The Week in Review for 17 September 2010

The Week in Review for 17 September 2010

On Thursday the RBI increased its two key policy rates with immediate effect. The repo rate was increased by 25 basis points to 6%. And the reverse repo rate was hiked a full 50 basis points to 5%. This is the fifth such hike this year. Indian banks plan to increase rates on consumer loans sometime next month. But while their base rates are expected to go up, prime lending rates may remain the same for the moment.

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And while the RBI maintained that inflation remained its main concern, there was good news earlier in the week. On Tuesday the government announced that wholesale inflation for August increased 8.5%. That number was arrived at based on new data. The fresh data includes a new base year of 2004-05 instead of the earlier 1993-94. Also changed are the weights given to manufactured goods, primary articles, and fuel. Going by the old numbers, inflation in August was at 9.5% on a year-on-year basis, a modest fall compared to July’s 9.8%.

The controversy over the 2008 auction for 2G spectrum got more complicated this week. On Monday the Supreme Court issued a notice to telecom minister A. Raja, giving him ten days to respond to allegations of irregularities. The court also sent notices to the CBI and Enforcement Directorate. Monday’s notices were the result of a public interest litigation filed by lawyer Prashant Bhushan. Among other things, it asks the Supreme Court to oversee the CBI enquiry into the auction.

Meanwhile, the CBI is trying to keep Ramalinga Raju behind bars. On Monday it went to the Supreme Court to challenge his bail. The agency says releasing the former Satyam chief will hurt its case against him. The Andhra Pradesh high court granted Raju bail back in August. The C B I has already challenged the bail of two other top bosses at Satyam; former CFO, V. Srinivas and Ramalinga Raju’s brother B. Rama Raju.