Indian Economy: News and Discussion

[NSG_Blackcats]

SingTel mulls Bharti related $3 bln financing​

SINGAPORE (Reuters) - Singapore Telecommunications was talking to banks for $3 billion financing related to the merger between its Indian unit, Bharti Airtel, and MTN Group Ltd, Basis Point reported citing sources.The sources said that the talks are at a high level, and a final size has not yet emerged because the structure of the Bharti-MTN merger has not been finalised.

Bharti, India's leading mobile operator, and MTN had said they were considering an initial deal worth more than $23 billion, under which Bharti would pay cash and shares to end up with 49 percent of MTN after MTN pays cash and stock for an effective 36 percent stake in the Indian firm. SingTel, which owns about 31 percent of Bharti, could not give official comments on the report immediately. But the merger could change SingTel's control over the combined entity, but would remain a strategic partner and significant shareholder. On Friday SingTel officials said that merger negotiations between Bharti and MTN were ongoing and they could not give comments or updates on the progress.

Goldman Sachs was advising SingTel on its plan regarding the merger plan, a source with direct knowledge of the deal told Reuters. One year ago, when Bharti and MTN were first in talks, SingTel had said it would support Bharti financially in any merger and acquisition activity. A merger between Bharti and MTN would create a $61 billion telecoms giant spanning Africa, Asia and the Middle East.

Link

 

[Flint]

Hey, Pintu and Ritesh, great posts.

 

[Pintu]

Hey, Pintu and Ritesh, great posts.

Thanks Flint! It is my honour and pleasure to post

India will get back to 9% growth by Sept 2010: Pranab- Economy-The Sunday ET-Features-The Economic Times

India will get back to 9% growth by Sept 2010: Pranab
26 Jul 2009, 0049 hrs IST, Smitha Venkateswaran, ET Bureau

GOA: Union finance minister Pranab Mukherjee on Saturday said India will take one-and-a-half years to come back to a 9% growth rate.

"We are still facing many problems of recession; it will take time to get back to 9-10% of GDP. Earliest signs will be visible by September 2010," said Mr Mukherjee while addressing an interactive session with businessmen in Goa.

Mr Mukherjee was in the coastal state to unveil the Indian Customs and Central Excise National Museum — the first of its kind in India. Maintaining that India and China have managed to curtail the impact of recession to a "great extent," Mr Mukherjee acknowledged that the economic slowdown that began in the US has taken its toll on India.

"For many years from 2003 to 2009, we enjoyed an average 8.6% growth rate but this has come down heavily with the meltdown. At least I feel the worst is now behind us," he said.

The first signs of revival, the FM hopes, to see particularly in the cement and steel segments by early next year. "We have ejected Rs 1,86,000 crore already into the economy, even with the burden of the Sixth Pay Commission on us. This will show results," he explained.

Reiterating the Centre's commitment to create more spending power in the hands of people, Mr Mukherjee stressed on the growth of rural India which in turn will spurn growth, mainly of consumer durables. "Eradication of poverty is our primary focus. This in itself will become a solution to the slowdown problem," he added.

Regards

 

[advaita]

In continuance with the previous post .......................................

Pakistan

Remittance are one of the main contributor's in Pakistan's economy as per Wikipedia, it contributes 4 % of GDP and equivalent to 22% of annual exports.

This old report of 2006 is held as the source of information in Wiki.



However, this is interesting link of research work about state of Pakistan's remittance inflow:

Remittances in crises: a case study from Pakistan

Interesting point to note :

I am quoting from Wikipedia , the year wise list of top recipients of remittance and their share , where we can see , Pakistan which have earned more than Bangladesh in 2003-04 comprehensively overtaken by Bangladesh at the end of the table (2007-08)

