Indian Rupee Strengthens to One-Week High as Stocks Rebound

India’s rupee rose to a one-week high on speculation a rebound in the nation’s benchmark stock index will lure overseas investors as Europe takes steps to resolve its debt crisis.

The BSE Sensitive Index of shares climbed 3.3 percent after European Central Bank President Jean-Claude Trichet said yesterday the monetary authority would reintroduce purchases of covered bonds and offer loans to banks. Falling demand for the dollar also aided gains in the rupee, said Vikas Babu, a currency trader in Mumbai at Andhra Bank.

“The Sensex started positive and supported the rupee on expectations of capital inflows,” said Babu. “The dollar had also been overbought as investors avoided assets from countries like India because of worries about Europe.”

The rupee strengthened 0.5 percent to 49.0888 per dollar as of 10:34 a.m. in Mumbai, according to data compiled by Bloomberg. It earlier touched 48.9950, its highest level since Sept. 29. The currency declined 0.2 percent for the week. India’s markets were shut yesterday for a public holiday.

The Dollar Index, which tracks the currency’s performance against six major trading partners, declined for a third day.

Offshore forwards indicate the rupee will trade at 49.64 to the dollar in three months, compared with expectations of 49.88 yesterday. Forwards are agreements to buy or sell assets at a set price and date. Non-deliverable contracts are settled in dollars.

Greek finance minister rules out default but targets at risk

Greek Finance Minister Evangelos Venizelos defended his government's handling of the economy on Tuesday, saying there was no talk of Greece defaulting on its debt and blaming a deep recession for its failure to meet a deficit target.

JSW Steel stock ratings slashed

Morgan Stanley has downgraded the rating of JSW Steel shares to under-weight' from 'equal-weight' and has cut the target price to Rs 528 from Rs 732 citing adjustments made to iron ore, coking coal, steel price assumptions and Karnataka iron ore mining ban.

Economic risks imply risks to (current) steel prices. This can be negative for (JSW) Ispat's earnings in particular Morgan Stanley said in a note.
JSW steel owns 49.3 percent in JSW Ispat as per the National Stock Exchange of India.
The brokerage has cut the earnings estimates for JSW Steel by 16.2, 19.04, 17.9 percent for FY12, FY13 and FY14 respectively.
At 10.30 a.m JSW Steel stock was trading at Rs 551.55, down 6.8 percent, and JSW Ispat shares were trading lower by 3.83 percent at Rs 12.55.

Sensex up 473 pts on proposal to cut security transaction tax

Sensex, which had lost 1,050 points in last four trading sessions, bounced back 472.93 points to close at 16,524.03 as investors pinned hopes on renewed efforts by European policymakers to find a way to cut Greece's debt.

Gold down by record $100

Gold prices slumped more than $100 an ounce on Friday, the biggest fall on record in dollar terms, as traders sold to cover losses, while globalstocks edged up on expectations the European Central Bank will take new measures to contain the euro zone debt crisis.

Obama offers $3.6 trillion deficit plan

President Barack Obama laid out a $3.6 trillion plan on Monday to cut budget deficits partly by raising taxes on the rich, but Republicans rejected it as a political stunt and made clear the proposal has little chance of becoming law.

Inflation ?

Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past. For example, if there was a 6% inflation rate for the next 20 years, a Rs. 100 purchase today would cost Rs. 321 in 20 years.

sensex slips again, nifty under 4900

BSE Sensex ended at 16,162, dropping 199 points. It had earlier touched a day's high of 16,368 and a day's low of 16,052. It opened at 16,222. The NSE Nifty closed at 4,867, down 56 points.

PPF ?

What is PPF?    

--The PPF is a long-term, government backed small savings scheme of the Central Government started with the objective of providing old age income security to the workers in the unorganized sector and self employed individuals.

What is the interest rate offered through PPF?

--Currently, the interest rate offered through PPF is around 8%, which is compounded annually.


What is duration of the investment?

--The duration for the investment is 15 years. The account holder has an option to extend the PPF account for any period in a block of 5 years after the minimum duration elapses. The account holder can retain the account after maturity for any period without making any further deposits.


What is the minimum and maximum amount of deposit?

--The minimum deposit that you can make into a PPF account in one whole financial year is Rs. 500. The maximum is Rs. 70, 000.


Who can open a PPF account and where?

