Indian Economy - News & Updates - Archive

[white_pawn]

Textile ministry draws up wishlist to boost ailing sector​

27 May 2009, 0112 hrs IST

NEW DELHI: The textiles ministry has drawn up a booster dose of fiscal and policy measures that will address specific needs of different types of
fabrics and apparel manufacturers with the aim of reviving the sector that is second only to agriculture in terms of employment, top government sources told TOI.

The textiles sector along with jewellery and infotech has emerged as a cause of worry for the government as the December stimulus package for clothesmakers has not yielded the desired result as the industry depends a great deal on exports to the US and Europe. Even finance minister Pranab Mukherjee on Tuesday acknowledged to a TV channel that more needed to be done for the sector, raising hopes that the measures could make it to the Budget.

A draft package sent to the cabinet secretary suggests restoration of drawback rates, reinstitution of interest subvention on export credit, a two-year moratorium on term loan repayments, reduction in margin money requirement, exemptions from paying service tax/terminal excise duty and central sales tax.

To give a fillip to items made by rural artisans, the draft also suggests bringing in more products such as hand-printed textiles under the purview of Vishesh Krishi and Gram Udyog Scheme that will get them more financial protection.

In the December package for the industry, the government had reduced from 8% to 4% ad-valorem rates of central excise on textiles and accessories, additional funds of Rs 1,100 crore to ensure full refund of terminal excise duty/central excise and additional allocation of Rs 1,400 crore to clear the backlog of Technology Upgradation Fund Scheme (TUFS).

"The above steps are not sufficient to improve the condition of the sector. For example, the reduction in central excise duty affects only man-made fibre industry; the additional allocation for TUFS (funds) in effect covers past dues only upto June 2008 and in reality is only payment of dues which was long overdue," the textiles ministry has told the cabinet secretary.

In contrast, the ministry pointed out, competing countries such as China had been "incentivising their textiles and clothes industries" heavily to survive the global slowdown. China, for example, announced a 2-4% increase in VAT refund rates on textiles and clothes exports as early as July 2008 to take it to 13% and followed it up with more cuts to raise the refund level to 15% by February.

Around the same period, Pakistan announced reintroduction of R&D assistance to garments exporters at 6%, 5% refund of interest paid on loans for machinery, 3% interest subvention for spinning industry and a two-year moratorium on repayment of principal and interest on term loans.

Textile ministry draws up wishlist to boost ailing sector - India Business - Business - The Times of India

 

[white_pawn]

Telecom M&As set to touch $50 billion​

27 May 2009, 0311 hrs IST

NEW DELHI: If Bharti Airtel's proposed $23 to $29 billion merger with South African operator MTN goes through, India's telecom M&A market will
come of age either crossing or getting close to the $50 billion mark within a span of four years.

The telecom sector has seen greater M&A deals than any other segment in the country. Since 2005, 15 M&A deals have been struck, crossing a value of $25 billion. If Bharti pulls off a marriage with MTN, this number can cross $50 billion.

This also reveals that the size of Bharti-MTN deal will be roughly equal to or more than the last 15 telecom M&A deals in the country, though it is different since the transaction size is driven by share-swap rather than pure equity sale.

M&As in the Indian telecom sector started in the late 90s with companies like Bharti, Hutchison (now Vodafone), and Birla-AT&T (now Idea) starting to buy out smaller cellular operators with one or two circle operations. The first large M&A deal began with Tata Cellular merging with Birla-AT&T. This was followed by their acquisition of Escotel and RPG.

Bharti made multiple acquisitions in the late 90's to 2002. Hutchison first acquired Facel in Gujarat, and then BPL, to expand its footprint in Maharashtra, Tamil Nadu and Kerala.

Of the 15 M&A deals struck since 2005, the largest was Vodafone's 67% acquisition of Hutchison Essar for $13.66 billion which placed the enterprise value of Hutchison's mobile footprint in India at $18.8 billion in 2007.

The second largest deal in terms of valuation was more recently, in December 2008, when NTT DoCoMo bought 26% of Tata Tele for $2.7 billion, representing an enterprise value of $10.38 billion for Tata Tele.

Many Indian companies have sold stakes on more than one occasion, and between 2005 and 2008 the valuations of these companies have steadily gone up. Tata Teleservices, which received a valuation of $10.38 billion from DoCoMo in 2008, was valued at a mere $1.27 billion by Temasec in August 2006 when it parted with 9.9% stake.

