Inflation will be at 5.5 pc by March 07
"The cash reserve ratio (CRR) and bank rate may be hiked to rein in inflation. This may happen even before the budget announcement. In effect, the p rime lending rates (PLRs) could increase by about 50 basis points. The larger players will not have any impact as most have comfortable cash flows and could raise money abroad, if required. The hike would however, affect the domestic enterprises and retail borrowers for housing as well as other consumables.
In view of the buoyant economic growth, the Government can take certain regulatory measures without hampering development in the long term. The recent increase in repo rate was a short-term measure.
Inflation has touched two year high at 6.58 per cent during the week that ended on January 27. The trick is to control inflation without affecting economic growth. Inflation will come down to 5-5.5 per cent by end of March 2007, end of the financial year.
The proposed decision to make the rupee stronger will not have negative impact in the long run. There will be a fall in the current merchandise exports level but the growth in services exports will balance the situation.
Realty sector is currently overpriced on back of a boom in software economy and creation of special economic zones (SEZ). But, the development in the sector is not broad based. Property segment is witnessing a major expansion and as a result, prices in the housing segment are also rising.
The Union Government could implement a differential interest rate policy for the realty sector. Rate hikes in commercial banks have primarily affected the middle class. The other sections also need to be regulated.
Sensex will cross the 15000-mark in the near term. Studying the volatility index of the market, one finds that the numbers have come down indicating bullish sentiments. Market will not witness any major downslide in the current scenario.
On the eve of tough assembly elections, Budget 2007-08 will be populist one. Government is likely to reduce the surcharge but not the base rate in corporate taxes."
Chief Economist, Reliance Industries Ltd
In view of the buoyant economic growth, the Government can take certain regulatory measures without hampering development in the long term. The recent increase in repo rate was a short-term measure.
Inflation has touched two year high at 6.58 per cent during the week that ended on January 27. The trick is to control inflation without affecting economic growth. Inflation will come down to 5-5.5 per cent by end of March 2007, end of the financial year.
The proposed decision to make the rupee stronger will not have negative impact in the long run. There will be a fall in the current merchandise exports level but the growth in services exports will balance the situation.
Realty sector is currently overpriced on back of a boom in software economy and creation of special economic zones (SEZ). But, the development in the sector is not broad based. Property segment is witnessing a major expansion and as a result, prices in the housing segment are also rising.
The Union Government could implement a differential interest rate policy for the realty sector. Rate hikes in commercial banks have primarily affected the middle class. The other sections also need to be regulated.
Sensex will cross the 15000-mark in the near term. Studying the volatility index of the market, one finds that the numbers have come down indicating bullish sentiments. Market will not witness any major downslide in the current scenario.
On the eve of tough assembly elections, Budget 2007-08 will be populist one. Government is likely to reduce the surcharge but not the base rate in corporate taxes."
Chief Economist, Reliance Industries Ltd
Labels: Inflation
posted by SY at 3:04 PM
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