Indian Economy - News & Updates - Archive

[Screaming Skull]

Nation's forex reserves dip by $2.183 bn​

17 Apr 2009

MUMBAI: India's forex reserves dipped by $ 2.183 bn to $ 252.977 bn for the week ended April 10, as against 255.160 bn in the previous week.

During the week ended April 3, the country's total reserves had increased by $ 2.834 bn.

The foreign currency assets (FCAs) dropped by $ 2.174 bn to $ 242.423 bn as compared to $2 44.597 bn in the previous week, the Reserve Bank of India said in its weekly report.

FCAs, expressed in US dollar terms, include the effect of appreciation or depreciation of non-US currencies such as Euro, Sterling and Yen.

India's gold reserves and special drawing rights (SDRs) remained unchanged at $9.577 bn and $ one mn respectively during the week.

India's reserve position in the International Monetary Fund (IMF) decreased by USD nine million to USD 976 million in the week as compared to USD 985 million in the previous week.

 

[Screaming Skull]

IPL-2 may rake in Rs 800 cr for all core, fringe hopefuls​

18 Apr 2009,

NEW DELHI: India’s newest multinational, with projected revenues of Rs 800 crore in just five weeks, is all set to take wing in Cape Town on Saturday. Welcome to Lalit Modi’s India Premier League, Stage II, the Great Redeemer in these tough times, if you ask the entertainment, advertising and tourism industry.

And, if you believe Peter Roebuck, the famous Australian cricket columnist, “everyone except Elvis has been slated to appear at the opening”. And, some think he has half-a-chance of turning up, he wrote in Brisbane Times.

Even before the first match, between Sachin Tendulkar’s Mumbai Indians and MS Dhoni’s Chennai Super Kings, Multi Screen Media (MSM, previously Sony Entertainment TV), which plans to rake in close to Rs 400 crore, claims to have sold 85% of advertising space.

 

[Screaming Skull]

IPL could give 2 bn rand to South African economy: Modi​

17 Apr 2009

CAPE TOWN: The five-week long Indian Premier League Twenty20 cricket series that kicks off here on Saturday could give the South African economy
a cash injection of up to two billion rands, according to IPL chairman and commissioner Lalit Modi.

Speaking at a press conference here, Modi said he anticipated that the tournament will see between 1.5 bn rands and 2 bn rands spent, with 40,000 hotel rooms already booked in the eight host cities.

"In terms of Indian supporters wanting to come to South Africa, we hear reports of many fans being wait-listed. While we have confirmed 4,000 supporters, we are working with our partner airlines to arrange more international flights.

"We also expect more interest as the competition reaches its climax," said Modi.

This is good news for South Africa, where economists have expressed concern about the impact of the global economic downturn finally hitting home.

 

[Screaming Skull]

Sensex hits 'Sixer', soars 32% in six weeks​

Mumbai April 18, 2009

The Sensex posted gains for the sixth week in a row, amid continued volatility as certain section of markets opted to book profits. The index began the week on a strong note, surpassing the 11,000-mark with ease. However high volatility later in the week, saw the index slip to a low of 10,719, and then rallied to a high of 11,367 - a swing of 648 points.

he Sensex finally ended with a gain of 2% (219 points) at 11,023. In the process, the index has now gained a whopping 32.4% (2,697 points) in the last six trading weeks.

The NSE Nifty ended with a gain of 1.3% (42 points) at 3,384.

WEEKLY SENSEX GAINERS...

SBI zoomed nearly 15% to Rs 1,306. ICICI Bank soared 11% to Rs 398, and BHEL surged almost 10% to Rs 1,497.

Sun Pharma, HDFC, Tata Motors, Larsen & Toubro, ACC, Mahindra & Mahindra, DLF and Maruti gained 4-7% each.

...AND THE LOSERS

Hindalco plunged nearly 7% to Rs 59. TCS shed 5% at Rs 603.

ONGC, Infosys, Ranbaxy, Jaiprakash Associates, Sterlite and Tata Steel declined 1-2% each.

 

[Screaming Skull]

Govt to raise Rs 12,000 cr through sale of bonds​

NEW DELHI: The government announced that it will raise Rs 12,000 crore through sale of two bonds on April 24.

A sum of Rs 8,000 crore would be raised through auction of government paper bearing coupon rate of 6.05 per cent maturing in 2019 while another Rs 4,000 will be mopped up through government paper bearing 7.5 per cent coupon rate maturing in 2034.

