he Kelkar Committee set up by the Government to suggest measures for fiscal consolidation has recommended phased elimination of subsidies.

The Committee report, which has been uploaded by the Union Finance Ministry on its website for informed debate, suggests elimination of subsidies in diesel, Kerosene, cooking gas, petrol and foodgrains supplied through ration shops to deal with the deteriorating fiscal situation.

Secretary in the Department of Economic Affairs Arvind Mayaram said in New Delhi that the Committee report was under consideration of the Government and it had not taken a view on it so far. He said some recommendations appeared contrary to the declared objective of the government.

AIR correspondent reports that Finance Minister P Chidambaram has constituted the panel to assist the Centre in formulating the path of fiscal consolidation. Headed by former finance secretary Vijay Kelkar, the Committee has submitted its report on September 3.

The report has suggested that half of diesel subsidy should be eliminated by March 2013 and the rest by fiscal 2014. It recommended that kerosene price should be raised by Rs 2 rupees per litre and subsidy on it needed to be reduced by one-third by fiscal 2015. It also suggested phased elimination of subsidy on LPG in the next four years.

The panel has also warned that High fiscal deficits tend to heighten inflation, reduce room for monetary policy stimulus, increase the risk of external sector imbalances and dampen private investment, growth and employment.

India and Pakistan have signed three agreements for co-operation in customs matters, redressal of trade grievances and conforming to quality standards to further normalise economic relations between the two countries. A joint statement issued after the two-day commerce secretary level talks in Islamabad yesterday said that these agreements are expected to substantially facilitate bilateral trade mechanisms. Commerce Secretary S R Rao was in Islamabad for the 7th round of talks on Commercial and Economic Co-operation with his Pakistani counterpart Munir Qureshi.

 Economic growth declined to 5.5 per cent in the April-June quarter this fiscal due to poor performance of manufacturing, mining and farm sectors.The gross domestic product (GDP) had expanded by 8 per cent in the April-June quarter of 2011-12. During the quarter ended June 30, the manufacturing sector grew marginally by 0.2 per cent, against 7.3 per cent growth in the same period of 2011-12, according to the official data released today.

Farm production expanded by 2.9 per cent in the first quarter against 3.7 per cent in the same period last year. The trade, hotels, transport and communications segment also witnessed lower pace of growth at 4 per cent compared to 13.8 per cent expansion in the same quarter year-ago period.
The growth rate of electricity, gas and water supply also dipped to 6.3 per cent in first quarter, from 8 per cent in the corresponding period last fiscal.

However, the growth in the construction sector was robust at 10.9 per cent during Q1 of 2012-13, as against 3.5 per cent in the year-ago period.
Economic growth in the January-March quarter was at nine-year low of 5.3 per cent, as per the provisional estimates released earlier.

The Prime Minister has said that effective policy measuesr will be taken to enable the country return to the high growth path. Dr. Manmohan Singh appealed to all political parties to work with the government to restore the momentum of growth. Dr. Singh was talking to media persons last night on board the special aircraft while returning to New Delhi after a successful visit to Mexico and Brazil.

Dr. Singh said, problems in fiscal management including balance of payments deficit in the current account will be tackled effectively and credibly. He said that the country is not experiencing stagflation but a slowdown. Dr. Singh assured that policies will be put in place to ensure that the growth rate of the economy will be back to seven percent at the end of this fiscal.


Replying to a question, the Prime Minister said, events in the last couple of days convinced him that there are no international solutions to the problems of India's size and diversity. Referring to the balance of payment crisis, the Prime Minister said, India needs foreign investment both in portfolio as well as direct investment. Dr Singh also made it clear that obstacles and policy impediments hindering investments will be removed.

He said, as far as the rupee is concerned, it is operating on a system which is a market based exchange rate and the government curbs violent fluctuations. Expressing confidence that with the measures outlined by the government in the recent days, the rupee will return to a more stable path. On the reported lack of co-operation from state governments in implementing projects, the Prime Minister said, when it comes to facing fundamental problems of the country, all political parties will have to work with the Centre in attracting investments and ensuing high growth. 

On whether he would appeal to Mamata Banerjee to support Pranab Mukherjee's candidature in the Presidential election, Dr. Singh said, the Trinamool Congress continues to be with the UPA. The Prime Minister said he has still not given up hope on the Trinamool Congress finding its way in supporting the candidature of Mr. Mukherjee. He said he had spoken to BJP leaders including Mr. LK Advani to support Mr Mukherjee.