Country ↓ Remittances (2003–2004) ↓ Remittances (2005–2006) ↓ Remittances (2006–2007) ↓ Remittances* (2007–2008) ↓
India $21.7 billion $26.9 billion $27 billion $45 billion
China $21.3 billion $22.52 billion $25.7 billion $34.5 billion
Mexico $18.1 billion $24.7 billion $23.97 billion $26.2 billion
Philippines $12 billion $17 billion $18.26 billion
France $12 billion $12.5 billion $13.75 billion
Bangladesh $3.4 billion $ 5.97 billion $8.9 billion
Pakistan $3.9 billion $5.493 billion $6.50 billion $7.0 billion
Morocco $5.70 billion $6.7 billion

I think this is the main reason why Pakistan excluded in 2009-10 , while India along with made an astonishing growth ,Pakistan's growth was only $ 500 million up from 2006-2007 $ 6.5 Billion to $ 7.0 billion i.e. 7 % growth which is negligible while to be compared with its neighbours.

The recent earth quakes took toll in Pakistan's inflow of remittance. the above link I mentioned can explain it.

Regards

The reliance on remittances should actually be seen in a poor light.
See at it like this. A family has 2 sons, one remains with parents in hometown and other goes off to some other town. The other son doing well is ok for everybody involved (family, other son, the other town where the other son is working) but what really matters is the one son in the home town. If he is matching up with the other son then its good but if he is not then the other son is merely subsidizing the one son who stayed back. Now the other son is actually very profitable for the other town that is why he is being tolerated in the other town in the first place. But the son staying back may not be fully utilized in terms of talent. All the Indian policies and practices should be to improve the competitive ability (not subsidies - other son is already subsidising this guy) of the hometown boy.
I think we should do the following for the hometown boy:

1. Bet on his ability to manage the businesses he specializes in.
2. Allow him to bring in foreign capital under his own banner (100% in all sectors except defence industry).
3. Allow him to remunerate and secure the foreign capital contributer the best way he can (including the allowance of agricultural land for which CLU to industrial land is facilitated and even coordinated by the governments, also allow capital exit strategy).
4. Allow him to work day and night in a flexible labour environment (give him flexible & real time arbitration and compromise oriented labour laws and allow a labour exit strategy).
5. Ensure the business he carries on is ultimately exchange neutral, especially since CG tries to keep the INR market determined (export as much as his future forex liability).
6. Free him up from multiple tax and regulatory points to ensure low corruption and higher efficiency.

Quite a lot of the posts in this tread are not exactly analytical. Some very common sense analysis can be found at Swaminomics (search for quoted items)

Likely scenario for next 2-3 years - search for "End of the 9% Growth Dream"

Present Reality and Future Challenges

1. search for "India subsidising OPEC"
2. search for "Free Trade Areas can be a bad Idea" (important because basic reality has not changed much.)

Likely solution

1. search for "India should turn 'oil speculator'".
2. Free up Indian businesses.

:113:

 

[NSG_Blackcats]

Infrastructure to drive India issuance - JP Morgan​

By Tony Munroe and Narayanan Somasundaram

MUMBAI (Reuters) - JPMorgan's India chief executive expects infrastructure spending, domestic demand and global liquidity to help drive Indian capital raising, but merger activity may be curbed by a dearth of financing. Like China, India has seen a spate of equity-raising in recent months fuelled by a surging stock market and billions of dollars in global liquidity searching for higher returns.

"Unlike a lot of other emerging markets where liberalisation was almost immediately followed by a huge capital expenditure plan for infrastructure, India has lagged," said Kalpana Morparia, who took the top India job at JPMorgan last year after 33 years at ICICI Bank, India's No. 1 private sector lender. JPMorgan has been the second biggest manager of equity offerings from the country this year through Thursday, behind only Morgan Stanley, Thomson Reuters data show.

Poor infrastructure shaves an estimated 1 or 2 percentage points off India's annual economic growth, which slowed to 6.7 percent last year after three years of 9 percent or more. In its annual budget early this month, the government unveiled spending increases and other measures to bolster infrastructure. Several companies in the Indian power sector, where the capacity shortfall is especially severe, are among those planning billions of dollars of equity-raising in the coming months, including Adani Power, Indiabulls Power, Rural Electrification and NHPC Ltd.