“Up to 5 per cent of the notified amount of the sale of both the stocks will be allotted to eligible individuals and institutions as per the Scheme for Non-Competitive Bidding Facility in the Auction of Government Securities,'' an official statement said .

Both the auctions will be conducted using uniform price method by the Reserve Bank of India on April 24.

 

[Screaming Skull]

IT sector to regain growth momentum next year: Infosys chief​

18 Apr 2009,

CHENNAI: Though the financial sector has started showing some signs of recovery from the global meltdown, the IT industry in the country will
take some more time to regain the growth momentum, a top industry official said here on Saturday.

"The crisis started in the financial sector and recovery also seems to be happening first in that sector," S Gopalakrishnan, deputy chairman, Confederation of Indian Industry (CII)-southern region, told reporters here on Saturday.

"IT growth will be near flat in the near future. Probably, there will be pick up early next year. When that happens, outsourcing should go up," Gopalakrishnan, also the chief executive of Infosys Technologies, added.

He said Infosys would hire around 18,000 employees this year.

"We are honouring our promise made to the campus recruits. Appointment letters with joining dates have been sent to the candidates," Gopalakrishnan said.

 

[Screaming Skull]

Rural India: Glitter in times of gloom​

No company can afford to ignore two third of the consumer population pie. However inaccessible they may be and whatever changes may be required in the company's strategy to attract them. No wonder, the growing power of the rural consumer (accounting for 64 per cent of country's total consumer base) is forcing Indian blue chips and MNCs to flock to rural markets. Not only FMCG companies but even banks, auto, telecom and retail companies are finding it difficult to keep themselves away from the lure.

Fathom this. Seventy per cent of India's and 12 per cent of global population lives in rural India and contributes 50 per cent of the country's GDP. Their population of 75 crore (750 million) is more than that of US, UK, France, Japan, Italy and Germany put together. In fact, as per Mckinsey, despite rising urbanisation, 63 per cent of India's population will continue to live in the rural areas even in 2025.

Surging ahead in terms of growth

As per National Council of Applied Economic Research, rural market accounts for 55 per cent of LIC policies, 70 per cent of toilet soap consumption, and 50 per cent of TV, fans, bicycles, tea and wrist watch consumption. So as a target market, it is attractive not only because of the size, but also because of impressive growth potential.

Rural GDP has been witnessing strong growth in the last four years (avg of 4 per cent) not only on the back of increase in minimum support prices for the agri-products but also due to availability of alternative employment opportunities.

In 2008, the rural areas grew at a robust rate of 25 per cent as compared to 10 per cent growth in urban retail market According to a McKinsey, rural India, would become bigger than the total consumer market in countries such as South Korea or Canada in another twenty years. It would grow almost four times from estimated size of $577 bn in 2007. While the per capita income is lower than urban areas, the customer base is thrice that of urban areas.

Resilient to slowdown

On account of negligible tax liability and little or no burden of loan repayments, the Indian rural population has a higher propensity to save. The rural areas account for 33 per cent India's total savings. Being more conservative than their urban counterparts, the rural populace has not burnt their fingers in the real estate or stock market bust. Further, the rural income distribution pattern is also changing and the bottom is getting narrower.

While 18 per cent of rural India has earnings in the range Rs 45,000 to Rs 215,000 per annum, 58 per cent of urban population earns in this range. However, 27 m individuals form a part of this income bracket in rural areas while in urban areas it is about 29 m; of which large base is already tapped.

No of households (m)
Demographic classification Urban Rural Total
Rich ( income greater than Rs 1 m per annum) 4.8 1.3 6.1
Well off (income greater than Rs 0.5 m per annum) 29.5 27.4 56.9
Total 34.3 28.7 63.0
% of total 54.4% 45.6%

As per the Associated Chambers of Commerce and Industry of India, the rural market is becoming increasingly attractive for FMCG, automobiles and organised retail businesses. Rural India accounts for more than 40 per cent consumption in major FMCG categories such as personal care, fabric care, and hot beverages.

FMCG sector in rural areas is expected to grow by 40 per cent as against 25 per cent in urban areas in the coming quarters. The size of retail market in India is estimated at US$ 280 bn of which the rural retail market works out to be $112 bn. This is expected to double in next 4 to 5 years because of the huge potential. Even auto companies in recent times are witnessing shift in trend as they are gearing to explore the huge market potential lying in the rural areas.