Similarly, Providence and TA Associates valued Idea Cellular at approximately $3.9 billion at 2006-end. Subsequently, in mid-2008, Telecom Malaysia gave Idea an enterprise value of $7.6 billion and acquired 14.9% stake.

Two of the most recent acquisitions include Telenor in Unitech and Etisalat in Swan neither of which had, at the time of the acquisition, any subscribers or operations in India. These deals were valued at $1.7 billion and $2 billion respectively.

It is clear that India is one of the most attractive markets representing huge growth potential over the next five years. DoT, in its latest spectrum report, has forecast one billion mobile consumers by 2014. This would mean an average addition of 10 million subscribers per month for the next five years.

It is also clear that no market in the world can sustain 12 to 13 operators per circle which is currently the case in India. It is expected that in line with the M&A deals over the last three years, further consolidation is on the cards in the near future. Most telecom experts forecast three to four national players with two or three regional operators over the next two to three years as average revenues per user decline, markets start to slowly saturate, and mobile telephony moves from the current land grab mentality to a fight for switching high-paying customers between competing mobile networks.

It is, however critical that for India to move to an efficient number of market players from the present overcrowding, the government immediately start to review its April 2008 telecom M&A guidelines which place severe restrictions on inter-circle mergers within the first three years.

Telecom M&As set to touch $50 billion - India Business - Business - The Times of India

 

[white_pawn]

Investors richer by Rs 7L cr in 7 trading session​

27 May 2009, 0115 hrs IST

MUMBAI: A unexpectedly clear mandate to the Congress-led UPA government has made Dalal Street investors richer by over Rs 7 lakh crore.


Since the results of the Lok Sabha elections were announced on May 16, BSE's market capitalisation has increased by Rs 7.04 lakh crore to Rs 44.8 lakh crore now. In other words, in the last seven sessions, on an average, investor wealth has increased by Rs 1 lakh crore. And this is after BSE's market capitalisation declined by a little over Rs 1.1 lakh crore in Tuesday's sliding market.

An analysis of prices of group A and B stocks on BSE also showed that in those seven sessions, four stocks Kaushalya Infra, UB (Holdings), Jindal Capital and Evernnon Systems have at least doubled from where they were on May 15, the day before the poll results were out.

There are 1,410 stocks in BSE's A and B groups, of which 1,372 have given positive returns in the last seven sessions. Of these, 19 have given returns of 75% or more and 165 have returned of over 50%. On the other side of the spectrum, there are 38 stocks that gave negative returns, with three down over 10% in the last seven session.

Among sensex stocks, Reliance Infrastructure, with a gain of 37.2% to Rs 1,123, tops the table. Among laggards were Bharti Airtel, TCS and Infosys.

Investors richer by Rs 7L cr in 7 trading session - India Business - Business - The Times of India

 

[white_pawn]

Drug exports up 31% on weak Re

28 May 2009, 0205 hrs IST

NEW DELHI: Drug exports from India shot up 30.7% for the first 10 months of 2008-09 ended January 2009 compared with the previous year, backed by
weak Indian currency and increased demand for low-cost generic medicines.

Indian drugmakers exported medicines worth Rs 31,608 crore during April 2008-January 2009, which was even higher than exports worth Rs 29,139 crore for the fiscal 2007-08, as per figures compiled by Pharmaceutical Exports Promotion Council (Pharmexcil), a government body that oversees drug exports.

“In dollar terms, pharma exports touched $6.99 billion against $6.08 billion during the same period growing at 16.4%,” said Pharmexcil executive director PV Appaji.

The growth comes even as exports to the US market, the world’s largest market, has shown negative in the past two months. Exports to the US market dropped 13% in December and January, the past two months for which data is available, to Rs 1,263 crore.

Mr Appaji explained, “The US sales have been negatively affected by the US drug regulators decision to ban 30 drugs made by Ranbaxy, one of the largest exporters of Indian drugs to the country.”

Moreover, total exports also dipped in the dollar value for January. In January, exports grew 11.5% to Rs 2,917 crore compared with Rs 2,617 crore in the same month last year. But, in the dollar terms, exports during the month declined 10.1% to $597.38 million. This is because of the sharp appreciation in the value of dollar, which had risen almost 25% during the period. The rupee has since then strengthened investment flows into the country.

