Indian Economy-News & Updates
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India among world's top 3 preferred investment destination
India is among the world's top three preferred investment destination, but equity caps limit the size of potential inflows, according to a Columbia University report.
The report cited liberalisation in FDI policy and several economic sectors, a globally competitive workforce, and rapid GDP and market growth as the main drivers of foreign investment in India.
Yet, it said equity caps limit the size of potential new inflows and national security concerns might prompt more oversight of FDI approval processes.
According to the 15-page report 'Inward FDI in India and its policy context' India is also the 13th largest in terms of foreign investment inflows, which have risen 15-fold since 2000.
The report said while investors initially concentrated on manufacturing, power and telecommunications, they now focus on services.
Among other visible trends, firms in developed countries dominated investment in the 1990s, but in the past decade developing country investors have also become significant, it said.
A third of the post-2000 inflow is invested around Mumbai, a manufacturing hub, and one-fifth around Delhi, a services hub.
India among world's top 3 preferred investment destination- Hindustan Times
India is among the world's top three preferred investment destination, but equity caps limit the size of potential inflows, according to a Columbia University report.
The report cited liberalisation in FDI policy and several economic sectors, a globally competitive workforce, and rapid GDP and market growth as the main drivers of foreign investment in India.
Yet, it said equity caps limit the size of potential new inflows and national security concerns might prompt more oversight of FDI approval processes.
According to the 15-page report 'Inward FDI in India and its policy context' India is also the 13th largest in terms of foreign investment inflows, which have risen 15-fold since 2000.
The report said while investors initially concentrated on manufacturing, power and telecommunications, they now focus on services.
Among other visible trends, firms in developed countries dominated investment in the 1990s, but in the past decade developing country investors have also become significant, it said.
A third of the post-2000 inflow is invested around Mumbai, a manufacturing hub, and one-fifth around Delhi, a services hub.
India among world's top 3 preferred investment destination- Hindustan Times
Justin Joseph
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Russia intends to create $3-billion free economic zone in India
12:5512/03/2010
Russia may set up a free economic zone worth $3 billion in India intended to involve investors from third countries, the deputy chief of Russia's federal property agency said in an interview with the Russian government daily.
The interview was published on Friday, amid Prime Minister Vladimir Putin's visit to India, which is expected to see the signing of around 15 deals worth more than $10 billion.
A joint titanium enterprise, which is being created on account of India's debt to Russia, is planned to become the basis for the project, Russia's first initiative of such kind, Yury Medvedev told Rossiyskaya Gazeta.
He said the project would test a scheme that allows for the discharge of debts to Russia by countries through investments in their economies beneficial for Russia.
Russia, which holds a 51% stake in the Titanium Products Private Ltd., intends to invest some $120 million in the project, he said.
"A concept to create and develop the free economic zone was worked out in Russia and stipulates the involvement of nine more enterprises, which can work in cooperation with the joint enterprise," he said, adding the main problem for the Titanium Products Private Ltd. was to gain a prerogative right for the lease of land.
"In the future, it will be possible to assign the joint enterprise the operating right for the development of the zone," Medvedev added.
Russian and Indian investors, as well as those from third countries, are welcome to join the project in future, he said.
Medvedev said Russia was also planning to invest $676 million in the charter capital of the Sistema Shyam telecommunication company, a joint venture project between Russia's major industrial and financial group, Sistema, which holds a 74% stake, and India's Shyam Group.
Russia intends to create $3-billion free economic zone in India | Top Russian news and analysis online | 'RIA Novosti' newswire
12:5512/03/2010
Russia may set up a free economic zone worth $3 billion in India intended to involve investors from third countries, the deputy chief of Russia's federal property agency said in an interview with the Russian government daily.
The interview was published on Friday, amid Prime Minister Vladimir Putin's visit to India, which is expected to see the signing of around 15 deals worth more than $10 billion.
A joint titanium enterprise, which is being created on account of India's debt to Russia, is planned to become the basis for the project, Russia's first initiative of such kind, Yury Medvedev told Rossiyskaya Gazeta.
He said the project would test a scheme that allows for the discharge of debts to Russia by countries through investments in their economies beneficial for Russia.
Russia, which holds a 51% stake in the Titanium Products Private Ltd., intends to invest some $120 million in the project, he said.