India's domestic demand, meanwhile, has helped insulate it from the ravages of the global downturn. Local consumption makes up nearly 60 percent of India's economy, compared with 35 percent in export-reliant China. "The absolute necessity for a strong capital expenditure plan in infrastructure, coupled with a strong domestic demand across products and services, we feel makes a very compelling demand story," Morparia said in her office overlooking the Arabian Sea. India made headlines in the last bull market with a frenzy of overseas deals such as Tata Motors' $2.3 billion Jaguar Land Rover buy, which was arranged by JPMorgan.

Morparia said it was her view that outbound activity may be curbed in part by tight global finance markets.

Bharti Airtel's planned tie-up with South African mobile carrier MTN, worth an estimated $23 billion, is an exception in an outbound M&A market that has been relatively quiet even as government-run Chinese companies backed by state banks continue to make a splash overseas. "The Chinese government is committed for their banks to provide whatever it takes for these acquisitions, which are linked much more with the way they see they need to fill in the gap in terms of what China needs to grow," Morparia said.

"Whereas in India this is entirely a private initiative, and therefore you are reliant on the overseas bank market or the public markets to really fund this," she said. Valuations of target companies have come off from the lofty levels of recent years. "On the other hand, financing has become a significant challenge," she said.

Morparia said while foreign companies may continue to buy Indian firms, local mergers are less likely, in part because domestic banks are forbidden from financing takeovers other than through a privatisation.

"Purely domestic consolidation I don't think will happen in India. Part of it is a mindset issue, and part is also lack of funding because the domestic banks cannot fund any domestic acquisitions," she said.

LINK

 

[NSG_Blackcats]

GAIL approves Rs 8,000 cr pipeline projects​

The GAIL board has approved Rs 8,000 crore pipeline projects to be implemented by 2012, company Chairman U D Choubey said on Monday. GAIL will raise Rs 2,000 crore from the domestic market this fiscal, Rs 5,000 crore next fiscal mostly through external commercial borrowing, and Rs 10,000 crore in 2011-12, GAIL Director (Finance) R K Goel said.

GAIL will lay 2,050-km pipeline from Jagdishpur in Uttar Pradesh to Haldia in West Bengal at an investment of Rs 7,595 crore, company Chairman U D Choubey said in New Delhi. Besides, two separate spur lines will be laid to Baurani and Chappra. GAIL will also lay Moradabad-Kashipur-Rudrapur and enhance capacity of Agra-Ferozabad line.

Goel said the company had a debt-equity ratio of 0.12:1 and it can leverage its balance sheet to raise Rs 14,000 crore. "This fiscal, we plan to raise Rs 2,000 crore from domestic market. Next fiscal, the company will raise Rs 5,000 crore from domestic and overseas market. In the following year it will be Rs 10,000 crore," he said.

Link

 

[NSG_Blackcats]

India faces power shortage of 15,000 MW​

The government today said in the Rajya Sabha that there were difficulties in meeting targets of thermal power generation because of shortage of equipment and manpower and pointed out that the country faces a shortage of 15,000 MW. Replying to supplementaries during the Question Hour, Minister of State for Power Bharatsingh Solanki said in order to achieve additional target of 78,700 MW set for the 11th Five Year Plan, BHEL has enhanced its capacity to deliver main plant equipment.
He said BHEL, NTPC, L&T and many other Indian companies have entered into joint ventures with each other and with foreign companies to help enhance power generation in the country and ensure supply of power equipment. Solanki said though the country produces 1,50,000 MW, there is a shortage of 15,000 MW. "To bridge this shortage we have opened up our policy," he said.Solanki said that in order to overcome shortage of manpower, government has been training young men and women.
Indigenous companies are also being invited to train the youth and overcome shortage of skilled manpower. He said actual power generation during 2007-08 and 2008-09 was 704.47 billion units and 723.79 billion units respectively, which represent an achievement of 99.2 per cent and 93.5 per cent of target fixed. "During the current year 2009-10 (April-June 2009) the actual power generation has been 189.70 billion units against the target of 191.82 billion units, an achievement of 98.9 per cent," he said.