Meanwhile, Russia has edged past Germany as the second-largest market for Indian drugmakers. Exports to Germany for the 10-month ended January 2009 stood at Rs 1,105 crore against Rs 1,197 crore for Russia.

Indian companies export drugs to over 200 countries, but the top 25 markets, which includes the US, Germany, Russia, China and few European and African countries, account for about half of the total. Among the top 25 countries, exports for January declined for 18 countries in the dollar value, with the biggest drop in Germany (-34.92%), Spain (-35.21) and Brazil (-30.74%).

Drug exports up 31% on weak Re- Foreign Trade-Economy-News-The Economic Times

 

[white_pawn]

IFC to invest $1 bn in India next fiscal​

NEW DELHI: International Finance Corporation (IFC), the World Bank's lending arm, on Tuesday said it plans to invest close to $1 billion (about Rs
5,000 crore) in India in the next fiscal (July 2009-June 2010).

"One billion dollar in India as a whole was done in the last year (July 2007-June 2008). This fiscal also we expect to do about the same amount...I think we would remain at the one billion dollar figure more or less for the next one or two years," IFC South Asia Manager-Infrastructure Advisory Vipul Bhagat said.

He further said that IFC is focused on investing in the country's infrastructural projects and close to 50 per cent investment would be in this sector.

"Infrastructure is a focus area for IFC especially because the Indian government has told IFC to do more in that sector," he added on the sidelines of a book release function organised by the CII and IFC.

Besides investing in infrastructure, IFC also invest in agriculture and rural development among others.

Bhagat further said that the economic slowdown has not impacted its investment plans and IFC faces no liquidity problem.

IFC is a member of the World Bank Group which provides investments and advisory services to private sector in developing countries.

IFC to invest $1 bn in India next fiscal- Finance-Economy-News-The Economic Times

 

[white_pawn]

Govt to fast track Rs 20k cr road projects​

NEW DELHI: With elections over, the government will soon consider clearing 21 infrastructure projects, at a total cost of about Rs 20,000 crore, to
be implemented jointly by various state agencies and private sector developers.

The model code of conduct for public servants during the national polls had forced central and state agencies to put on hold new public private partnership (PPP) projects.

The PPP appraisal committee, chaired by finance secretary Ashok Chawla, will soon examine these projects, which are spread across the country. All of them are road projects, each at a cost of Rs 500-1,000 crore. About 13 projects have sought financial support from the government to achieve financial closure under the viability gap funding (VGF), said an official who asked not to be named. Under the VGF scheme, the government meets one-fifth of the total cost of the project, which could be doubled if the state agency feels so.

The government feels spending on large infrastructure projects is crucial for protecting jobs and helping firms remain in business till the good times return. Besides making it easier for infrastructure project developers to access funds, the government had also decided to spend more on the sector last December.

Of the Rs 20,000-crore extra Plan spending the government had announced last December to stimulate the economy, a significant part was allocated for building new roads.

The official told ET that the government will also look into the grievances that infrastructure lenders may have. According to Hemant Kanoria, CMD of Srei Infrastructure Finance, it is difficult for such firms to borrow from multilateral agencies under the existing norms on overseas commercial borrowings. The private sector infrastructure lender wants the norms to be further eased.

The PPPAC cleared two port and five highway projects in March with a spending of Rs 5,220 crore. Since January 2006, the panel has approved 101 projects, with an estimated cost of Rs 1,00,384 crore. These include 88 highways, nine ports, two airports, a tourism infrastructure project and a railway project.

Govt to fast track Rs 20k cr road projects- Infrastructure-Economy-News-The Economic Times

 

[Neo]

Siemens to invest Rs2.8bn in Gujarat plant ​

Friday, May 29, 2009

MUMBAI: Siemens Ltd said on Thursday it intends to invest 2.75 billion rupees for expansion of its steam turbine making unit in Gujarat.

The company’s steam turbine unit at Vadodara currently makes industrial steam turbines of up to 45 MW. After the expansion, this would increase to 100 MW, it said in a release.

The expansion will strengthen company’s exports markets in Asia, Europe and Africa, apart from catering to domestic market, the company said.

Siemens AG sources turbines of up to 15 MW from this plant to cater to its requirements in Asia and Africa and intends to do it for European markets in future, it said.

