Surge in prices of metal and food items pushed inflation rate growth by 6.68 per cent, the highest ever in the past one year, dashing hopes of a softer interest rate regime in the near future. After remaining close to 4 per cent in recent months, inflation has begun moving upwards, and surged by 0.76 per cent during the week ended March 15. It was 5.92 per cent in the previous week and 6.56 per cent in the corresponding period last year.
In line with the global trends, metal prices continued to be more expensive. While joist and rolls rose by a whopping 34 per cent, heavy light structural were up by 32 per cent, bright bars by 24 per cent, basic pig iron and foundry pig iron by 17 per cent each and steel sheets, plates and strips by 13 per cent each. Food items, like vegetables, rape seeds and mustard oil also turned costlier.
Announcement of Sixth Pay Commission recommendations, and provisions for enhanced expenditure on social sectors in the Budget 2008-09 coupled with rising crude oil prices have also raised expectations about high inflation. The rise in inflation may not let RBI to go for a soft monetary stance and the central bank is expected to continue the tight interest rate policy.
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The Indian tyre market may become more competitive as State-run MMTC Ltd has finalised plans to market Chinese truck-bus tyres in India. Cross-ply and radial tyres both are to be imported from April 2008 onwards. MMTC is planning to grab 15-20 per cent share of the 1.2-lakh-import market for bus tyres in the country. Apart from directly marketing to large fleet-owners including the State transport corporations, MMTC is also setting up its own dealer network for retail sales.
At present, 35-odd small players dominate tyre import trade. MMTC is set to emerge as the first major outfit to start importing tyres in India. The entry of MMTC will help in consolidation of the trade. Also there would be resistance on increase in prices of tyres by local companies going forward.
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Long-distance telecom (STD) tariffs are set to become cheaper with regulator Trai announcing on Thursday that access deficit charge (ADC) on domestic calls will be eliminated from April. International calls to India will also be cheaper as Trai has halved their ADC to 50 paise per minute from April 1 to September-end, after which it will be phased out. However this reduction of charges on incoming long distance calls will have no benefit for Indian consumers, but will help consumers in other countries like NRI’s to call their relatives back home at rates lower by 50 paise for every minute of the call. This will also help reduce the grey market calls in the international telephony market due to lower arbitration margins.
Currently, all telcos pay 0.75% of total revenues towards ADC, which is used to support state-owned BSNL’s unviable fixed-line operations in rural India. Private operators who were bearing the burden of paying the charges till now stand to collectively save about Rs 750 crore, for individual subscribers this move will translate into a reduction of about 0.75 per cent on their monthly bills. For example if a mobile user spends Rs 200 a month he will now have to pay Rs 1.50 less. The Cellular Operators Association of India also said that the savings will be passed on to the consumers though it may not result in any significant decrease in tariffs when distributed among 300 million subscribers. Within hours of the Trai announcement, all telcos said they would pass on the savings to subscribers.
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