Sensex in India Tumbles 2.5%; Direct Tax Collection Surges 19.5%

Chandrasekhar Atreya
07 Jan, 2011
New York City

Stocks in Mumbai tumbled 2.5% today and dropped 4% in the week. A sharp and sustained increase in food prices and the government

[R]5:00 PM Mumbai, 8:30 AM New York – Stocks in Mumbai tumbled 2.5% today and dropped 4% in the week. A sharp and sustained increase in food prices and the government’s inability to curb the inflation sparked a new round of fears. India’s direct tax collections in nine months to December surged 19.5%.[/R]

Indian stocks extended their losses of Thursday and dropped nearly 2.5% on fears of a rate hike pushing metals and auto stocks down. The benchmark indexes closed lower for the fourth day in a row.

The BSE Sensex tumbled 2.44% or 492.93 to 19,691.81. The CNX Nifty closed down 143.65 to 5,904.60. The benchmark index dropped 3.98% in the week or lost 817.28.

The rupee gained 3 paisa to close at Rs 45.89 to a dollar in Mumbai today.

The International Monetary Fund expects Indian economy to grow at 8.8% during the current fiscal year, up from 7.4% a year ago on the robust farm sector growth and on a pickup in consumption.

The agency also highlighted rising prices and underlined the urgent need for controlling inflationary pressures through the monetary actions by the central bank.

Research in Motion, the BalckBerry maker, said it wants an additional 18 to 24 months or up to January end 2013, to address the concerns of Indian security agencies that have been demanding encryption keys to its corporate e-mail services. The company has asked the Indian government not to ban its services in the interim period.

Indian government said it will link wages under the employment guarantee act to inflation, but resisted the demand to bring them on par with minimum wages.

Minimum wages under the National Rural Employment Act will rise from 17% to 30% from the current Rs 100 a day with effect from January 1 and will require an additional Rs 3,500 crore of spending in the current financial year.

The direct taxes collection in the first nine months of this fiscal year increased 19.47% from a year earlier to Rs 300,000 crore, according to data from the concerned ministry.

“Net direct tax collections during the nine month period ending in December 2010 stood at Rs 298,958 crore, up from Rs 250,232 crore in the same period last fiscal year period,” a Finance Ministry statement showed.

The Reserve Bank of India on Thursday gave banks another six months till June 2011 to adopt the new method for computing base rate, below which lenders are not allowed to extend loans.

“Banks are permitted to change the benchmark and methodology used in the calculation of base rate for a further period of six months or up to June 30, 2011, the RBI said in a statement.

India approved on Thursday an amended Power Tariff Policy which mandates states to have solar energy as 3% of their total power purchases by 2022, in its efforts to push to clean energy production in India.

“The solar power purchase obligation for states may start with 0.25% in phase-I by 2013 and go up to 3% by 2022,” according to a statement issued by the government in New Delhi on Thursday.