The expansion is expected to completed by 2010 and will provide additional employment to 200 people, it said.

The shares in the company closed up 3.21 per cent to 478.40 rupees, in a firm Mumbai market.

 

[sob]

New RIL gas find may put India among top 15- Oil & Gas-Energy-News By Industry-News-The Economic Times

Reliance Industries’ (RIL) new gas finds in the Krishna Godavari (KG) basin, if validated by Indian regulators, may place India among the
top 15 gas producers in the world.

RIL’s joint venture partner UK-based Hardy Oil and Gas on Wednesday had announced the discovery of 9.5 trillion cubic feet (tcf) of gas in the D-3 block of the KG basin and another find of 10.8 tcf in another block called D-9.

Neither of these finds has been certified yet by the Indian upstream regulator, but could potentially raise India’s proven reserves of natural gas to a significant extent. Blocks refer to areas, running into thousands of square kilometre, where companies have been allowed to search for oil and gas.

India had proven gas reserves of over 37 trillion cubic feet (tcf) at the end of 2007 according to British Petroleum’s 2008 Statistical review. If another 20 tcf of gas reserves is added, it will place India in the ranks of the top 15 gas producers in the world.

With 57 tcf, India will overtake countries like Azerbaijan, Netherlands and Libya. India’s gas reserves will, if these finds are endorsed by the regulator, then figure just below Canada.

Based upon the gas find, brokerage CLSA has upgraded RIL to “outperform” in the near future.

A technical evaluation report commissioned by Hardy Oil on the potential of the company’s D3 and D9 exploration licences stated that the “best estimate resources for the D3 Block was estimated at 9.5 trillion cubic feet of natural gas and the gross risked best estimate prospective resources in Block D9 is estimated at 10.8 tcf of natural gas and 143 million barrels of oil.”

The technical evaluation of both the blocks were carried out by international consultants Gaffney, Cline & Associates (GCA). The report is on the company’s website.

Commenting on the report, Sastry Karra, chief executive of Hardy in a statement said: “The report confirms the significant hydrocarbon potential of our exploration assets in the emerging world class petroleum system of the KG basin in India. The two discoveries on D3 in conjunction with the acquisition of risk mitigating technologies and geotechnical studies have resulted in the upward revision of the perceived geological chance of success on both of our KG basin blocks.” Hardy Oil has 10% in a special purpose vehicle (SPV) which is exploring these blocks. RIL has the remaining 90%.

When asked for comments a RIL spokesperson declined to do so as Indian upstream regulator the Directorate General of Hydrocarbons (DGH) has banned announcing any new find without its approval. V K Sibal, director general, DGH could not be reached for his comments.

Besides RIL’s latest discovery of 20 tcf, GSPC, a company owned by the Gujarat state government and ONGC have also claimed discoveries of 20 tcf of gas each in the same basin.

These were reported by the media in 2005 and 2006 but are also yet to be certified by the regulator. The DGH has asked both the firms to drill more wells before these claims are validated. Given this track record, it could be some time before Hardy Oil’s claims are confirmed, if indeed that happens.


The KG basin, off India’s eastern seaboard, was relatively unexplored territory till the last years of the 20th century. It is now proving to be potentially India’s equivalent of North Sea or Gulf of Mexico.

 

[sob]

Economy Grows Faster Than Expected

Economy grew faster than expected in the March quarter, helped by strength in farm and services sectors that suggested Asia's
third-largest economy has already turned the corner and may be set for an early recovery.

"The economy has clearly performed better than expectations despite very challenging credit conditions," said Han-Sia Yeo, currency and rates strategist at Australia and New Zealand Banking Group in Singapore.

The economy grew 5.8 per cent from a year earlier in January-March, matching the upwardly revised rate in the previous quarter, data showed on Friday. That was still the lowest in four years, but above analysts' forecast of a 5.2 per cent annual expansion.

October-December growth was revised from 5.3 per cent. India does not publish seasonally-adjusted quarter-on-quarter growth figures, but analysts' estimates showed the economy grew 1.2 per cent in the quarter compared with a stagnant reading in September-December.

In the whole of the 2008/09 fiscal year to March 31, economy grew 6.7 per cent, its weakest in six years and well below rates of around 9 per cent of the previous three years, but still faster than predicted by economists in a Reuters poll.