% of households owning products (2008)
Top 20 cities Other cities Rural
Car 23 5 3
Bicycle 37 61 69
Colour Tv 68 47 17
AC 5 3 0
Refrigerator 63 34 8
Computer 8 3 1

As rural India becomes more lucrative and the government becomes more committed to its development, schemes like the rural employment guarantee, Bharat Nirman, focus on rural education, debt waiver plan and higher support prices will aid the rural demand. Although the penetration levels are still very low, the scope is huge. And India Inc. is not letting go of this opportunity.

 

[Screaming Skull]

Rs 50,000 Crore ($ 10 Billion) stimulus package waiting in the wings​

19 Apr 2009,

NEW DELHI: A high-powered panel is thrashing out a mega economic stimulus package with a kitty of Rs 50,000 crore, which may be part of the first Budget of the next government at the Centre, said an official who didn’t want to be named. Ajay Shankar, secretary, department of industrial policy and promotion (DIPP), who is a member of the panel headed by cabinet secretary KM Chandrasekhar, confirmed that another booster measure was in the works to kick-start the economy.

“We have drawn the contours of this package. It’s for the next government to finalise it,” he told SundayET. “We have to keep the stimulus going though we need to be fiscally responsible. Its aim will be to substitute the decline of private investment with public expenditure,” he said.

Other members of the panel include secretaries of the finance and commerce departments, and a secretary of the Planning Commission.

SundayET had reported on January 25 quoting deputy chairman of Planning Commission Montek Singh Ahluwalia that the government had begun the process of preparing another fiscal stimulus package for FY09-10.

Though no one was willing to risk a guess on the size of the package, SundayET learns it will constitute 1% of GDP, or roughly Rs 50,000 crore. The package is likely to be a part of the budget to be presented before June 25, 2009, if not announced earlier on a stand-alone basis.

According to Mr Shankar of DIPP, impacts of the two fiscal packages announced earlier were already visible. Some of the sectors have started recovering. Many expansion plans announced by private sector companies are actually taking place, Toyota’s small car plant in Bangalore being an example, he said. Mr Shankar also said the country had clocked in foreign direct investment of over $25 billion till February, which is more than what was raked in the earlier fiscal.

The government had earlier announced two fiscal packages in addition to the Indian central bank RBI’s monetary interventions to boost the economy. The earlier fiscal measures also liberalised various rules and regulations to increase liquidity and give a boost to spending. While announcing the earlier packages, Planning Commission deputy chairman Montek Singh Ahluwalia said the government’s initiatives were mainly to ensure that the growth momentum was intact.

 

[Screaming Skull]

Global troubles for India Inc​

20 Apr 2009,

Hindalco

Soon after the Tata-Corus deal Hindalco acquired Novelis for around $6 billion. The acquisition has not been successful so far with Novelis continuing to make losses. Also, there is not much of integration synergy between two entities.

So far, the company has not been able to recover anything out its investment since Novelis generates negligible (or negative) cash even at operating level. Current impact of economic slowdown on its Indian operation would only add a pinch of salt to Hindalco’s overseas pain.

Punj Lloyd

Punj Lloyd’s international acquisitions like Singapore-based SembCorp and Technodyne have not benefited much to the company. December quarter has been very bad for its overseas operation with a loss of around Rs 300 crore.

However, the results of previous quarters indicate that the contribution of these foreign operations to bottom line was reasonably good. It has taken higher debt on its standalone balance sheet rather than the consolidated one. One has to keep an eye on the performance of these acquisitions once global economy recovers.

Ranbaxy

Ranbaxy, the eighth largest generic company in the world, has made a spate of acquisitions starting from US based Ohm Laboratories to Romania-based Terapia and South African player Be-Tabs among others. In 2006, Ranbaxy’s foreign asset base of $1.1 billion formed 60% of its total assets.

While the company’s foreign operations have been profitable, the forex losses in recent quarters have impacted the profitability of the company’s standalone operations. Moreover, the recent setback received by the company in its US operations has adversely impacted the company’s overseas business.

Sun Pharma

With six overseas acquisitions and one pending, Sun Pharma has been one of the fastest growing companies in the Indian pharma space. Acquisition of loss making US-based Caraco marked Sun’s first overseas acquisition in 1996. The company has since then acquired some loss making or under performing companies and managed to turn them around.

It is in the last leg of litigation with Taro, slated to be around $454 million acquisition. The company’s foreign assets constitute 35-40 % of its total asset base. Sun’s foreign acquisitions, majority of them in US, have proved to be more profitable than its standalone Indian business.