Link

 

[I-G]

Rs. 50,000 cr worth of crop lost to poor handling

New Delhi (PTI): India is losing food items worth a whopping Rs 50,000 crore every year due to poor post-harvest handling of farm produce, a development that analysts say may jeopardise the Centre's plan to formulate a food security law, especially in view of a "below-normal" monsoon.

"The level of wastage of agricultural food items is estimated to be about Rs 50,000 crore (a year), occurring at various stages of handling after harvesting," Food Processing Minister Subodh Kant Sahai said in a written reply in the Rajya Sabha on Monday.

The minister blamed "fragmented farming, provisions in the Agricultural Produce Marketing (Development & Regulation) Act, lack of cold chain facilities, transportation, proper storage and processing facilities" for the losses.

Commodity analysts apprehend that the huge crop losses can jeopardise the Centre's plan to enact a food security law, especially at a time when poor monsoon has raised concerns on lower farm production.

"The huge losses of crops (in post-harvest handling) in times of poor monsoon may affect plans to build a food security law. The government needs to take urgent steps to plug loopholes in different areas, including losses at warehouses," commodity brokerage Karvy Comptrade Research Head Aurobindo Prasad told PTI.

President Pratibha Patil had last month said the Centre would formulate the National Food Security Act whereby every family below the poverty line will get 25 kg of foodgrain per month at Rs 3 a kg.

Another commodity analyst said, "Since farm production depends upon monsoon, the Centre cannot afford to ignore such huge losses in post-harvest handling in times of poor rains, and also when it wishes to make a law making foodgrain supply to the poor binding upon it."

He also said though the government intends to make the storage system efficient through the Warehousing Act, it also needs to fill gaps in every step of post-harvest handling, including transporation, storage and processing facilities.

"Below-normal" monsoon in the country, especially in the north-eastern and north-western regions, has remained a matter of concern, with the sowing of major Kharif crops like paddy having taken a knock so far.

Food and Agriculture Minister Sharad Pawar had said in Parliament last week that paddy output may be dented this Kharif due to erratic monsoon.

The Hindu News Update Service


These losses should be stopped

 

[Avinash R]

^^ Anyone tasted meat which comes from animals that are produced in industry like farms and the local varieties. For example the white feathered broiler chicken and the local chicken. You can tell the difference easily, the industrially produced chicken just down taste right since they have been fed all their life unnatural food and injected with hormones for faster growth.

 

[Pintu]

The Telegraph - Calcutta (Kolkata) | Business | RBI wake-up call on inflation

RBI wake-up call on inflation

OUR SPECIAL CORRESPONDENT

Mumbai, July 27: Inflation will torment the country in the second half of the year.

That’s no longer a gloomy forecast by number-crunching economists; it is a fear that the Reserve Bank of India has officially articulated for the first time this year.

The bugbear — which had been thrown off our backs in early June when inflation turned negative for the first time after a gap 30 years — could return to haunt monetary policy makers at the central bank once again.

In a document released a day before it hunkers down to review its monetary policy at the end of the first quarter, the RBI said there were indications that inflation could firm up again by the end of this year.

Since September last year, the RBI had changed tack and had aggressively started trimming interest rates to jump-start a faltering economy as inflation started weakening and appeared to be less of a concern. But with the economy starting to lurch into forward drive, the RBI may have to start devising way to put a lid on inflation.

“The visible signs of price pressures, even as the headline inflation number turned negative over the short-run, pose complex challenges for the conduct of monetary policy, particularly given the dampened domestic demand conditions,” the RBI said.

High commodity prices and the delayed monsoon could exert pressure on food prices.

Moreover, the high base effect, which has been cited as one of the major reasons for the lower levels of inflation, will almost disappear by October. It cautioned that fiscal stimulus and its accommodative monetary policy could have inflationary implications if they are sustained longer.

The RBI said kharif production, which accounted for about 57 per cent of the overall agricultural output, could be affected. The worst hit kharif crops could be rice, tur, urad, maize and soyabean which are all monsoon-dependent. However, rainfall in July has been relatively good and the improved sowing position as on July 17 indicates that sowing of most pulses, oilseeds and coarse cereals are close to last year’s levels.