The data fanned hopes that India was already on the mend, unlike other major economies that suffered a disastrous January-March quarter and have yet to show hard evidence of improvement.

Unlike most Asian economies, which heavily rely on exports to sustain economic growth, India is driven by domestic demand. But it still suffered a sharp slowdown in late 2008 as job cuts at exporters and outsourcing firms as well as the drying up of investment flows soured consumer and business sentiment.

Exports account for only about 15 per cent of India's GDP, less than half the levels in China and Japan.

"I think the GDP upgrade cycle has just started. We are past the eye of the storm," said Rajeev Malik, economist with Macquarie Capital in Singapore.


MARKETS CHEER

Indian stocks jumped more than 3 per cent and the rupee and bond yields also rose as the numbers boosted investor confidence about India's outlook and suggested the central bank may be finished with interest rate cuts.

"I think policy rates have bottomed out so the next move for the policy rate is upwards," said A Prasanna, chief economist at ICICI Securities primary dealership in Mumbai, who predicted rates would stay on hold over the next 6-9 months.

March quarter growth was only slightly below the 6.1 per cent expansion reported by China, Asia's second-largest and the world's third-largest economy, which for years has served as the world's main growth engine.

Central bank expects growth of about 6 per cent for the whole of current 2009/2010 fiscal year.

Growth beats expectations, fuels recovery hopes- Indicators-Economy-News-The Economic Times

 

[sob]

Indian Company unveils Rival to Blackberry

The little-known maker of Red Chery - a mobile application used for receiving mails from free and corporate email accounts - is dreaming
big: eating into a market straddled by BlackBerry of Canada's Research In Motion and other similar service providers
.

To make this happen, the Rs 15-crore software product company, AJ Square Consultancy, is banking on an aggressive pricing strategy, and hoping to rope in two million (20 lakh) subscribers by this fiscal-end.

"With an average revenue per subscriber of Rs 110 per annum, which is about a tenth of what existing players charge, we hope to earn around Rs 22 crore from 20 lakh subscribers by the end of this fiscal. We may even offer this service free at a later stage," AJ Square managing director Boaz Augustin said.

Like other similar products, Red Chery is a mobile application used for receiving mails from any of the free email accounts (Yahoo, Gmail, Hotmail and Rediffmail) and corporate email accounts (MS exchange and IBM Lotus servers) on a mobile handset.

"Red Chery is platform, telecom and mobile instrument independent. One can read emails like a short messaging services," Augustin added. AJ Square will be focussing on the corporate sector to push Red Chery.

According to Augustin, the company will offer services in Singapore and Europe once it stabilises its Indian operations and gets venture capital to the tune of $25 million. "We are open to dilute up to 45 per cent stake."

The 200-employee Madurai-based AJ Square is into development of e-commerce and gaming software for European companies.

BlackBerry gets an Indian rival- Telecom-News By Industry-News-The Economic Times

 

[sob]

Oil Prices to be Deregulated

he Government will consider deregulating petrol and diesel prices in six weeks, Petroleum Minister Murli Deora said on Friday.

"The issue of deregulation is being discussed and it will be put up to the cabinet for a decision," he said after taking charge of the Petroleum Ministry for the second time on Friday.

Asked about the time frame during which the decision is likely, he said: "In about six weeks."

Govt may free fuel prices in 6 weeks: Deora - The Financial Express

 

[King Julien]

First time in history, average Indian's income crosses Rs3000
29 May 2009, 1639 hrs IST, PTI

NEW DELHI: The monthly income of an average Indian for the first time in the country's history has crossed Rs 3,000, thanks to economic reforms
and a high growth rate of above 9% achieved for three years since 2005-06.

The per capita income, a measure of average income of a citizen, went up 12.2% to Rs 37,490 per annum during 2008-09, said the advance estimate for national income released by the Central Statistical Organisation (CSO) on Friday.

During 2007-08, the per capita income was Rs 33,283 per annum.

The CSO data further reveals that the per capita income at constant (1999-2000) prices during the last fiscal rose to Rs 25,494 per annum from Rs 24,295 per annum in the previous year, recording a growth rate of 4.9 per cent.

The per capita income would have been higher but for the global economic crisis, which pulled down the country's economic growth
during 2008-09 to 6.7 per cent from 9 per cent in the previous fiscal.