Suzlon

Helped by foreign acquisitions - Belgium-based Hansen Transmission and Germany-based Repower - Suzlon Energy has grown to be the fifth largest wind power equipment manufacturer in the world. After an initial phase of generating poor profit margins post the acquisition of Hansen in FY07, Suzlon seems to have recovered and managed to witness higher sales realization.

However, the going again seems to have got tough with significant currency fluctuation leading to MTM and charges related to blade retrofitting. If the company manages to control these exceptional items in coming quarters, its acquisitions can certainly be termed as value accretive .

Tata Chemicals

Tata Chemicals’ $1 billion acquisition of US-based General Chemical Industrial Products Inc (GCIP) in March 2008 has enabled it to become the world’s second largest maker of soda ash. Earlier in 2006, the company had also acquired Brunner Mond, a UKbased chemical company.

These acquisitions have cut down its cost of soda ash and greatly increased its profitability. Moreover, the acquisitions have been earnings accretive right from their very first year of operations.

 

[Screaming Skull]

PM sees return to 8-9 pc growth from Sep​

19 Apr 2009,

AMINGAON: The economy will return to growth rates of 8-9 per cent as the global economy begins to recover from September, Prime Minister
Manmohan Singh said on Sunday.

Asia's third-largest economy is expected to have grown slightly below 7 per cent in the fiscal year ending March 31, 2009 and some private economists have said growth could be slower in the current financial year.

This compares with growth of 9 per cent or more in the last three years, before the financial crisis slashed exports and moderated domestic demand.

"The world economy is expected to partially recover by September and if that happens we expect to go back to the growth rate of 8-9 per cent," Singh told reporters at a news conference in the northeastern state of Assam.

He did not say if the economy would grow at that pace in the year to March 2010.

 

[Screaming Skull]

RBI survey lowers GDP growth forecast to 5.7%​

Tuesday, Apr 21, 2009

Mumbai, April 20 The median forecast of real GDP growth, according to the Reserve Bank of India’s latest professional forecasters’ survey, for 2009-2010 has been revised downwards to 5.7 per cent from 6 per cent.

The central bank, in its report on the Macroeconomic and Monetary Developments in 2008-2009, said that the various surveys of economic activity point towards prevalence of less-than-optimistic sentiment for the outlook of the economy in the coming months.

Between the sixth round survey conducted in December 2008 and seventh round survey in March 2009, median forecast of real GDP growth for 2008-09 was revised downwards to 6.6 per cent from 6.8 per cent.

According to the report, for the April-June 2009 quarter, the overall net sentiment for all industries, except textiles, is positive. Moderate growth is expected across the various companies in the first quarter. However, the expectations are less optimistic for smaller companies compared with their bigger counterparts.

Inflation

On the inflation front, the report underscored the fact that unlike the wholesale price index based inflation, consumer price index based inflation in India remains high, with recent evidence of very slight moderation. “The transmission process of lower inflation at the wholesale level to inflation at the retail level has emerged as an important issue in the conduct of RBI’s monetary policy,” the report said.

The WPI-based inflation eased to 0.18 per cent for the week ended April 4 from 0.26 per cent for the previous week. Various measures of consumer price inflation, though started declining, still remained high in the range of 9.6-10.8 per cent during January/ February 2009.

The higher level of consumer price inflation (CPI) as compared with WPI inflation , in recent months, could be attributed to higher prices of food articles, which have higher weight in CPI.

Scheduled commercial banks (SCBs’) investment in statutory liquidity ratio (SLR) securities as a per cent of their net demand and time liabilities (NDTL) increased at end-March 2009 to 28.1 per cent, from 27.8 per cent a year ago.

However, adjusted for Liquidity Adjustment Facility collateral securities on an outstanding basis, SCBs holding of SLR securities amounted to Rs 11,10,156 crore or 26.7 per cent of NDTL at end-March 2009 – implying an excess of Rs 1,13,817 crore or 2.7 per cent of NDTL over the prescribed SLR of 24 per cent of NDTL.

The lower expansion in credit relative to the expansion in deposits resulted in a decline in the incremental credit-deposit ratio (y-o-y) of SCBs to 64.4 per cent at March-end 2009 from 73.6 per cent a year ago.

