis: IMF

The IMF MD also admits that the Fund had previously underestimated implications of the crisis in the US.

 

IT shrugs off recession fears

It is now clear that the IT and BPO sector will be hit by the US recession only in the future

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FM may approve $ 5 billion fund for Indian M&A

The government is considering a sovereign investment fund with an initial corpus of $5 billion to acquire companies abroad. The investment fund may also be used to bolster the country's energy security by acquiring coal mines and oil and gas blocks abroad.

Prime minister Manmohan Singh has issued a directive to the finance ministry in this regard, and an announcement is likely in the Budget, an official said.

According to officials, one of the options available to the government is to create a special purpose vehicle (SPV), which will borrow funds from RBI in the form of long-term securities in foreign currency and lend the same to Indian companies at lower rates. Thus, RBI and the government will be able to earn more on forex reserves, which currently fetch average returns of 3.5-4%.

 

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News- Sensex may touch the level of 29,000 by June 2009

Like Mumbaikars caught unawares by the recent spell of cold wave, investors have been struggling to adapt to the recurring bouts of volatility on the bourses over the last one month. But the weathermen of Dalal Street are expecting sunny skies by the end of this calendar year. Five of the six participants at the ET Round Table see the bellwether BSE Sensex between 20-22,000 then.

The panelists included Narayan Ramachandran, MD & Country Head, Morgan Stanley; Pankaj Vaish, MD & Head equities and fixed income, Lehman Brothers; Ved Prakash Chaturvedi, MD & CEO, Tata Asset Management; Gaurang Shah, MD, Kotak Life; Rashesh Shah, CEO, Edelweiss Capital; and Motilal Oswal, Chairman, Motilal Oswal Securities. The session was moderated by Ramesh Damani, director, Ramesh S Damani Finance.

Only one participant, Ved Prakash Chaturvedi felt that the market was likely to be around 18,000 levels on December 31, 2008. "But that does not mean that mutual fund investors will not make money," he added.

Mr Ramachandran expects a modest performance by the Sensex in the current calendar, but expects the benchmark to touch 29,000 by June next year. Slowing corporate earnings is one factor that most market watchers feel could hold back the market. However, the ET panelists are not too worried about it.

According to Mr Ramachandran and Mr Vaish, interest rates are showing signs of slackening and that could provide a support to corporate earnings over the next couple of years. "These (recent outflow of FII money) are not big things...they are just minor....India has attracted a lot of money and most of it came because of the fact that India is an attractive destination for money," said Mr Ramachandran. "The real thing that will decide is where fundamentals are going. I feel that they (fundamentals) are solid," he added.

Mr Shah felt that issue was not about whether earnings will grow 18% or 12%, but about the rate at which the Indian GDP would grow. "If you expect corporate earnings growth of 11-12%, it means we are looking at a GDP growth of 4.5 to 5 to 6%. But if you expect GDP growth rate to be around 8%, give or take 200 basis points, then a 17-18% corporate earnings growth is not difficult. And I haven't seen anybody—Indian or global—question India's 8% GDP growth rate," Mr Shah said.

While foreign funds have pulling out over the last few months, domestic liquidity has been a strong pillar of support and this trend is expected to continue, feels Mr Chaturvedi. "The kind of money we have seen that has flown in from the domestic investors in the last one year is certainly heartening," said Mr Chaturvedi. "My guess is that if you combine insurance and mutual funds and other (domestic) sources of inflows into the market, close to $2 billion of fresh money is coming into the market every month," he added.

Mr Gaurang Shah sees more investors tapping the stock market through Unit Linked Insurance Plans (ULIPs), mainly because of the handsome returns these products have delivered in the last four years of the Bull Run.

He excepts inflows of roughly $5 billion through various insurance schemes during the current quarter, a significant portion of which will be accounted for by ULIPs.

"I think relative disadvantage of insurance as a instrument vis-à-vis other fixed interest products has come down, which is also because real interest rates have reduced across the world over the last 10 years. So I see money continuing to come in," he said.

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Economy News- 15th Feb 2008

· PM confident of sustaining 9% economic growth

· Inflation down 4.07% in the week ended 2 February 2008

· Government to offer package to address credit needs of farmers: PM

· PM confident of sustaining 9% economic growth

On 15 February 2008, Prime Minister Manmohan Singh while addresing the annual meeting of the Federation of Indian Chambers of Commerce and Industry (Ficci) in New Delhi, expressed confidence on sustaining a 9% annual economic growth despite a possible global slowdown.

The minister also cautioned India must be aware that it cannot be completely insulated from chilly global winds that may blow in its direction.

He further said keeping the lid on inflation rate was a priority for his government, but controlling the price-line did not mean growth would be sacrificed.

Amid fears that a hike in petrol and diesel prices might fuel inflation, he said the government has taken an important policy stand to keep inflation under check and ensure that growth is more inclusive. The minister termed inflation as iniquitous tax explaining that it hurts the poor more than the rich. Therefore, it is essential to ensure that the poor are not adversely affected by high inflation, particularly that of basic items of consumption.

· Inflation down 4.07% in the week ended 2 February 2008

Annual inflation, based on the wholesale price index, moved down 4.07% in the week ended 2 February 2008 compared with 4.11% in the week ended 26 January 2008. Inflation was 6.58% in the corresponding week a year ago.

The market estimate stood at 4.16%.

Prices of fruits and vegetables decreased 3% and those of arhar, masur and condiments and spicesn reduced 1% each. Prices of jet fuel also eased in the week.

Inflation figure for the week ended 8 December 2008 was revised upwards to 3.845 as against 3.65% reported earlier.

· Goverment to offer package to address credit needs of farmers:PM

On 15 February 2008, Prime Minister Manmohan Singh while addresing the annual general meeting of Federation of Indian Chambers of Commerce and Industry (Ficci) in New Delhi, said the government will soon come out with a package to address the indebtedness of farmers.

The minister pointed out that the share of agriculture in the GDP has been declining. He added that the importance of this sector for India's economy cannot be minimised this sector as it supports a significant portion of the country's population and also acts as a social safety net.

The package would look into the credit needs of farmers. The minister explained the goverment could not have a situation where 80% of the agri sector is outside the formal financial system and suffers from excessive indebtedness.

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