Growing economy

Many expect the RBI to raise its growth forecast for the economy from the 6 per cent it forecast in April. In 2008-09, the country had achieved a GDP growth of 6.7 per cent after three straight years of over 9 per cent growth.

The return of the growth phase is predicated on a set of positives that the RBI listed out in the document titled “Macroeconomic and Monetary Developments: First Quarter Review 2009-10”.

These include a positive growth in the index of industrial production (IIP) in April-May 2009, higher growth in the core infrastructure sector and some indications of an upsurge in the services sector that accounts for over 55 per cent of the country’s GDP.

There are other cues as well. A survey of professional forecasters conducted by the apex bank in June 2009 placed the growth rate for 2009-10 at 6.5 per cent, higher than 5.7 per cent in an earlier survey.

The RBI said non-food credit growth was turning positive since the beginning of June 2009 and the year-on-year deceleration in credit growth had shown a modest reversal since the last fortnight of June.

Moreover, capital flows had increased after two consecutive quarters of net outflows.

“Early information on the corporate performance for the first quarter of 2009-10 is indicating positive growth in both sales and profits over the corresponding period of the previous year,” it noted.

Since October last year, the RBI has brought down the repo rate by 425 basis points and the reverse repo by 275 basis points to 4.75 per cent and 3.25 per cent, respectively.

The repo is the rate at which RBI provides funds to banks against the government securities they hold. The reverse repo is the rate at which it absorbs liquidity.

However, bankers do not expect any change in these key rates tomorrow.

 

[NSG_Blackcats]

No change in key policy rates: RBI​

MUMBAI: RBI on Tuesday left its short-term rates and banks' cash reserve requirement unchanged as expected and stressed that nurturing growth remains its priority as the economy recovers from the global downturn. "It is worth reiterating that the Reserve Bank will maintain an accommodative monetary stance until there are definite and robust signs of recovery," it said in its review. The Reserve Bank of India (RBI) left its lending rate steady at 4.75 percent, its lowest in nine years, and its reverse repo rate, at which it absorbs surplus cash from the banking system, unchanged at 3.25 percent.
Both rates, introduced in 2000, were last cut by 25 basis points in its April review. The RBI also kept the cash reserve ratio, the amount of funds banks have to keep on deposit with it, unchanged at 5.00 percent. It was last cut by 50 basis points in January. The bank rate, used by banks to price long-term loans, remained at 6.0 percent. Analysts polled by Reuters last week expected the central bank to hold key rates steady as growth begins to show some signs of revival while concerns about rising prices were seen deterring further cuts. Of 25 analysts polled, 22 expected no rate change while three had forecast a 25 basis-point cut in both rates. The RBI has cut its short-term lending rate by 425 basis points in six steps since October to support growth.
The reverse repo rate, at which the central bank absorbs surplus cash, has been cut by 275 basis points in four steps since December.
Highlights of credit policy
* Bank rate retained at 6 percent
* Repo rate unchanged at 4.75 percent
* Reverse repo rate unchanged at 3.25 percent
* Cash reserve ratio unchanged at 5 percent
* Statutory liquidity ratio unchanged at 24 percent
* Inflation forecast hiked to 5 percent from 4 percent
* Negative inflation only a statistical phenomenon
* Balance between liquidity and inflation main concern
* India's growth now forecast at 6 percent with upward bias
* More scope for cutting rates by commercial banks
* Money supply may grow 18 percent this fiscal
* Policy will ensure enough commercial credit

Link

 

[Pintu]

UPDATE 1-Hindustan Unilever's Q1 net falls, knocks shares down | Industries | Consumer Goods & Retail | Reuters

UPDATE 1-Hindustan Unilever's Q1 net falls, knocks shares down
Tue Jul 28, 2009 8:34am EDT

* Q1 profit falls 2.7 pct, drags down shares from 9-yr high

* Demand for high-margin soaps, detergents hit

* Shares close down 7.3 pct (Adds quotes, details, analyst comments, share price)

MUMBAI, July 28 (Reuters) - Hindustan Unilever Ltd (HLL.BO), India's largest consumer goods company, on Tuesday reported a 2.7 percent fall in net profit for the June quarter, disappointing investors and knocking its shares down from a nine-year high touched earlier in the session.

