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The country’s monsoon may be weaker than normal this year, according to India's Meteorological Department.The rain is expected to be 95% of the long-term average, said P.S. Goel, Secretary at the Ministry of Earth Sciences in New Delhi today. 
The rupee crossed the 42 mark against the dollar on Monday on the back of strong capital inflows even as Finance Minister P. Chidambaram said that the Indian currency was competitive despite the sharp appreciation this year. The rupee rose by 1.4% to 41.9050 against the dollar as of the 5 p.m. close in Mumbai. The Indian currency rose as high as 41.85 today, the strongest since June 1998. On Friday, the rupee closed at 42.51/52 per dollar -- its strongest since April 6, 1999.
The partially-convertible currency is one of the top 10 gainers among the world's most-actively traded currencies this year, rising 5.4%, spurred partly by strong capital inflows and partly due to liquidity crunch.
Exporters continued to sell dollars, while importers stayed on the sidelines hoping for cheaper dollar/rupee rates. Meanwhile, the central bank was virtually absent in the foreign exchange market today.
Although importers may enter at the current levels a few of them will prefer to await for better rates. The Reserve Bank of India (RBI) may also intervene and absorb dollars, to curb the rapid rise in the rupee.
"The rupee appreciation is because of the large inflow of capital," Chidambaram said. "The rupee is still very competitive relative to other currencies."
Finally, there is some good news on inflation which should cheer up the Government and the Reserve Bank of India (RBI) ahead of the annual monetary and credit policy announcement on April 24. After stubbornly remaining static for three consecutive weeks, India's inflation, based on the Wholesale Price Index (WPI), declined marginally in the week ended March 24. The point-to-point inflation was 6.39% compared with 6.46% in the preceding week.
The latest inflation reading is above the average estimate of around 6.25% by economists. The annual inflation rate was 4.06% during the corresponding week of the previous year. The slight dip in inflation may not bring much relief to the Government and the Reserve Bank of India (RBI) till it falls below 6%. Finance Minister P. Chidambaram wants inflation at 4%. The RBI has set a target of 5-5.5% for the year 2006-07.
It may be recalled that on March 30, the RBI announced a 25 basis point hike in the repo rate, a key short-term lending rate, besides raising the Cash Reserve Ratio (CRR) by 50 basis points to 6.5% in two stages. The surprising monetary tightening measures by the RBI took most economists by surprise as they had expected the central bank to wait at least till the annual policy meeting, scheduled for April 24, before taking any further steps.
The Confederation of Indian Industry (CII) on Friday warned that any further tightening of money supply by the Reserve Bank of India would trigger a slowdowm of the economy.
"There are already emerging signals in the form of slowdown in the automotive sector and retail banking,'' CII President R. Seshasayee said in a statement here. Mr. Seshasayee said that while inflation control was legitimately at the top of the national agenda, "it is important that growth is not traded off in the bargain.''
The RBI recently announced another increase of 25 basis points in the repo rate (the rate at which RBI lends short-term money to banks) to 7.75 per cent and increased the cash reserve ratio to 6.5 per cent from 6 per cent. The central bank's move would suck up Rs. 15,000 crore liquidity from the system. The CII President said a large number of projects were in the pipeline and any more intervention by the RBI could "force companies to rethink their investment.''
He said that if at all the central bank had to intervene it should be on a selective basis and restricted to the segments where overheating was felt. He also wanted that the RBI should not surprise industry by sudden jerks. The CII chief said industry had to live with appreciation of the rupee even if it hurt exports. "While the supply side measures take effect, industry might have to accept in the short term, appreciation of the rupee even if it means that exports are hurt a bit.''
He hoped that the industry would improve productivity and competitiveness in the face of the adverse exchange rate. For improving supply side constraints, post grain harvest measures like cold chain infrastructure should be built in and over the medium term, agricultural productivity must match the ever-increasing demand, he said.
India's annual inflation of 6.5 per cent is not that high when considering the nation's strong economic growth, a senior World Bank official said on Tuesday.
The Indian economy is forecast to grow 9 per cent this year, the same pace of growth estimated for 2006, making it one of the fastest-growing economies in the world, said Isabel Guerrero, the World Bank's Country Director for India.
