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Delhi Budget 2010-11 Makes the Life More Expensive for Delhiites

Tuesday, March 23, 2010

Delhi Finance Minister, A.K. Walia unveiled Delhi Budget 2010-11 yesterday that hiked taxes on a host of items. Delhi Budget 2010-11 makes the life in the city more expensive. He justifies the budget with Games projects. With the budget, it is clear that it's payback time.

About the Delhi Budget 2010-11, economictimes.indiatimes.com writes, “The hike that is likely to hurt most is the increase in the value-added tax (VAT) on diesel from 12.5% to 20%, coming on top of the hikes Pranab Mukherjee had imposed in the Union budget less than a month ago. Higher VAT would mean diesel will cost Rs 2.37 more per litre. Given the widespread use of diesel in transporting goods, it is likely to lead to a cascading effect across the board, partly due to its actual impact on transport costs and partly because it also provides traders with a ready excuse for raising prices.

Higher cooking gas prices would also hit home, quite literally. The Rs 40 per cylinder subsidy on LPG which has been continuing from June 2008 has been withdrawn. In absolute terms, the hike in the cost of an LPG cylinder will come to Rs 41.60 because of the incremental increase in local levies.”

With this budget, Delhiites have to pay more for oil, gases, foods and transport costs that are the basic needs for any cities.

Recently, we saw the effect of Union Budget 2010-11 in comparison of union budget 2009-10. Now, Delhi Budget 2010-11 is very opposite in comparison of last year’s "thanksgiving budget".

Mr. Walia defends Delhi Budget 2010-11 with the examples of other states, “States like Madhya Pradesh and Punjab charge a far higher VAT on diesel than we do and we made the best efforts to keep the hike at the minimum possible, which is why we did not touch the VAT on petrol. As for the subsidy, name one state that continued it for so long after the original hike that had necessitated it was withdrawn. We were concerned so we footed the bill, but now we need this money for other welfare projects like widow pension etc.”

So, the government will not responsible for the crisis of common man’s life. Now, it is completely clear that the capitalist system has no way to solve recession and crisis rather than increasing difficulties in the life of common people.
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RBI Hikes Key Rates by 25 bps and Increases Repo and Reverse Repo

Friday, March 19, 2010

Recently, RBI announced to hike short-term interest rates - repo and reverse repo - by 25 basis points. Raises in key rates by 25 bps may hike home and auto loans also.

About the key rates hikes, economictimes.indiatimes.com, a news portal writes, “Home loan rates may harden in April, banks will be hit by bond losses, and retail borrowers will have to cough up a little more EMI, with the Reserve Bank of India unexpectedly hiking interest rates on Friday evening, a month before the monetary policy.”

Further the news portal writes, “Banks pay the repo rate to borrow from RBI and receive the reverse repo rate for parking surplus funds with the central bank. The repo rate is up from 4.75% to 5% while the reverse repo rate is up from 3.25% to 3.5% with immediate effect.”

Chanda Kochhar who is the ICICI said to ET, “The bank will wait and see the credit offtake and systemic liquidity to assess the medium-term impact on lending and borrowing rates”. “Currently, there is ample liquidity in the market.”

According to the RBI, “Headline WPI inflation on a year-on-year basis at 9.9% in February 2010 has exceeded our baseline projection of 8.5% for end-March 2010.”

According to the Keki Mistry who is the vice-chairman and managing director of HDFC, “In the short term, cost of funds is unlikely to change much... It’s more a signal.”

Already almost all private banks have hiked interest rates for home and car loans. Now, it is the second phase when again home and car loans may hike after the hike of RBI key rates by 25 bps within a month.

In the analysis, RBI has raised the short-term interest rates - repo and reverse repo - by 25 basis points to control the inflation. What are your opinions about the hikes? Write to us your opinions about the hike. How will it affect the economy of India?
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Almost All Private Banks Hike Rates for Home and Car Loans in India

Saturday, March 6, 2010

Recently, almost all banks hike rates for home and car loans in India. In this series, the HDFC Bank, the ICICI Bank and the Kotak Mahindra are the main player. The banks have raised rates on home and auto loans.

About the hike, Economictimes.indiatimes.com which is the India’s news portal writes, “These private banks have raised lending rates by as much as 100 basis points, following the hardening of market rates even as the central bank holds on to low rates to avoid derailing the economic growth. A basis point is 0.01 percentage point. RBI has started slowly rolling back some liquidity-boosting measures and has indicated it may not hesitate to raise rates. It raised the cash reserve ratio by 75 basis points in the last review.”

Further the news paper quote a statement of Pralay Mondal who is the country head in HDFC Bank of retail assets & credit cards, “The increase in the cost of funds is being passed on to customers. It has been done to protect our margins.”

On the other hand, Kamlesh Rao who is the retail assets head in Kotak Mahindra Bank said to the news paper, “We had increased fixed deposit rates by 75 bps in the past couple of months. The increase in lending rates is to align it with the rise in deposit rates.”

About the new charges, the news portal writes, “ICICI Bank will now charge 8.75% for loans up to Rs 30 lakh, 9% between Rs 30-50 lakh and 9.5% for loans over Rs 50 lakh. It was earlier offering loans at 8.25% for two years. From the third year it would have been floating reference rates minus 3.5%.

The bank has also hiked its auto loan rates by 25-50 bps from March 5, thus increasing the rack rates to 9.75-11%. HDFC’s home loan rates have reverted to 8.75% for loans up to Rs 30 lakh, 9% for loans between Rs 30 lakh and Rs 50 lakh and 9.25% for loans over Rs 50 lakh. Till last month, it was offering loans at a fixed rate of 8.25% up to March 31, 2012, after which the loan would revert to the prevailing floating rate.

Kotak Mahindra has increased its auto loan rates by 50-100 bps. With this hike for super premium cars, the rates would now be 9.25-9.75%. For premium segment cars it would go up to 10-10.25% while for lower end cars the rates would be 10.75-11%.”

The hike is due to Reserve Bank of India policy rates change. During the Union Budget 2010-11 presentation, there was a symptom of hiking in the loan rates. The hike will create more crisis and inflation in Indian economy rather than relaxation.
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