HLL's shares, which rose to 306 rupees in intra-day trades, fell to a low of 273.40 rupees before closing at 277 rupees. The stock has risen 10.7 percent so far this year, lagging a 59 percent rise in the main index .BSESN.

"Being the market leader, the market was expecting more from the company. It has taken a hit in market share in its high-margin segments such as personal care products, soaps and detergents," said Vanmala Nagwekar, research analyst with India Infoline (IIFL.BO).

The company, a unit of Anglo-Dutch firm Unilever Plc (ULVR.L) (UNc.AS), reported a net profit of 5.43 billion rupees ($113 million), down from 5.58 billion a year ago. Net sales rose to 44.76 billion rupees from 41.53 billion.

A Reuters poll of 11 brokerages forecast net profit at 6 billion rupees on net sales of 45.6 billion rupees.

Profits were hit by a mark-to-market charge of 320 million rupees from a restatement of foreign exchange exposure, the company said.

Volume growth was led by the personal products and food categories, Chief Financial Officer R. Sridhar told reporters on a conference call.

However, the high-margin detergents and soap segments, which are the biggest contributors to the company's revenue and profits, and tea suffered as customers opted for cheaper products amid the economic downturn, he said.

The company is re-launching products in some of these categories, Sridhar said, adding that there have also been price changes. The company has either reduced prices or increased "the grammage without changing the price", Sridhar said.

While HLL's strong distribution network gives it an edge over its peers, "the company has come under increasing pressure from smaller rivals, such as Dabur (DABU.BO), Emami (EMAM.BO) and L'Oreal, which have adopted aggressive expansion policies and have consequently eaten into Hindustan Unilever's value share," Euromonitor said in a recent report

Analysts said that Godrej Consumer Products (GOCP.BO) was also eating into HLL's market share in soaps.

The fast-moving-consumer-goods sector, estimated to be valued at more than $17 billion, has been seeing double-digit growth in sales in the last couple of years.

"It is one of the most promising sectors in India," the India Brand Equity Foundation said in its report in May.

Despite the economic recession, the sector will see a 14 percent growth, it said.

Last week, cigarettes, hotels and lifestyle apparel firm ITC Ltd (ITC.BO), which competes with Hindustan Unilever in toiletries and branded foods segment, had reported a forecast-beating 17.4 percent rise in net profit for the June quarter on higher prices for its premium cigarettes.

HLL shares, valued at $13.55 billion, rose 12 percent in the June quarter, lagging a 49 percent rise in the main index but almost in line with an 11 percent rise in the sector index .BSEFMCG. ($1=48.2 rupees) (Reporting by Janaki Krishnan; Editing by Himani Sarkar)

 

[Pintu]

UPDATE 2-Indian swaps end slightly lower; cbank holds rates | Reuters

UPDATE 2-Indian swaps end slightly lower; cbank holds rates
Tue Jul 28, 2009 6:13pm IST

(Updates to close)

MUMBAI, July 28 (Reuters) - Indian overnight indexed rate swaps eased slightly on Tuesday after the central bank said it would continue its accommodative policy stance until there are definite recovery signs.

The benchmark five-year interest rate swap INROIS closed at 6.26/31 percent, from previous closing of 6.33/37 percent.

The Reserve Bank of India left key rates unchanged at its first quarter monetary policy announced earlier in the day. See [ID:nBOM398293]

Some traders had built up paid positions in swaps on expectations the central bank may sound a more hawkish stance on inflation but absence of any such talk in the policy review prompted them to unwind those positions.

"The policy was a silent, sober one. It did not talk anything very much bullish for the economy," a senior trader at a foreign bank said.

Swap rates will continue to trade largely range-bound with the policy action falling in line with market expectations, and tracking bond yields, economic developments and inflation concerns, dealers said.