--A PPF account can be opened by an individual (salaried or non-salaried). An individual can open only one PPF account to which he contributes. A PPF account can also be opened in the name of your spouse or children.
It can be opened with a minimum deposit of Rs. 100 at any branch of the State Bank of India (SBI) or branches of it’s associated banks like the State Bank of Mysore or Hyderabad. The account can also be opened at the branches of a few nationalized banks, like the Bank of India, Central Bank of India and Bank of Baroda, and at any head post office or general post office.


What are the tax benefits from PPF?

--The amount you invest is eligible for deduction under the Rs. 1, 00,000 limit of Section 80C. On maturity, the entire amount including the interest is non-taxable.

Is it possible to withdraw the amount deposited at any time during the tenure?

--Yes. You can take a loan on the PPF from the third year of opening your account to the sixth year. So, if the account is opened during the financial year 2009-10, the first loan can be taken during financial year 2011-12 (the financial year is from April 1 to March 31). The loan amount will be up to a maximum of 25% of the balance in your account at the end of the first financial year. You can make withdrawals during any one year from the sixth year. You are allowed to withdraw 50% of the balance at the end of the fourth year, preceding the year in which the amount is withdrawn or the end of the preceding year whichever is lower. For e.g., if the account was opened in 2000-01, and the first withdrawal was made during 2006-07, the amount you can withdraw is limited to 50% of the balance as on March 31, 2003, or March 31, 2006, whichever is lower.

Maruti Suzuki is looking forward for compact Dzire, build on the swift platform

Maruti Suzuki India Ltd’s Manesar plant, which has faced labour unrest since June, is preparing to roll out a new compact sedan to take advantage of lower tax rates on models that are shorter than 4 metres in length.
Maruti Suzuki’s Manesar factory, which has only produced the Swift hatchback since the second round of workers’ protest started on 29 August, is testing the sub-4-metre car built on the Swift platform for introduction during the Delhi Auto Expo in January or even earlier, according to two company officials, who declined to be named.
The Manesar factory also makes A-star hatchback and SX4 sedan and can produce 1,200 cars a day.
The new sedan—known as Swift 3.99 among workers—is being developed at an investment of at least Rs. 500 crore and may primarily be targeted at markets outside India as people in Europe and Latin America prefer smaller, fuel-efficient cars as the slowdown in the global economy reduces incomes.
There were at least 20 such cars including a few left-hand drives meant for overseas markets parked inside the plant. A Mint photographer was prevented from taking pictures of the car.
“We have started the trial runs,” said an official at the plant, who did not want to be named and refused to share more details. A formal name for the car has not been decided.
“If the trial runs have started, then it is quite possible that we may see the car much before the Auto Expo,” said Shapur Kotwal, deputy editor, Autocar India magazine.
I.V. Rao, managing executive officer, engineering, at Maruti Suzuki and Shashank Srivastava, chief general manager, marketing and sales, declined to comment.
The car will be fitted with a 90 bhp engine in both petrol and diesel versions. The only major difference is a significant reduction in the boot space compared with the Swift Dzire. The interiors are somewhat similar to the new Swift.
Maruti Suzuki is planning to introduce a shorter version of the Dzire, which is 4.16m long, to avail the benefit of lower excise tax, a move that will give it room to be more price-competitive. The existing Dzire puts it in the category of a big car, attracting excise duty of 22% compared with 10% for a car that is less than four metres long.
The current ex-showroom price of the Dzire in Delhi is Rs. 4.94 lakh. However, the compact Dzire is likely to be priced around Rs. 4.49 lakh.
The shrinking of the Swift Dzire will also help Maruti Suzuki fend off competition from cheaper models such as Toyota Motor Corp.’s Etios andTata Motors Ltd’s Indigo sedans at a time when higher interest rates on automobile loans have discouraged car buyers. At least 70% of Indians borrow to purchase cars.
“Etios sedan, which sells at less than Rs. 5 lakh, is a threat to Dzire,” said an industry expert, who did not want to be named.
In the 2006 Union budget, the then finance minister P. Chidambaram gave special benefits to small cars to boost local production and promote India as a global small-car manufacturing hub.
The budget proposed an 8 percentage point excise duty reduction to 16% for cars less than 4m in length and with petrol engines displacing less than 1,200cc or diesel engines smaller than than 1,500cc.
The Dzire comes with a 1,200cc petrol and 1,250cc diesel engine that meets the engine displacement criteria.
In 2008, Tata Motors was the first to take advantage of the tax incentive for smaller cars by introducing the Indigo CS model. The car maker chopped the boot off the Indigo, dropped its length to 3.9m, and passed on some of the benefit of the lower tax to customers.
As a result, the Indigo CS, or compact sedan, became approximately Rs. 50,000 cheaper.
The Economic Times had last year that Mahindra and Mahindra Ltd was planning to do the same with its multi-utility vehicle Xylo.