The national income during the year went up to Rs 43.26 lakh crore, showing a rise of 14.2%, while the population of the country increased by 1.6 crore to 115.4 crore.

The CSO data further says that the national income at 1999-2000 prices increased by 6.4% to Rs 29.42 lakh crore during 2008-09.

First time in history, average Indian's income crosses Rs3000 - India - The Times of India

 

[NSG_BlackCats]

India's economic growth slows to 6.7% from 9% a year ago​

NEW DELHI: India's economy expanded by a stronger-than-expected 6.7 percent in the past fiscal year, giving a boost to the newly re-elected government, which aims to restore growth to scorching levels.
The figure for the 12 months till the end of March 2009 was, however, still down from the nine percent posted a year earlier due to the global downturn but better than analysts' forecasts which were mostly in the range of 6.0 to 6.5 percent.
Shares rose on the news with the benchmark Sensex index of 30 leading stocks was up 2.60 percent or 371.76 points at 14,667.77.
Growth was lifted by an unexpectedly robust performance in the fourth quarter of 5.8 percent on the back of government spending and aggressive rate cuts by the central bank. The fourth quarter performance was, however, down compared to 8.6 percent in the same year-earlier period. The numbers were welcome news for the Congress-led government, which was swept back to power earlier this month on a poverty alleviation platform.

"What you're seeing in these better-than-expected figures is essentially the effects of government spending, which is showing up in social and community services and construction," said D.K. Joshi, principal economist at leading Indian credit rating agency Crisil.
Finance minister Pranab Mukherjee has said the government will make lifting growth its top priority to help India's "common man" -- even at the risk of ballooning the country's already large fiscal deficit.
New Delhi is hoping to return growth back to levels around nine percent seen before the global financial crisis hit, and possibly push into double-digits. The government says it needs such growth levels to lift hundreds of millions of Indians out of poverty.
Friday's full-year figures were also helped by an upward revision of third-quarter growth to 5.8 percent from 5.3 percent and a stronger performance in the farm sector.
Agriculture accounts for nearly 20 percent of gross domestic product (GDP) and provides a living for two-thirds of the population.
Analysts say the economy has been showing signs of a rebound, with car sales and cement output up due to interest rate cuts and a series of stimulus packages introduced by the previous administration.
Eyes will now keenly be on the government's budget, expected in early July, to see how quickly it moves ahead on economic reforms such as disinvestment and opening up the financial sector to more foreign firms.
India has weathered the international slump better than many nations because of its still relatively inward looking economy, which has only opened up slowly since 1991.


LINK

 

[Rajkumar]

Indian economy grows by 6.7 pc in 2008-09



New Delhi: India's economy grew a faster than expected 5.8 per cent in the March quarter from a year earlier, as a still strong services sector offset a decline in manufacturing.

The manufacturing sector contracted 1.4 per cent in the January-March quarter from a year earlier, while farm output grew an annual 2.7 per cent, government data showed on Friday.

For the full year, India's economy grew 6.7 per cent in 2008/09, sharply slower than the 9.0 or more in the previous three years.

The annual growth for India's fiscal fourth quarter was above a median forecast of 5.2 per cent in a Reuters poll, but sharply lower than the year-ago quarter's 8.6 per cent expansion.

Key Points

*

Farm output in the March quarter grew 2.7 per cent from a year earlier vs a decline of 0.8 per cent in Oct-Dec quarter.

*

Manufacturing fell an annual 1.4 per cent in Jan-March vs a 0.9 per cent rise in the October-December period.

*

Construction grew an annual 6.8 per cent in Jan-March vs growth of 4.2 per cent in October-December.

*

Trade, hotels, transport and communication grew 6.3 per cent in Jan-March from a year earlier vs 5.9 per cent in October-December.

*

Financing, insurance, real estate and business services grew an annual 9.5 per cent in Jan-March vs 8.3 per cent in October-December.

Commentary:

ICICI Securities primary dealership Chief Economist A Prasanna: "This just confirms that after Q3 there was a sudden slowdown but things stabilised and improved in the fourth quarter. If this continues what we could see is in the first half probably the economy will continue to grow at a pace slightly below 6 per cent and in the second half it will grow closer to 7 per cent."