"Overall, we expect the policy pause to extend for a significant period," Indranil Pan and Kaushik Das, economists at Kotak Mahindra Bank wrote in a note published post policy.

At close, total volume in swaps was at 22.5 billion rupees according to the central bank's reporting platform. (Reporting by Boby Michael; Editing by Ramya Venugopal)

 

[Pintu]

India Inc welcomes central bank's monetary policy- Indicators-Economy-News-The Economic Times

India Inc welcomes central bank's monetary policy
28 Jul 2009, 1611 hrs IST, IANS

NEW DELHI: Welcoming the monetary policy announced by the apex bank on Tuesday, India Inc expressed hope that the country's economic growth will exceed the bank's expectation of 6 per cent this fiscal.

"The economy could grow at around 7 per cent, as the fiscal and monetary measures have an impact on domestic demand," said Chandrajit Banerjee, director general of the Confederation of Indian Industry (CII).

The Reserve Bank of India (RBI) in the quarterly update of its monetary policy kept the key rates unchanged and cautioned that inflation rate can soon balloon to 5 per cent.

"Monetary policy must remain accommodative in such an environment so as to ensure a revival in India's growth path," Banerjee added.

The Associated Chambers of Commerce and Industry (Assocham), another industry lobby, also welcomed the monetary policy.

"However, RBI should have taken some measures to strengthen the bond market by allowing FIIs (foreign institutional investors) to participate in it so as to ensure release of commercial papers, bond documents as currently these are being withheld by their subscribers," Assocham president Sajjan Jindal said.

According to Moody's Economy.com, the economic research arm of consultancy Moody's, the central bank would keep monetary policy at the accommodative setting this fiscal to help the economy recover.

"Although the global climate is still a little unstable, cutting rates cannot help immediately boost domestic activity. Instead, policymakers are counting on previous rate cuts to influence market rates now," said Sherman Chan, an economist at Economy.com.

"RBI will likely commence monetary tightening a year from now, as inflation may again emerge as a concern to policymakers."

The wholesale price index is expected to return to positive territory by 2009-end as improving global economic conditions continue to put upward pressures on commodity prices, Moody's said.

 

[Pintu]

RBI keeps rates steady, cautions against deficit- Policy-Economy-News-The Economic Times

RBI keeps rates steady, cautions against deficit
29 Jul 2009, 0509 hrs IST, ET Bureau

MUMBAI: India Inc should take the hint. While prodding banks to cut rates and assuring easy money to stoke growth, the Reserve Bank of India indicated on Tuesday that interest rates will not remain low forever and banks will not continue to sit on a mountain of cash.

As inflation rises, interest rates will harden and the surplus money sloshing around the system will be mopped up by RBI. But till there are no “robust signs of recovery”, the central bank has promised liquidity to help a decent GDP growth, which it has pegged at 6% with upward bias. RBI’s decision to keep key interest rates unchanged in Tuesday’s quarterly monetary policy statement perhaps marks the end of a rate cut cycle.

In the policy document, RBI governor Duvvuri Subbarao said, “The accommodative monetary stance is not the steady state stance. On the way forward, the Reserve Bank will have to reverse the expansionary measures... The exit strategy will be modulated in accordance with the evolving macroeconomic developments.”

No one knows when that U-turn will happen, but the money market is already talking about a rate hike next year. “I think RBI will hike the interest rate in April... It will watch inflation, particularly food prices, very carefully and move swiftly when it goes in for unwinding,” said Pradeep Madhav, MD of the biggest bond house STCI Primary Dealer.

In the next few weeks, only a few banks may give in to RBI’s persuasion and go for a token rate cut.

Behind closed doors

Guv: There’s room for lending rates to come down

Bankers: But we won’t be able to cut rates further... look at corporates, they haven’t cut prices. Overall demand will rise when companies also lower prices of their products

Guv: So far, lending rate cuts have been less than adequate...

Bankers: Not exactly. A comparison of this quarter’s corporate numbers with the preceding quarter and June ‘08 will show that interest cost has come down

Guv: Loans are getting restructured, so what’s the view on credit quality?