Sensex 704 points down.........

Stock markets turned a sea of red today, with the BSE Sensex plunging the most in 26 months – down 704 points to 16,361.15 at the close -- as investors dumped equities globally on US Fed warning on the American economy, triggering fresh fears of worldwide slowdown.


Similarly, the broad-based NSE index Nifty plunged 209.60 points, or 4.08 per cent to close below 5K mark at 4,923.65.
All the 13 sectoral indices closed with sharp losses of up to 6 per cent, while all 30 Sensex-scrips closed in red.
Investors lost over Rs 2 lakh crore in the meltdown. Besides, fall of the rupee to over 2-year lows against the US dollar -- Rs 49.36 per USD in intra-day trade – weakest level since July 13, 2009, added to investor worries.
economy.Asian and European markets tumbled, following drubbing of the Wall Street as funds pulled out of risky assets on worries over slowing global 
Analysts said the US Federal Reserve disappointed investors with its stimulus plan yesterday, while warning of serious downside risks to American growth amid severe euro zone debt crisis.
The US indices, Dow Jones and Nasdaq tanked 2.49 per cent and 2.01 per cent respectively, weighing heavily on other global markets today.
The Hong Kong's Heng Seng dropped 4.85 per cent, Japan's Nikkei by 2.07 per cent, Indonesia¿s index by 8.88 per cent.
Markets fell more than 3 per cent in Taiwan, Russia and Poland. The European indices, led by London' FTSE plunged 4.55 per cent, followed by Paris - 4.65 per cent - in early trade.
The 30-share BSE index, Sensex, opened 230 points lower and plunged to 16,361.15, a fall of 704.00 points or 4.13 per cent. It had plunged by 869.65 points or 5.83 per cent on July 6, 2009.two carry over 20 per cent weight on the Sensex. RIL alone contributed over 110 points to the fall.economy," said Amit Chheda, Equity Head at Inventure Growth and Securities.Reliance Industries fell 6.16 per cent and Infosys by 3.28 per cent. The 
"Nonetheless, worries in Euro zone are larger at the moment. Unless a comprehensive bail-out is not acted upon, we could see high risks to European banks holding euro-assets, which could lead to a domino effect in other continents as well," Chheda added.
Meanwhile, Finance Minister Pranab Mukherjee, who is on a visit to the US, expressed confidence that India will be able to achieve 8 per cent growth this year, even as he noted that the global economic environment remains an area of concern.
"We will have 8 per cent growth even this year, though the first quarter growth figure is 7.7 per cent," he told reporters here after meeting leading Indian industrialists at an investment forum.
Investors ignored sharp dip in food inflation to 8.84 per cent for week ended September 10, from 9.47 per cent in the earlier week.was the top loser from the Sensex pack with a fall of 9.33 per cent, followed by DLF (7.16 pc), Sterlite Ind (6.82 pc), Tata Motors (5.98 pc), Bharti Airtel (5.22 pc), Jindal Steel (4.90 pc), TCS (4.59 pc), Hindalco (4.52 pc), L&T (4.46 pc), HDFC (4.42 pc), HDFC Bank (4.28 pc), ICICI Bank (4.20 pc), NTPC (4.14 pc) and Wipro (4.14 pc).Jaiprakash Associates 
Others closed down between 1 per cent and 4.0 per cent.
Among sectoral indices, BSE-Realty crashed by 5.67 pc, Metal (4.34 pc), Oil&Gas (4.19 pc), Teck (4.10 pc), Bankex (3.98 pc), Auto (3.86 pc), IT (3.86 pc) and Capital Goods (3.83 pc).
The total market breadth at BSE was sharply weak as 2,235 stocks ended with losses, while only 606 finished with gains.