The Reserve Bank of India (RBI) has been raising interest rates on concern that the economy might be overheating, but it is also 'playing by ear' how its policy action could affect future economic growth, she said. "That shows they are concerned about inflation but not as much because inflation is still quite low," Guerrero said in an interview. She was in Tokyo with other World Bank South Asia country directors to meet Japanese officials.
The RBI raised its repo rate by 25 basis points to 7.75 per cent in March, its highest in nearly 4-½ years, saying it was critical to take 'demonstrable and determined action' to fight inflation. Annual inflation, as measured by wholesale prices, is running at nearly 6.5 per cent, which is well above the RBI's comfort zone of 5.0-5.5 per cent. But Guerrero, who oversaw Latin American countries at the World Bank before assuming her current post in March, said annual inflation of 6.5 per cent is 'not really high' and inflation staying below 10 per cent is in fact 'very good'. For a country achieving growth as high as India's, it is hard to tell whether inflation is caused by economic overheating or by high capacity needs, Guerrero said.
"It could be consumption overheating, but it could very much be high economic growth, and high growth always puts a strain on the productive capacity of an economy," she said. Guerrero also said that by maintaining certain financial market controls, such as limiting the presence of foreign banks operating in the nation, India remains less vulnerable to financial market shocks such as the one that hit much of Asia in the late 1990s.
"The risks of destabilising inflows and outflows is less in India than in other countries, and I think the government has done the right thing by being careful about opening up its financial markets," she said. India's economy, Asia's fourth largest, is estimated to have grown 9.2 per cent in the financial year that ended March 31, growth that has attracted foreign fund inflows and prompted the RBI to hike rates in March.
The projected growth would be the fastest pace in 18 years and higher than the 6.5-8 per cent rate which economists say is the country's more natural speed while it works on improving its transport network and other infrastructure.
Money supply expanded at the fastest pace in eight and a half years during the fortnight ended March 16, the Reserve Bank of India (RBI) said on Friday.
The M3 measure of money supply grew by 22% in the two weeks to March 16 from a year earlier, compared with 22.1% in the previous two weeks, the central bank said in a statement.
M3, which mainly comprises currency in public circulation, bank deposits and money invested in other saving plans, stood at Rs32.06 trillion on March 16.
Money supply has expanded at an average rate of 19.3% since April 1, 2006. This is more than the 15% growth targeted by the RBI for the fiscal year 2006-07.
During the fortnight ended March 16, the annual growth in non-food credit of scheduled commercial banks (SCBs) was 29.5% as against 32.7% a year ago.
Banks' total loans increased by Rs205.5bn in the period under review, taking outstanding advances to Rs18.7 trillion, the RBI said.
While non-food credit to industry and consumers was up by an additional Rs197.05bn, food credit rose by Rs8.5bn, the RBI said.
Meanwhile, total deposits rose by 24.8%, or Rs5 trillion, in the same period to Rs25.04 trillion.
Strong Foreign Direct Investment (FDI) during the October-December quarter lifted the overall Balance of Payments (BoP) into a surplus of US$7.5bn as against a BoP deficit of US$4.67bn in the year-ago period.
The net capital inflows in Q3 FY07 stood at US $ 10.7bn versus US $ 0.4bn in the corresponding period of last year. It may be mentioned that in Q3 FY06, net capital flows were affected by outflows due to repayments of IMDs (US $ 5.5bn).
While FDI in to India surged in the third quarter to US $ 8.7bn (US$2bn), outward direct investments from India at US $ 6.4bn (US$784mn) also showed strong growth due to some large overseas acquisitions. The major contributors to net capital inflows were External Commercial Borrowings (ECBs), NRI deposits and other capital.
The current account deficit, a key barometer of a country's trade, declined to US$3.04bn in the quarter ended December 31, 2006 from US$4.78bn a year earlier, the Reserve Bank of India (RBI) said on Friday.
The fall in the current account deficit was largely due to higher income from software, business and financial services rendered abroad, coupled with remittances from Non-resident Indians and income from tourism.
India's external debt increased to US$142.7bn as of December 31, 2006 as companies stepped up their overseas borrowings amid rising local interest rates. India had an external debt of US$136.5bn by the end of September, data released on Friday by the Finance Ministry showed.
Total external debt as at December 2006 was up 12.8% over the period ended March 2006 when it stood at US$126.41bn.