Pointing out that he has been pondering over a number of issues including that of the New Finance Minister, the Prime Minister said a number of issues need to be resolved and it will not be proper for him to speak about them when he is outside of the country.

On a probable cabinet expansion, Dr. Singh said it is a legitimate expectation and the media will get to know about it when it takes place. Dr. Manmohan Singh reached New Delhi late last night.

US stocks rallied, after positive housing data, and on hopes that the US Federal Reserve will take further measures to stimulate the economy. So the Dow Jones Industrial Average rose 96 points or 0.8%, to 12,837. The S&P 500 added 13 points, or 1%, to 1,358. And the Nasdaq Compostie index gained 34 points, or 1.2%, to 2,930. Investors are awaiting the U.S. Federal Reserve's Federal Open Market Committee's statement later today.

In economic news, the US Commerce Department said builders started work on new homes in May at a slightly slower pace. Housing starts fell 4.8% in May, to an annual rate of 708,000--below expectations. But permits for future construction jumped to the highest level in nearly four years. In euro zone news, the German economic expectations, or ZEW survey declined at fastest rate in over a year. And Spanish bond yields were down from recent highs.

The Prime Minister is now on his way to Los Cabos in Mexico to attend the crucial G-20 summit. Dr. Manmohan Singh Left Frankfurt on Sunday after an overnight stay. The two day summit beginning tomorrow is likely to devote substantial time to deliberate on an action plan to revive growth, amidst a meltdown witnessed in several countries.

In his Departure statement, Dr Singh expressed the hope that European leaders will take resolute action to resolve the financial problems facing the region. Dr Singh said, continuing problems in Europe would dampen global markets and adversely impact India’s economic growth. Pitching for development to be core of the deliberations in the G-20 summit, the Prime Minister stressed the need to focus on investment in infrastructure as a means of stimulating global growth.

On the sidelines of G-20 Summit, Dr Singh will have bilateral talks with Mexican President Felipe Calderon, Russian President Vladimir Putin and German Chancellor Angela Merkel. He will also be meeting French President Francois Hollande, Prime Minister of Britain David Cameron Prime Minister of Canada Stephen Harper. 

On the second leg of his visit, Dr Manmohan Singh be attending the RIO+20 Summit in Brazil. The Rio+20 Conference is likely to debate complex and contentious issues such as green economy and Sustainable Development Goals.

Finance Minister Pranab Mukherjee says, the government is not sitting idle on reforms and indicated a cut in interest rates by the RBI, in its review of Monitory policy tomorrow, to arrest the slowdown in Economic growth.

Addressing an Assocham conference in Mumbai yesterday, Mr Mukherjee said, the government is taking steps to address concerns expressed by global agencies like Standard & Poor's and the industry.

Indicating that the RBI too will be joining the government in dealing with the slowdown, he said he is confident that keeping in view all the factors, the RBI will adjust the monetary policy as the government is adjusting fiscal policy.

Mr Mukherjee listed the growing burden of petroleum subsidy as one of the difficult areas before the Centre for which he appealed to the states to reduce their taxes. He said he has written to the states that the Centre will also respond but it has to be balanced because if federal finance becomes weak, nobody will be able to bailout the Indian economy.

Prime Minister Dr Manmohan Singh has called a meeting on Wednesday to review the status of infrastructure sector with an aim of pushing the slowing growth.

AIR correspondent quoting official sources reports, the meeting, which will be attended by ministers of all infrastructure-related ministries, is expected to assess whether the targets are being met and what needs to be done to address bottlenecks.

AIR correspondent adds that the government has maintained that one trillion US Dollars would be required in the infrastructure sector during the 12th Plan of which it expects 50 per cent from private sector.

According to Finance Ministry documents, projects worth 1.46 lakh crore rupees are pending because of absence of regulatory clearances. These are in the sectors of power, steel, highways and cement.

These projects are besides the mega projects like 12 billion US Dollars Posco steel project and 90 billion US Dollars Delhi-Mumbai Industrial Corridor, which are also delayed on various counts like clearances and land acquisition.

The meetingassumes signif icance as it comes against the backdrop of economic growth falling to nine-year low of 6.5 per cent in 2011-12 and contraction of industrial output in March quarter.

The meeting comes close on the heels of the decision by the Prime Minister to set up Investment Tracking System to monitor the status of projects of 1,000 crore ruppes and above.