The total turnover was relatively up at Rs 2,818.81 crore from Rs 2,536.54 crore yesterday.economy.Asian and European markets tumbled, following drubbing of the Wall Street as funds pulled out of risky assets on worries over slowing global 

Analysts said the US Federal Reserve disappointed investors with its stimulus plan yesterday, while warning of serious downside risks to American growth amid severe euro zone debt crisis.
The US indices, Dow Jones and Nasdaq tanked 2.49 per cent and 2.01 per cent respectively, weighing heavily on other global markets today.
The Hong Kong's Heng Seng dropped 4.85 per cent, Japan's Nikkei by 2.07 per cent, Indonesia¿s index by 8.88 per cent.
Markets fell more than 3 per cent in Taiwan, Russia and Poland. The European indices, led by London' FTSE plunged 4.55 per cent, followed by Paris - 4.65 per cent - in early trade.
The 30-share BSE index, Sensex, opened 230 points lower and plunged to 16,361.15, a fall of 704.00 points or 4.13 per cent. It had plunged by 869.65 points or 5.83 per cent on July 6, 2009.two carry over 20 per cent weight on the Sensex. RIL alone contributed over 110 points to the fall.economy," said Amit Chheda, Equity Head at Inventure Growth and Securities.Reliance Industries fell 6.16 per cent and Infosys by 3.28 per cent. The 
"Nonetheless, worries in Euro zone are larger at the moment. Unless a comprehensive bail-out is not acted upon, we could see high risks to European banks holding euro-assets, which could lead to a domino effect in other continents as well," Chheda added.
Meanwhile, Finance Minister Pranab Mukherjee, who is on a visit to the US, expressed confidence that India will be able to achieve 8 per cent growth this year, even as he noted that the global economic environment remains an area of concern.
"We will have 8 per cent growth even this year, though the first quarter growth figure is 7.7 per cent," he told reporters here after meeting leading Indian industrialists at an investment forum.
Investors ignored sharp dip in food inflation to 8.84 per cent for week ended September 10, from 9.47 per cent in the earlier week.was the top loser from the Sensex pack with a fall of 9.33 per cent, followed by DLF (7.16 pc), Sterlite Ind (6.82 pc), Tata Motors (5.98 pc), Bharti Airtel (5.22 pc), Jindal Steel (4.90 pc), TCS (4.59 pc), Hindalco (4.52 pc), L&T (4.46 pc), HDFC (4.42 pc), HDFC Bank (4.28 pc), ICICI Bank (4.20 pc), NTPC (4.14 pc) and Wipro (4.14 pc).Jaiprakash Associates 
Others closed down between 1 per cent and 4.0 per cent.
Among sectoral indices, BSE-Realty crashed by 5.67 pc, Metal (4.34 pc), Oil&Gas (4.19 pc), Teck (4.10 pc), Bankex (3.98 pc), Auto (3.86 pc), IT (3.86 pc) and Capital Goods (3.83 pc).
The total market breadth at BSE was sharply weak as 2,235 stocks ended with losses, while only 606 finished with gains.

The total turnover was relatively up at Rs 2,818.81 crore from Rs 2,536.54 crore yesterday.economy.Asian and European markets tumbled, following drubbing of the Wall Street as funds pulled out of risky assets on worries over slowing global 

Analysts said the US Federal Reserve disappointed investors with its stimulus plan yesterday, while warning of serious downside risks to American growth amid severe euro zone debt crisis.
The US indices, Dow Jones and Nasdaq tanked 2.49 per cent and 2.01 per cent respectively, weighing heavily on other global markets today.
The Hong Kong's Heng Seng dropped 4.85 per cent, Japan's Nikkei by 2.07 per cent, Indonesia¿s index by 8.88 per cent.
Markets fell more than 3 per cent in Taiwan, Russia and Poland. The European indices, led by London' FTSE plunged 4.55 per cent, followed by Paris - 4.65 per cent - in early trade.
The 30-share BSE index, Sensex, opened 230 points lower and plunged to 16,361.15, a fall of 704.00 points or 4.13 per cent. It had plunged by 869.65 points or 5.83 per cent on July 6, 2009.two carry over 20 per cent weight on the Sensex. RIL alone contributed over 110 points to the fall.economy," said Amit Chheda, Equity Head at Inventure Growth and Securities.Reliance Industries fell 6.16 per cent and Infosys by 3.28 per cent. The 
"Nonetheless, worries in Euro zone are larger at the moment. Unless a comprehensive bail-out is not acted upon, we could see high risks to European banks holding euro-assets, which could lead to a domino effect in other continents as well," Chheda added.
Meanwhile, Finance Minister Pranab Mukherjee, who is on a visit to the US, expressed confidence that India will be able to achieve 8 per cent growth this year, even as he noted that the global economic environment remains an area of concern.
"We will have 8 per cent growth even this year, though the first quarter growth figure is 7.7 per cent," he told reporters here after meeting leading Indian industrialists at an investment forum.
Investors ignored sharp dip in food inflation to 8.84 per cent for week ended September 10, from 9.47 per cent in the earlier week.was the top loser from the Sensex pack with a fall of 9.33 per cent, followed by DLF (7.16 pc), Sterlite Ind (6.82 pc), Tata Motors (5.98 pc), Bharti Airtel (5.22 pc), Jindal Steel (4.90 pc), TCS (4.59 pc), Hindalco (4.52 pc), L&T (4.46 pc), HDFC (4.42 pc), HDFC Bank (4.28 pc), ICICI Bank (4.20 pc), NTPC (4.14 pc) and Wipro (4.14 pc).Jaiprakash Associates 
Others closed down between 1 per cent and 4.0 per cent.
Among sectoral indices, BSE-Realty crashed by 5.67 pc, Metal (4.34 pc), Oil&Gas (4.19 pc), Teck (4.10 pc), Bankex (3.98 pc), Auto (3.86 pc), IT (3.86 pc) and Capital Goods (3.83 pc).
The total market breadth at BSE was sharply weak as 2,235 stocks ended with losses, while only 606 finished with gains.