"A concept to create and develop the free economic zone was worked out in Russia and stipulates the involvement of nine more enterprises, which can work in cooperation with the joint enterprise," he said, adding the main problem for the Titanium Products Private Ltd. was to gain a prerogative right for the lease of land.
"In the future, it will be possible to assign the joint enterprise the operating right for the development of the zone," Medvedev added.
Russian and Indian investors, as well as those from third countries, are welcome to join the project in future, he said.
Medvedev said Russia was also planning to invest $676 million in the charter capital of the Sistema Shyam telecommunication company, a joint venture project between Russia's major industrial and financial group, Sistema, which holds a 74% stake, and India's Shyam Group.
Russia intends to create $3-billion free economic zone in India | Top Russian news and analysis online | 'RIA Novosti' newswire
PakSher
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Indian inflation nears double figures | Pakistan | News | Newspaper | Daily | English | Online
MUMBAI (AFP) - India said Monday inflation rose to near double figures as roaring economic growth sent prices higher, fuelling expectations that the central bank will raise rates next month.
Prices of fuel, rubber, plastic and cement all jumped during February, as the economy accelerated out of last year’s global downturn, led by a strong recovery in the industrial sector.
Annual inflation as measured by the wholesale price index, or WPI, rose to a 16-month high of 9.89 percent in February from 8.56 percent in January. Food prices rocketed 17.79 percent after the country’s worst monsoon in nearly four decades last year, raising pressure on the government, which has been under attack from the opposition over the rising cost of living.
Experts said inflation could jump further for next month.
India’s chief economic advisor to the finance ministry, Kaushik Basu, said he did not rule out inflation crossing into double digits next month.
“The rate should start easing from April-May onwards,” Basu told reporters in New Delhi on Monday.
The headline figure was seen by analysts as making an increase in key interest rates by the central bank extremely likely, possibly by as much as 50 basis points, when it holds its next scheduled meeting on April 20.
“The RBI will have to act. We are seeing higher fuel and commodity prices,” said Rupa Rege Nitsure, chief economist with the state-run Bank of Baroda. The year-on-year rise in the WPI was above the average 9.70 percent forecast in a Dow Jones Newswires poll of nine economists, and far higher than the target set by the central Reserve Bank of India.
MUMBAI (AFP) - India said Monday inflation rose to near double figures as roaring economic growth sent prices higher, fuelling expectations that the central bank will raise rates next month.
Prices of fuel, rubber, plastic and cement all jumped during February, as the economy accelerated out of last year’s global downturn, led by a strong recovery in the industrial sector.
Annual inflation as measured by the wholesale price index, or WPI, rose to a 16-month high of 9.89 percent in February from 8.56 percent in January. Food prices rocketed 17.79 percent after the country’s worst monsoon in nearly four decades last year, raising pressure on the government, which has been under attack from the opposition over the rising cost of living.
Experts said inflation could jump further for next month.
India’s chief economic advisor to the finance ministry, Kaushik Basu, said he did not rule out inflation crossing into double digits next month.
“The rate should start easing from April-May onwards,” Basu told reporters in New Delhi on Monday.
The headline figure was seen by analysts as making an increase in key interest rates by the central bank extremely likely, possibly by as much as 50 basis points, when it holds its next scheduled meeting on April 20.
“The RBI will have to act. We are seeing higher fuel and commodity prices,” said Rupa Rege Nitsure, chief economist with the state-run Bank of Baroda. The year-on-year rise in the WPI was above the average 9.70 percent forecast in a Dow Jones Newswires poll of nine economists, and far higher than the target set by the central Reserve Bank of India.
India-GCC success story waiting to be written
The Peninsula On-line: Qatar's leading English Daily
By and large, for very different reasons though, India and the GCC have escaped devastation of their economies in the current global crisis. Let’s not go into the reasons at this point, but suffice it to say India and the Gulf nations need to further build on each others’ strengths and look forward to a spectacular future.