The government also set up yesterday a high-level inter-ministerial board under Commerce and Industry Minister Anand Sharma to boost the manufacturing sector.

he Captains of Industry today outlined 12 point action agenda for reviewing the economic growth of the economy including moratorium on additional expenses on doles.(: something distributed at intervals to the needy,foods or grants to unemployed)

Following a meeting in New Delhi, the commerce body FICCI called for expediting the implementation of goods and services tax, GST.

It has urged the government to ease the monetary policy and bring down interest rates by 200 basis points and cash reserve ratio by 100 basis points. 

The monetary policy is to be unveiled by the government on the 18th of this month.

FICCI have also called for pushing through FDI policy reforms in areas where action is possible outside the Parliment.

It has called for extending the price decontrol mechanism for oil products.

The statement on quarterly review of the trends and receipts and expenditure in relation to the Budget at the end of third quarter of 2011-12 was tabled by Finance Minister Pranab Mukherjee in Parliament today. The statement said, uncertainties prevailing in the global economy at the time of presenting the Budget for 2011-12 turned out to be on the negative side and has impacted growth performance of the economy .

This, coupled with prevailing high international crude prices, has resulted in higher expenditure on subsidies for petroleum and fertilizer products. Also moderation in growth has impacted direct tax revenue receipts.

The volatility in capital market has resulted in recalibration of government's disinvestment strategy. The statement said, all these factors have a combined impact of deterioration in fiscal performance when compared to the Budget estimates 2011-12.

Accordingly, the fiscal deficit and revenue deficit estimates have been revised as 5.9 per cent and 4.4 per cent of Gross Domestic Products respectively in the revised estimates for 2011-12.

European markets suffered a jittery session today as concern continued over Greece and Spain. Spain's main index is trading higher after losing more than two per cent earlier. Some investors moved money into German bonds, which are seen as low-risk. 

The oil price also fell, reflecting worries about the global economy. Confidence in European banks was undermined by rating agency, Moody's, which cut the credit ratings of 16 Spanish banks late yesterday.

The Government has came out with a number of austerity measures to cut down spending on foreign travel by ministers and officials, holding of meetings in five-star hotels and purchase of new cars by government departments in view of the tight economic situation.

Announcing the measures in a written reply in the Lok Sabha on Friday, Minister of State for Finance Namo Narain Meena said the Government was committed to carry on the process of fiscal consolidation vigorously. 

In a bid to adhere to the budgetary fiscal targets and for better expenditure management, the Government will issue orders for strict compliance of austerity measures, he added.

The Minister's statement comes two days after Finance Minister Pranab Mukherjee said in the Rajya Sabha that the Government planned to announce some unpopular austerity measures to tighten the belt.

India and the United Arab Emirates have decided to set up a high-level joint task force on investment which will also look into securing more oil supplies from UAE.

Managing Director of the Abu Dhabi Investment Authority Sheikh Hamad bin Zayed al Nahyan and India’s Commerce and Industries Minister Anand Sharma will lead the respective sides of the high-level task force. The decision was taken following wide ranging discussions between External Affairs minister SM Krishna and his counterpart from UAE Sheikh Abdullah bin Zayed Al Nahyan in New Delhi on Friday.

Noting that the United Arab Emirates’ leadership is now keen to address the issue of investments to bring it on par with the multi-faceted relations the two countries enjoy in all other sectors, he said the high-level joint task force would explore further opportunities in investments.

Sheikh Hamad bin Zayed al Nahyan said besides oil, UAE was also looking at investment opportunities in sectors like petrochemicals.

Both the leaders held discussions on ways to boost trade ties and maritime security cooperation to tackle piracy. Other issues that figured in talks, included situation in West Asia, Iran's nuclear programme, Afghanistan and Indo-Pak relations.

The two sides also discussed the 3rd India-Arab Economic Conclave to be held in Abu Dhabi from Monday.