Personal loans

Our Chennai Bureau reports: The latest confirmation of a slowdown in the personal loans segment comes from the Statement on Macroeconomic and Monetary Developments put out by the Reserve Bank of India. Personal loans (inclusive of housing, credit cards, educational loans, consumer durable loans etc.) at Rs 5,55,392 crore account for about 22 per cent of the total loans outstanding as of end February 2009. Personal loans grew at just 8.5 per cent in the last one year compared with 13 per cent growth registered in the previous year.

Loans for housing, which constitute about half the personal loan segment, were at Rs 272,376 crore. They grew at just 7.5 per cent last year compared with 13 per cent in the previous year (2007-08) and 26 per cent in the year 2006-07. Credit card outstandings also grew at a mere 8 per cent compared to about 51 per cent in 2007-08 and 46 per cent in 2006-07.

Despite oft-repeated complaints that the real estate sector was credit starved, statistics provided by the RBI show that real-estate loans grew 61.4 per cent last year to Rs 9,0765 crore compared with a 27 per cent growth in 2007-08.

Similarly, loans to NBFCs also grew by 42 per cent during the last year to Rs 90,521 crore.

 

[Screaming Skull]

Forex reserves at $252 bn in end-March: RBI​

20 Apr 2009,

MUMBAI: India's foreign exchange reserves stood at USD 252 billion as of end-March, declining by USD 57.7 billion over the previous year, the Reserve Bank said on Monday.

The RBI said in its Macroeconomic and Monetary Developments in 2008-09 said, the overall approach to the management of India's foreign exchange reserves in recent years reflects the changing composition of the balance of payments and the 'liquidity risks' associated with different types of flows and other requirements.

"Taking these factors into account, India's foreign exchange reserves continued to be at a level consistent with the rate of growth, the size of the external sector in the economy and the size of risk-adjusted capital flows," RBI said.

Forex reserves, however, increased to USD 253 billion as of April 10, it added.

 

[Nihat]

Can you add links to some of the more important articles.

 

[Screaming Skull]

Can you add links to some of the more important articles.

All the articles that I have posted have embedded links in the titles. Just click the titles and you will be directed to the source.

 

[NSG_BlackCats]

Loans to get cheaper as RBI cuts rates​

MUMBAI: Banks on Tuesday said they would cut lending rates making home, consumer, corporate and personal loans cheaper after the Reserve Bank
slashed short-term lending (repo) and borrowing (reverse repo) rates by 25 basis points each in its annual monetary policy for 2009-10.

"The policy stance of RBI indicates further softening of the interest rates," Oriental Bank of Commerce Executive Director S C Sinha told media.

Banks would bring down lending and deposit rates after reviewing their asset liability condition. It may not be immediate but would take some time to respond, he said.

Indian Bank Executive Director A Subramanian said that deposit and lending rates would come down simultaneously. "That is the signal RBI is giving to all banks." The apex bank cutting down short-term borrowing rate would encourage banks to lend and earn interest income rather parking funds with RBI and earn reverse repo rate, he said.

The Chennai-based bank would take a view on the interest rates in the next few days, Subramanian said.

In its annual credit policy, RBI reduced repo rate to 4.75 per cent and reverse repo to 3.25 per cent with immediate effect, while retaining the other key ratios such as the Cash Reserve Ratio, the percentage of deposits that banks keep with the central bank.

RBI rate cut would lead to softening of effective lending rate, Subramanian said, adding that deposit rates would also be cut simultaneously.

UCO Bank Chairman and Managing Director S K Goel had said that the bank would take a view on the interest rates after the annual credit policy.

The RBI has given enough indication to banks to ease rates, however, private sector banks have been laggard in the responding to the central bank's signals.

While public sector banks have reduced their benchmark prime lending rates (BPLR) as much as 250 basis points post Lehman Brothers crisis in mid-October last year.

RBI has reduced repo rate from 9 per cent in October 2008 to 4.75 per cent now, while it brought down reverse repo rate from 6 per cent in October last year to 3.25 per cent at present.

Yes Bank Chief Economist Shubhada Rao said the complete pass-through of previous rate cuts is yet to fully transmit through lower lending and deposit rates in the banking sector.

Although interest rates have dropped from their peak levels, there remains a scope for rates to decline further, she said. We expect this to happen within coming two quarters when the banking sector will be able to re-price their balance sheets on liabilities side followed by assets side," Rao added.

Deutsche Bank Ananth Narayan said combination of high liquidity and forceful message from RBI will probably bring lending rates down. "On the govt bond side also this combination will work ... We should see bond prices holing up and going up from here," he said.

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