"There is a likelihood that the the second half growth could exceed 7 per cent so there is an upside to RBIs estimate of 6 per cent growth for the full year."

"I think policy rates have bottomed out so the next move for the policy rate is upwards, probably that will take some time. The central bank would prefer to pause and wait for concrete evidence of recovery before it starts hiking rates. We are looking at a 6-9 month period, where liquidity withdrawal will come first and possibly early next year rate hikes could start."

Macquarie Capital Economist Rajeev Mailk: "I think the GDP upgrade cycle has just started. We are past the eye of the storm. "There are two aspects. One is purely more stable political setting, along with improvement as far as capital markets and financing. Both mean that investment revival can come out earlier, with an additional push on infrastructure."

Bank of Baroda Chief Economist Rupa Rege Nitsure: "GDP growth of 6.7 per cent for 2008/09 is line with the RBI's projection, and way above the pessimistic forecasts given by the global think-tank. The GDP growth number for FY09 justifies the claim that India is dealing with the global crisis from a position of strength. "Fourth quarter is generally a better quarter than the earlier quarters, and 5.8 per cent in Q4 despite a severe industrial and export contraction shows that agriculture as well as certain components of the services sector are supportive of growth. This means that growth has bottomed out, or at least the deceleration has stopped. We may even see IIP (industrial output) in the positive territory from April onwards. But the only thing is that it will not be strongly positive to begin with, and we will see firmer signs of recovery only towards the end of the second quarter.

 

[Neo]

India’s economic growth beats forecasts ​

Saturday, May 30, 2009

NEW DELHI: India reported unexpectedly robust economic growth on Friday, sending stocks to a near nine-month high, as analysts said the worst may be over for Asia’s third-largest economy.

India’s economy, which has weathered the global downturn better than many of its peers, expanded by 5.8 per cent in the last quarter of the fiscal year to March 2009, beating forecasts of 5.0 per cent, boosted by government spending.

“We’ve definitely turned the corner,” Rajeev Malik, economist at Australia’s Macquarie Capital Securities, told AFP.

Growth for the full-year was 6.7 per cent, down from the nine per cent posted a year earlier, but outpacing predictions of as low as 6.0 per cent.

“What you’re seeing is essentially the effect of government spending,” said D K Joshi, economist at Indian credit rating agency Crisil.

Government consumption grew 22 per cent year-on-year in the final quarter as authorities spent on social programmes and construction, helping to offset a sharp decline in private consumption and manufacturing.

Mumbai’s benchmark 30-share index jumped 2.3 per cent or 329.24 points to close at 14,625.25, its highest in nearly nine months, following the figures.

Analysts still expect the economy to slow more in the year to March 2010 due to fallout from the worldwide slump but said the deceleration may not be as severe as earlier forecast and the economy was on the mend.

Foreign capital now is pouring back into India amid signs of economic “green shoots” such as higher car sales and cement output following aggressive interest rate cuts and government stimulus packages.

“A main reason (for the slowdown) was financing drying up as a result of the global crisis,” said Malik. “The revival in capital markets automatically means one of the negatives crippling investment is addressed.”

Growth was seen at around six per cent in the first half and closer to seven per cent in the second. Next year, economists expect growth of eight per cent.

The economy still has “significant pent-up demand for investment, especially in infrastructure and in affordable housing,” said Goldman Sachs economist Tushar Poddar. The numbers gave cheer to the Congress-led government, which swept back to power earlier this month on a poverty alleviation platform. Its strong mandate is seen as a positive for investors, spelling political stability.

Finance Minister Pranab Mukherjee has said the government will make increasing growth its top priority to help India’s “common man” even at the risk of ballooning an already large fiscal deficit.

He said “prophets of doom,” referring to ratings agencies, were focusing on increased public spending without realising higher growth could help get India back on the path of fiscal rectitude through stronger tax revenues.

New Delhi hopes to return growth back to nine per cent and even into double-digits, saying it needs such expansion to lift hundreds of millions of Indians out of poverty.

Friday’s figures were also helped by an upward revision of third-quarter growth to 5.8 per cent from 5.3 per cent and a stronger performance in agriculture, which accounts for nearly 20 per cent of gross domestic product.

Eyes will now be on the budget, due in early July, to see how quickly the government moves on reforms such as opening up the financial sector to more foreign firms and dis-investment, seen as boosters to growth and fiscal health.