The annual high-level strategic and economic dialogue between US and China began in Beijing today. Inaugurating the two-day talks , Chinese President Hu Jintao called for a new type of relationship between the two countries to break the traditional belief that big powers only have conflicts and sought new ways to develop ties.The meeting is being attended by US Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner among others. During the meeting,the Chinese Premier said that whatever changes may take place in the world and no matter how the domestic situations in the two countries may evolve, China and US should be firmly committed to advancing the cooperative partnership . He further added that the two countries should build a new type of relation between the major countries that is reassuring to peoples from both sides and the world. . The dialogue began amid controversy over the blind Chinese activist Chen Guangcheng seeking shelter in the US Embassy in the Chinese capital as well as tensions between Philippines and China over disputed islands. Speaking that inaugural meeting of the economic dialogue, Geithner said US exports to China have doubled since early 2009, roughly twice as much as its exports to the rest of the world and the Chinese investment in the United States has increased five-fold from 2005-2010.

Chief Economic Advisor Kaushik Basu on Thursday met Prime Minister Manmohan Singh amid controversy over his remarks on slow pace of economic reforms in the country. Basu is believed to have given clarifications about his comments in Washington last week on the issue. 

During a lecture at the Carnegie Endowment, the Chief Economic Advisor had said that major economic reforms in India would hit a roadblock and are unlikely to happen before the next Parliamentary elections in 2014.Post-2014, he had said, India would be one of the fastest growing economies of the world.

His remarks had created a political storm with Opposition parties attacking the government accusing it of policy paralysis. Basu, however, had clarified India would see some important reforms in the next six months, including on
subsidies, and partial diesel decontrol and FDI in retail.

The government has said it has taken an in-principle decision to link diesel prices with market rates, However, there is no proposal at present to fully deregulate cooking gas price. Minister of State for Finance, Namo Narain Meena said this in a written reply to the Rajya Sabha yesterday.

While petrol prices are market-linked, the government fixes the rates of LPG, kerosene and diesel, which results in a large budgetary expenditure on subsidies. Mr. Meena said, the government continues to fix the price of diesel in order to shield the common man from the impact of rising crude oil prices and the resultant inflation. 

Finance Minister Pranab Mukherjee later told reporters, that the in-principle decision to deregulate the price of diesel was taken in June last year.

The Finance Minister Mr. Pranab Mukherjee has said that there is no need to panic in the wake of global rating agency, Standard and Poor's lowering India's rating outlook to negative. Reacting to the Outlook by the agency the Finance Minister expressed confidence that the country will overcome the difficulties faced by it and several bills regarding economic reforms will come up for consideration of Parliament in the current session. He however said some bills may be passed in the monsoon session.The lowering of outlook from stable to negative is expected to make external commercial borrowing expensive for Indian companies. It may also have implications for the capital market.

The International Monetary Fund (IMF) said that some optimism has returned to the global economy and predicted slightly faster growth. It revised world economic growth for 2012 to 3.5%, up from its previous forecast of 3.3%. However, the IMF noted another eurozone crisis was possible and that most major economies still face major brakes on growth.India's economic growth forecast has also been lowered to 6.9 per cent in 2012, from 7 per cent projected earlier, on weak global and domestic demand.

As per the estimates of India's Central Statistical Organisation, CSO, the growth rate during the financial year 2011-12 slipped to a 3-year low of 6.9 per cent. While the government has projected a growth rate of 7.6 per cent for the current financial year which began on April 1, 2012, the Reserve Bank of India expects it to be 7.3 per cent.

Reserve Bank Governor D Subbarao has said that rising fiscal deficit and short-term debt levels are quite disturbing. Speaking at a panel discussion on India's economic reforms and development in New Delhi, Mr Subbarao however said, the nation is not facing a repeat of a 1991 balance of payment crisis.

He said, the 1991 crisis was triggered by high oil prices almost drying foreign reserves and currency crash.

Mr Subbarao said, fiscal deficit in 1991 was 7 per cent and it is ruling at 5.9 per cent in 2012. He said, the current account deficit at 3.6 per cent is higher than 1991 figure and short-term debt at 23.3 per cent of GDP in 2012 is much more than 10.2 per cent in 1991.

Stating that the structure of the economy has changed in
fundamental ways, he said that financial markets are more matured, more diverse and much deeper and have resilience to absorb shocks.

Tamil Nadu Chief Minister Jayalalitha has criticised the centre for reducing Central Sales Tax compensation to states by linking it with VAT rate revision.
In a letter to the Prime Minister Dr. Manmohan Singh she said though the Centre had agreed to compensate states for the revenue loss for 2010-11 also, the eligible compensation was arbitrarily restricted.

This was done by by deducting additional revenue realised through revision of VAT rate from four to five per cent, she said.
Earlier, West Bengal Chief Minister Mamata Banerjee had also made similar objection.