The total turnover was relatively up at Rs 2,818.81 crore from Rs 2,536.54 crore yesterday.

Govt unveils new duty drawback plan for exporters

The new duty drawback scheme will cover 1,100 items, R.S. Gujral, Finance Secretary, told reporters in New Delhi today.

The Government on Friday announced a new duty drawback plan for exporters to items under the Duty Entitlement Pass Book (DEPB) program, which expires on Sept. 30 The new duty drawback scheme will cover 1,100 items, R.S. Gujral, Finance Secretary, told reporters in New Delhi today. However, the Government will end a tax break under the DEPB for exporters with effect from Sept. 30, Gujral said. The new drawback scheme, proposed by the Saumitra Chaudhuri panel, has reportedly been approved by Finance Minister Pranab Mukherjee.

Sensex scores hat-trick...Up for 3rd straight week

Nifty adding ~25 points or 0.4% to close at 5084 while Sensex gained 0.5% to close at 16,994. An eventful week ended on a flat note with the NSE Nifty adding ~25 points or 0.4% to close at 5084 while the BSE Sensex gained 0.5% to close at 16,994. The benchmark indices surged slightly higher extending its winning streak to the third straight week. The BSE Capital Goods, FMCG and the Metals index were among the major losers. On the other hand, BSE IT index, Oil & Gas, Realty and Auto were among the top gainers. A spate of domestic bad news was countered by encouraging external developments, especially from the eurozone. The RBI announced a 25 bps hike in policy rates. But it hasn’t scaled down its hawkish stance. It could go for one more rate hike, especially if inflation doesn’t cool and the rupee remains under pressure.

Maruti shares recover as strikes at 3 Suzuki units end

Shares of car major Maruti Suzuki India Ltd. bounced back from intraday lows after reports that labour unrest at three of Suzuki's Indian subsidiaries was called off.  However, it was not clear whether the strike at Maruti Suzuki's Manesar factory has also been ended or not.  It may be recalled that Maruti's car production at Manesar has been severely crippled over the past several days due to the labour unrest. Workers at Suzuki Powertrain India, Suzuki Motorcycle India and Suzuki Castings called off their two-day-long strike this morning after an agreement was reached with the management of the companies. On Wednesday, workers at Suzuki Powertrain India and Suzuki Motorcycle India went on strike in support of their colleagues at Maruti Suzuki India's Manesar plant. Yesterday, Maruti Suzuki had announced that it will shut down its plants at Manesar and Gurgaon on Friday due to engine supply constraints on account of the strike at Suzuki Powertrain. Suzuki Powertrain India employs over than 2,000 workers at its Manesar plant, where it manufactures diesel engines and transmissions for supplies to Maruti Suzuki. Suzuki Castings has nearly 700 workers. Suzuki Motorcycles India has 1,400 workers at its plant near Manesar. The stock closed at Rs1106, up Rs23.65 or 2%. The stock has hit a high of Rs1117 and a low of Rs1060

Rate hike will bring down inflation, hopes FM

Finance Minister Pranab Mukherjee Friday said hike in key policy rates by the Reserve Bank of India would help bring down inflation to a 'comfortable' level sooner rather than later.

SBI likely to hike rates in 15 days.

A day after the Reserve Bank raised key policy rates, country's largest lender State Bank of India's Chairman Pratip Chaudhuri today said there will be a hike in its interest rates in the next 15 days.