The recent visit of none less than the Indian Prime Minister to Saudi Arabia, signifies India’s willingness, rather eagerness, for a win-win relationship in matters social, political, strategic, technological, cultural and economic. Dr Manmohan Singh was the first Indian prime minister in 28 years to visit the GCC giant. The presence of three senior ministers, top officials and a bunch of CEOs added weight to the visit, which came four years after the historic visit of the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz of Saudi Arabia to India in 2006. Since then, the two sides have had 19 exchanges at the ministerial level and trade has tripled during this time. The King’s visit resulted in Saudi Arabia replacing the UAE as India’s number one crude oil resource, with exports jumping from $500 million to $23bn in 2008.
India has expressed the hope that two-way trade and investment ties between India and the Gulf region will strengthen further, in order to double the bilateral trade turnover from the current $114 bn to $230 bn by 2014. Based on India’s high domestic consumption and demand and a high savings and capital formation rate of 38 per cent, the economy is expected to grow by 7.5 to 8 per cent this fiscal.
Top Indian officials have gone on record saying the government is determined to accelerate the momentum of growth and this can only be down in partnerships with the Arab world. According to commerce minister Anand Sharma, the Gulf region has large sovereign funds and India is the right place to invest. Unctad and other multilateral agencies have ranked India as one of the three most attractive investment destinations after China and the US and the returns from India are the highest amongst the emerging economies.
Negotiations are currently on between India and members of the Gulf Cooperation Council (GCC) to thrash out a Free Trade Agreement. According to the Associated Chambers of Commerce and Industry of India (Assocham) with enhanced economic cooperation through the proposed FTA, India would not only be assured of oil supplies in future but is also expected to benefit immensely from increased trade and investment opportunities in the region.
The Chambers is also of the view that except for UAE, India’s trade value with other GCC countries is way below potential and could increase substantially once the FTA is operationalised.
India being the largest import source for countries such as UAE and Oman, occupies a prominent position and would not provide large market access post FTA. On the other hand, the FTA could provide high market access for India in Bahrain, as it accounts for a small share in this market at present. Even Saudi Arabia and Qatar would provide adequate market access post implementation of free trade area as India caters to about 4-5 per cent of total imports of these markets and has the potential to increase exports, an Assocham report has said.
A more recent KPMG study noted: “Synergies between both regions combined with a promising future, and existing friendly relations have spawned the desire to enhance and develop economic co-operation on the basis of equality and mutual interest.”
A good place for the high level Prime Ministerial delegation to have started out on a new round of further strengthening ties with the Arab word was Saudi Arabia. The Kingdom is India’s fourth largest trading partner with two-way trade of over $25 bn and its largest supplier of hydrocarbons, accounting for 20 percent of crude oil imports.There are around 500 Indian joint ventures in Saudi Arabia with an estimated investment of over $2 bn.
Saudi imports of Indian goods stood at SR18 bn in 2008, marking an almost six-fold rise from 2000, according to data of the Saudi Arabian Monetary Agency (SAMA). That positioned India as the sixth-largest source of Saudi imports, accounting for 12.4 percent of the Kingdom’s total imports from Asia in 2008. Gulf countries as a whole supply the majority of India’s petroleum needs, including nearly a quarter by Saudi alone, while other major suppliers are Iran, Iraq, Kuwait, the UAE and Yemen. Qatar provides about 5 million tonnes per year of liquefied natural gas to India - a level that rose to 7.5 million tonnes in 2009.
But far more than trade ties, India would want GCC countries to invest in its infrastructure and other development project. India is poised for stupendous growth and the government has time and again made clear its inability to keep pace by financing this growth. Several important sectors have been opened up for foreign investment through the direct and indirect routes. Herein lies the opportunity for the Gulf nations, are no strangers to India – having historic trade relations – or to Indians – with nearly five million of them working in GCC countries.
In the current global scenario, the Gulf-India relationship is a success story waiting to be written.
The Peninsula On-line: Qatar's leading English Daily
By and large, for very different reasons though, India and the GCC have escaped devastation of their economies in the current global crisis. Let’s not go into the reasons at this point, but suffice it to say India and the Gulf nations need to further build on each others’ strengths and look forward to a spectacular future.