The rise in external debt at the end of December 2006 was due to an increase in multilateral debt, External Commercial Borrowings (ECBs) and NRI deposits, offset by a marginal decline in short-term debt, the Finance Ministry said.
As a result, the trade deficit in February was US$4.66bn as against US$2.49bn in the corresponding month a year earlier. The trade deficit stood at US$5.78bn in January, US$5.68bn in December 2006 and US$6.2bn in November 2006.
During April-February 2006-07 (first 11 months of the fiscal year 2006-07), exports were up 19.26% at US$109.13bn while imports climbed by 27.78% to US$164.98bn. Year-to-date trade gap is up at US$55.86bn from US$37.62bn in the year-ago period.
Farmers were upset about reports that the government wants private buyers to stay away from wheat markets and those reports forced the Agriculture Minister to call media.
He said that he had not banned private players like Cargill or ITC from procuring wheat at prices higher than the Centre's Minimum Support Price (MSP) of Rs 850 a quintal but hoarding has to be in check.
However, despite the Minister's claims it's no secret that the Finance Minister had called these companies and asked them not to procure wheat till the FCI has bought 15 million tonne.
In a statement issued by Cargill, the company said that private companies normally procure from states like MP, Rajasthan and UP.
They suggested that they have no plans to procure from states like Punjab, which the government focuses on. So reports that they were offering prices higher than the MSP in Punjab were wrong.
Surplus year
On the other hand FCI officials said that threats from farmers unions like the Bharat Kisan Union not to sell to FCI should not be taken seriously because in the past they have never implemented their threat.
Besides, they said that production figures are higher by 40 lakh tonne and in a surplus year it's unlikely that private traders will pick up more wheat than their requirement of 10 lakh tonne.
Agriculture growth cannot double without the involvement of the corporate sector, which has the capacity in marketing, supporting diversified agriculture base and bringing in modern technologies, according to Mr Montek Singh Ahluwalia, Deputy Chairman, Planning Commission.
The Centre has not failed to recognise the role the corporate sector has to play in agriculture growth. It would be possible to double the growth rate in agriculture to 4 per cent only with a broad based agriculture production involving horticulture, livestock, dairy, and poultry and increasing agriculture productivity. Relying on cereals alone would support only 2 per cent growth, he said.
Diversification can only happen with modern technology in production, post-harvest processing, transportation and widening market - domestic and export. The corporate sector and possibly the cooperative sector but with a `modern corporate structure' have to play a key role, he said.
Unlike the green revolution of the 1960s, modern revolution in agriculture cannot come from a single crop or be public sector led. 'The world was different then,' Mr Ahluwalia said.
Private sector plays a large role in research; India is the fourth largest user of genetically modified seeds. IPR issues and modern infrastructure like reliable power and efficient water use need to be addressed. 'The challenge today is more difficult than the green revolution challenges,' he said.
A fundamental constraint is that the farmer alone could own the land and the corporate sector cannot.
But within the existing framework the companies and the farmers could be brought together, he said. Mr Ahluwalia said there is 'fairly deep suspicion' of the corporate sector involvement in agriculture because of the presumption of its bargaining power. But there were enough and more success stories - including traditional sugar mill operations, which are examples of corporate contract farming - that can be replicated with appropriate policy support.
The rupee touched a 7-year high of 43.01 against the dollar, as the Reserve Bank of India chose to stay on the sidelines of the forex market on Thursday.
Exporters, however, bet on a dollar rebound, stashing their export proceeds in foreign currency accounts while importers bought the dollar at lower levels to cover their positions.
The local currency has appreciated by more than 9% over the past 8 months, closing at 43.04/05 levels against the dollar on Wednesday, compared to the 3-year low of 47, in July 2006. The rupee on Monday had ended at 43.29/30 levels. The rupee was propped up by high interest rates caused by tightness in money markets.
Call rates the day in a range of 7-9%, after rising to 30% during the day. The central bank infused a total of Rs 27,395 crore through the repo operations under the two sessions of liquidity adjustment. On the other hand, it mopped up bids worth Rs 3215 crore through reverse repo operations.
Once the local currency breaches the 43-mark against the dollar, then it’s quite possible to foresee a level of 42.50 in the next few days, contend senior treasury officials. A report by Barclays Capital has talked about the possibility of rupee finding support in the 41-40.8 range.
