The deputy governor of the Reserve Bank of India (RBI), Subir Gokarn, said on Saturday the bank was looking at ways to ease the liquidity crunch, such as relaxing liquidity ratio limits or rescheduling or restructuring bond auctions.

Subir Gokarn was speaking to reporters at a press conference after the monetary policy review. Read the full story

India’s food and fuel inflation accelerated in the third week of August, maintaining pressure on the Reserve Bank of India (RBI) to tighten monetary policy. Read the full story

India’s November industrial output grew at its fastest pace in two years, which analysts say will strengthen the case for the Reserve Bank of India (RBI) to tighten monetary stance to temper inflationary expectations.

Industrial output rose 11.7 per cent in November from a year earlier, higher than the median forecast of an annual rise of 10 per cent in a Reuters poll and an unrevised 10.3 per cent rise in October, data showed on Tuesday.

The growth was the fastest since October 2007, when the industry grew an annual 12.2 per cent.

Factory output in November, which had expanded just 2.5 per cent in the same month last year, is riding a revival in consumer demand following aggressive rate cuts by the RBI and stimulus through tax breaks after the global downturn.

“This number combined with an expected 7.3 per cent WPI inflation for December, would strengthen the case for monetary tightening by the RBI,” said Gaurav Kapur, senior economist at ABN Amro Bank.

“The RBI may wait until the 3Q GDP release due end of February for hiking policy rates, but is likely to start withdrawing liquidity through a 50-basis points CRR (cash reserve ratio) hike in the January 29th policy review.”

Back pay of about Rs 18,000 crore ($3.96 billion) to federal government workers in October, the second instalment of a wage pact agreed in 2008, has also helped shore up consumers’ purchasing power.

A private survey found last week the December purchasing managers’ index showed the pace of manufacturing activity jumped to its highest since May on sharp rises in new work and output, while car sales in December rose an annual 40.3 per cent.

Industrial output, which grew for the 11th consecutive month exceeded South Korea’s but lagged the figure for neighbouring China. Output in China grew 19.2 per cent in November, while it rose 1.4 per cent in South Korea.

The benchmark 10-year bond yield rose to 7.81 per cent from 7.78 per cent before the data, while the rupee pared some of its loss to be at 45.38/39 per dollar from 45.41/42 before the data.

India – with its consistent growth performance and abundant highly skilled manpower provides enormous opportunities for investments. India is the largest democracy and tenth largest economy in the world. India is the fourth largest economy in the world in terms of purchasing power parity.

India has a federal system of Government with clear demarcation of powers between the Central Government and the State Governments.

India provides a liberal, attractive, and investor friendly investment climate.

India has the most liberal and transparent policies on foreign direct investment (FDI) among major economies of the world.

• 100% FDI is allowed under the automatic route in all sectors/activities except in few areas, which require prior approval of the Government.
• Under automatic route, investors are required to only notify the Reserve Bank of India within 30 days of receipt of inward remittances.

India has liberalized and simplified foreign exchange controls.

• Rupee is freely convertible on current account.
• Rupee is almost fully convertible on capital account for non-residents.
• For FDI- Profits earned, dividends and proceeds out of the sale of investments are fully repatriable.
• There are some restrictions for resident Indians on capital account on incomes earned in India.

Indian economy has been growing at an average growth rate of about 8.8% p.a over the last three years; the growth rate in 2007-08 was 9%.

• Imports in 2007-08 grew by 29% and exports by 25.8%.
• Manufacturing sector grew by 8.8% and services by 12% in 2007-2008.
• India has a large middle class and 55% of its population is below the age of 25.
• High economic growth and rising per capita income has resulted in high growth in the domestic market, which is the prime growth engine for Indian economy.

Government of India accords high priority to development of infrastructure in highways, ports, railways, airports, power, telecom, etc. Government is actively seeking domestic and foreign private investment, for infrastructure sector development.