Bankers: Non-performing assets could rise in a few sectors, but bad loans will not go up to the extent the market fears

Guv: Infrastructure projects are a must to boost growth. Can you fund them?

Banks: One-year deposit is as high as 72% of total liability, compared to 52% a few years ago... depositors are not renewing their money with banks. It’s tough to fund long-term assets with such short-term liabilities

RBI wants govt to come out with deficit-control plan

In their customary meeting with the governor, bankers said that by the time banks’ cost of funds drops and high-cost deposits mature, the system will see an upward rate pressure. “As credit growth picks up, there may be some pressure on rates,” SBI chairman OP Bhatt told reporters after the meeting.

Bond market circles expect that in each subsequent auction of government securities, the cut-off yield will inch up. The real pressure on rates will be felt post-October when the base effect that is generating negative inflation completely wears off. RBI is categorical that “thereafter, the year-on-year WPI inflation will creep up even without any major supply shock.”

Besides an orderly withdrawal of liquidity, RBI wants the government to come out with a credible plan to control its ballooning deficit. The government, according to the monetary authority, “has to go beyond merely indicating revised FRBM targets to giving out the details of the adjustment that will take place on the revenue and expenditure fronts.”

If the government continues to borrow heavily when recovery sets in, the fear is banks will not be left with adequate funds to lend to corporates — something RBI wants to prevent.

 

[NSG_Blackcats]

Indian Economy : New WPIs to be launched

Is India's Growth Inclusive??


In 1991 after facing an economic crisis, the then congress Govt. begins economic reform. Our current Prime Minister ManMohan Singh was then the finance minister. These economic reforms help us coming out of the Hindu rate of growth of 3% to 6% and subsequently 9%.
From a foreign exchange reserve which was insufficient for a 15 days import to a foreign exchange of $260 billion. Now we are the 2nd fastest growing economy.
Now we need to ask ourselves a question. Is India�s growth inclusive?
As we all know 70% of India�s population lives in rural areas. If we remain insulated to this economic crisis which the world is facing today, it is only because of our domestic consumption and demand. But we have a big different between India and Bharat. Is India is really Shinning? It is good to be optimistic, but we should also check the reality.
I hope you will share your views and provide information about the disparity we have in sharing our resources. Looking forward to your views. I will try to provide information about the existing disparities.
Regards
NSG

 

[Jeet]

i agree with u that there is a difference between Bharat and India , but at the same time there are millions of people who are shifting from Bharat to India. I read in a national daily few months back that around 2 crore people are joining middle class every year. the size of our middle class is around 30 crore presently, and if we grow with 9% and above then surely we will be able to pull more and more people up in middle class. hence there will be more demand and consumption which will lead to more faster growth.

It is very unfortunate that recession came at the wrong time for india . Our economy was about to get the momentum of high growth which china was able to sucessfully maintain for so long.

Whatever is the situation, truth is that we are better off today compared to what we were 15-20 years back, and we will even have a better india after 15-20 years.

 

[Jarnee]

It is very unfortunate that recession came at the wrong time for india . Our economy was about to get the momentum of high growth which china was able to sucessfully maintain for so long.

I agree with you, however its good that India does a reality check, and dont get complacent..., Innovation / Invention should be our focus, not just back office management. Or cheap production line. Indian companies should invest in R&D which they don't do. Tata's and Relience should take a lead in this.

 

[LETHALFORCE]

Indian economy is not export driven so the recession should not impact growth, it should be transitory.

 

[thakur_ritesh]

guys, stay on topic, which very clearly questions, Is India's Growth Inclusive? which effectively means, is this growth taking every section of the society together or not, what are the loopholes if any, what are the programs initiated by the GoI to give the rural flock a feel that they are as much a part of this growth, so that they do not feel neglected and how successfully all these programs are being implemented, what have been the benefits of all such programs, what are the measures the GoI is taking to move bharat to india, etc.

this isnt about some reform process, export/import, etc so please try and concentrate on bharat and you will start getting your answers.