However, exporters have already started postponing their receivables. On exposures, which are extremely short-term in nature, exporters are choosing to park funds in the exchange earners foreign currency (EEFC) accounts. They plan to convert these funds into rupees once current liquidity conditions ease and the local currency moves back to more secular levels over the next couple of weeks.
“Liquidity conditions are expected to ease in the first week of April as most money market participants view the current rise more as a function of the tightness in liquidity than any currency market-related issue,” said a senior treasury official.
The onset of April will see government borrowing picking up, alongside payments of salaries. Among the exporter clan, the smaller rung of players is expected to be the worst-hit, as they do not seek much recourse to hedging instruments. TCS, for instance, has currently hedged up to $580 million, which accounts for about 70% of its net foreign currency exposure.
MUMBAI: The Indian currency flared up by a steep 28 paise to close over 20-month high at 44.29/30 against the U.S. dollar on the back of heavy dollar sales by banks, despite rising global crude oil prices.
In active trading at the interbank foreign exchange market, the rupee opened strong at 43.51/52 a dollar against last Friday's close of 43.57/58 and rallied further to settle at 43.29/30.The rupee had ended at 43.20/25 on July 21, 2005.
India's annual inflation rate held steady below a two-year high in early March, data showed on Friday, reinforcing the prospect of another increase in interest rates in Asia's fourth-biggest economy. 
India seems ominously heading for a fearsome crisis. Evidence is mounting of institutions, commonly regarded as pillars of good and effective governance, rapidly sliding into a state of malfunctioning, if not near-crumbling. One by one, they are losing their sanctity and credibility. Disturbingly enough, whether it is the legislature, executive or the judiciary, people are fast losing their respect for them and, indeed, are heard to be holding them in contempt in their day-to-day conversations.
The so-called `temples of democracy', the elected legislatures, were the first to suffer a precipitous fall in public esteem. Moneybags, musclemen and mafias began invading the electoral arena. Persons with criminal antecedents began entering the portals of State Assemblies and Parliament in large numbers, and it did not take long before they found accommodation in the Councils of Ministers themselves.
This has led to the utterly revolting spectacle of law-breakers parading themselves as law makers, and accused in cases involving heinous crimes making policies as Ministers and lording it over national resources and assets.
Corruption is no longer hush-hush, but a matter of open negotiations openly carried out and concluded, without any sense of delicacy or shame. In fact, it has ceased to shock and is taken as a `transaction cost' by industry and business, `speed money' by those having dealings with the Government and accepted as a way of life by the people at large. We hear accounts from credible sources of this or that Minister, this or that functionary, sometimes even a judge, making demands running into crores of rupees, but we go our way unperturbed, hardly batting an eyelid.
Nobody has the stamina to fight the monster any more, or even to complain. The response to extortionist demands is just one of benumbed submission and compliance. It was hoped that multiple crores of rupees worth of personal assets declared by candidates who till the other day had no ostensible means of living will form the basis of stringent follow-up action by the income-tax or enforcement authorities. But those declarations too nowadays fail to create any ripple. There is no institution, in short, that has not been enveloped by the dark shadow of suspicion.
Pervading rottenness
The news of the action by the Election Commission (EC) against several top officials of Uttar Pradesh is of a piece with the pervading rottenness in every branch of governance.
There can be no more telling pointer to the degeneration in administration than that the EC should have found high officials such as the Chief Secretary, the Director-General of Police, a Divisional Commissioner, an IGP, two DIGs, a District Magistrate and three SPs to be impediments to holding free and fair elections and had to issue peremptory orders for replacing them by those with unsullied reputation for impartiality.
In fact, the EC has had to resort to its summary powers in this regard in an increasing number of instances in recent years in State after State. What was unthinkable until about 20 years ago, has now become commonplace.
This is deplorably indicative of the spread of the rot to the highest echelons of the administrative and police services to such an extent that senior officials see nothing wrong in participating in political functions or openly behaving in a partisan manner.
The Indian state faces the frightening prospect of its institutions being engulfed by the relentlessly advancing tide of corruption, subversion and perversion. Launching of organised efforts by the civil society to roll back the tide brooks no delay.
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