"In another 15 days we will if the input prices go up, the output has to go up," Chaudhuri said.
When asked about the likely quantum of the rate hike and if it will be at par with RBI's 25 basis point hike, he said, it will be "roughly" the same.
With an eye on taming high inflation, which stood at 9.74 per cent for August, RBI yesterday hiked its short term lending rate by 25 basis points to 8.25 per cent.

Indian Overseas Bank Chairman and Managing Director M Narendra had also said yesterday that banks needed to pass on the hike to customers as their cost of funds has gone up.

ONGC's Rs 12000 cr FPO put on hold: FM

Amid volatility in the stock market, the government on 16 sep. decided to postpone its 5% stake sale in state-run oil and gas explorer ONGC , that would have fetched the exchequer about Rs 12,000 crore.

Rates hiked by 25bps, petrol by Rs 3.14

In its quarterly review on Friday, the central bank hiked key interest rates by 25 basis points, taking the repo rate to 8.25% and reverse repo to 7.25%. While this move was expected by the market, it was the continued hawkish stance of the RBI that trimmed gains.

What is Repo rate and Reverse Repo rate?

Commercial banks are required to maintain with the RBI an average cash balance, the amount of which shall not be less than 3% of the total of the Net Demand and Time Liabilities (NDTL), on a fortnightly basis and the RBI is empowered to increase the rate of CRR to such higher rate not exceeding 20% of the NDTL.

What is Reverse Repo rate?

Reverse Repo rate is the rate at which the RBI borrows money from commercial banks. Banks are always happy to lend money to the RBI since their money are in safe hands with a good interest.

An increase in reverse repo rate can prompt banks to park more funds with the RBI to earn higher returns on idle cash. It is also a tool which can be used by the RBI to drain excess money out of the banking system. 

What is a Repo Rate?

The rate at which the RBI lends money to commercial banks is called repo rate. It is an instrument of monetary policy. Whenever banks have any shortage of funds they can borrow from the RBI. 

A reduction in the repo rate helps banks get money at a cheaper rate and vice versa. The repo rate in India is similar to the discount rate in the US.

Repo rate, reverse repo rate hiked by RBI; home, auto loan EMIs to go up

All loans are set to become costlier, with the Reserve Bank on Friday hiking the key interest rate for the 12th time since March, 2010, by 25 basis points to rein in high inflation.

With today's decision, the short-term lending (or repo) rate at which banks borrow from the RBIstands increased to 8.25 per cent and the short-term borrowing (reverse repo) rate at which banks park their funds with the RBI to 7.25 per cent.

Headline inflation rose to 9.8 per cent in the month of August from 9.2 per cent in July this year.

Despite the RBI hiking rates several times since March, headline and food inflation are close to double digits.

"As such, a premature change in the policy stance could harden inflationary expectations, thereby diluting the impact of past policy actions. It is, therefore, imperative to persist with the current anti-inflationary stance," the RBI said in its mid-quarter review of the monetary policy.

Going forward, the RBI's stance will be influenced by signs of downward movement in the inflation trajectory, to which a moderation in demand is expected to contribute, besides the implications of global developments, it said.

"The step is consistent with the RBI monetary stance for the first half of 2011-12 and overall concerns on growth sustainability in the medium term.

"I am hopeful that measures taken would get us back a more comfortable inflation situation earlier rather than later, while having scope for growth to pick up in the second half of the year," Finance Minister Pranab Mukherjee said.

Commenting on the rate hike, Indian Overseas Bank Chairman and Managing Director M Narendra said banks need to pass on the hike to customers as the cost of funds has gone up.

"I believe banks would wait till the month-end before taking a call on an interest rate hike," he said.

The RBI said food inflation is near double digits, despite the normal monsoon, underlining the fact that it is driven by structural demand-supply imbalances and cannot be dismissed as a temporary phenomenon.

After a slight moderation in July, non-food manufactured products inflation rose again in August, suggesting continuing demand pressures, it said.

For the week ended September 3, food inflation stood at 9.47 per cent.

The monsoon has been normal so far, it said, adding that the first advance estimates for the 2011-12 kharif season hint at record production of rice, oilseeds and cotton, though output of pulses may decline.

Meanwhile, it said the hike in petrol prices by Rs 3.14 per litre with effect from September 16, 2011, will have a direct impact of 7 basis points on WPI inflation, in addition to an indirect impact with a lag.

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