The recent visit of none less than the Indian Prime Minister to Saudi Arabia, signifies India’s willingness, rather eagerness, for a win-win relationship in matters social, political, strategic, technological, cultural and economic. Dr Manmohan Singh was the first Indian prime minister in 28 years to visit the GCC giant. The presence of three senior ministers, top officials and a bunch of CEOs added weight to the visit, which came four years after the historic visit of the Custodian of the Two Holy Mosques King Abdullah bin Abdulaziz of Saudi Arabia to India in 2006. Since then, the two sides have had 19 exchanges at the ministerial level and trade has tripled during this time. The King’s visit resulted in Saudi Arabia replacing the UAE as India’s number one crude oil resource, with exports jumping from $500 million to $23bn in 2008.
India has expressed the hope that two-way trade and investment ties between India and the Gulf region will strengthen further, in order to double the bilateral trade turnover from the current $114 bn to $230 bn by 2014. Based on India’s high domestic consumption and demand and a high savings and capital formation rate of 38 per cent, the economy is expected to grow by 7.5 to 8 per cent this fiscal.
Top Indian officials have gone on record saying the government is determined to accelerate the momentum of growth and this can only be down in partnerships with the Arab world. According to commerce minister Anand Sharma, the Gulf region has large sovereign funds and India is the right place to invest. Unctad and other multilateral agencies have ranked India as one of the three most attractive investment destinations after China and the US and the returns from India are the highest amongst the emerging economies.
Negotiations are currently on between India and members of the Gulf Cooperation Council (GCC) to thrash out a Free Trade Agreement. According to the Associated Chambers of Commerce and Industry of India (Assocham) with enhanced economic cooperation through the proposed FTA, India would not only be assured of oil supplies in future but is also expected to benefit immensely from increased trade and investment opportunities in the region.
The Chambers is also of the view that except for UAE, India’s trade value with other GCC countries is way below potential and could increase substantially once the FTA is operationalised.
India being the largest import source for countries such as UAE and Oman, occupies a prominent position and would not provide large market access post FTA. On the other hand, the FTA could provide high market access for India in Bahrain, as it accounts for a small share in this market at present. Even Saudi Arabia and Qatar would provide adequate market access post implementation of free trade area as India caters to about 4-5 per cent of total imports of these markets and has the potential to increase exports, an Assocham report has said.
A more recent KPMG study noted: “Synergies between both regions combined with a promising future, and existing friendly relations have spawned the desire to enhance and develop economic co-operation on the basis of equality and mutual interest.”
A good place for the high level Prime Ministerial delegation to have started out on a new round of further strengthening ties with the Arab word was Saudi Arabia. The Kingdom is India’s fourth largest trading partner with two-way trade of over $25 bn and its largest supplier of hydrocarbons, accounting for 20 percent of crude oil imports.There are around 500 Indian joint ventures in Saudi Arabia with an estimated investment of over $2 bn.
Saudi imports of Indian goods stood at SR18 bn in 2008, marking an almost six-fold rise from 2000, according to data of the Saudi Arabian Monetary Agency (SAMA). That positioned India as the sixth-largest source of Saudi imports, accounting for 12.4 percent of the Kingdom’s total imports from Asia in 2008. Gulf countries as a whole supply the majority of India’s petroleum needs, including nearly a quarter by Saudi alone, while other major suppliers are Iran, Iraq, Kuwait, the UAE and Yemen. Qatar provides about 5 million tonnes per year of liquefied natural gas to India - a level that rose to 7.5 million tonnes in 2009.
But far more than trade ties, India would want GCC countries to invest in its infrastructure and other development project. India is poised for stupendous growth and the government has time and again made clear its inability to keep pace by financing this growth. Several important sectors have been opened up for foreign investment through the direct and indirect routes. Herein lies the opportunity for the Gulf nations, are no strangers to India – having historic trade relations – or to Indians – with nearly five million of them working in GCC countries.
In the current global scenario, the Gulf-India relationship is a success story waiting to be written.
RBI had already warned he Indian government regarding inflation if I am correct -
Bombay
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GDP set to jump fourfold to $4.5 trillion by 2020: Edelweiss
GDP set to jump fourfold to $4.5 trillion by 2020: Edelweiss- Indicators-Economy-News-The Economic Times
The economy is set to grow four times over the next ten years to a hefty Rs 205 trillion from Rs 53 trillion in the last fiscal, says a report.
"Driven by a nominal annual growth rate of 13 per cent, GDP is set to quadruple over the next ten years and the country is likely to be a Rs 205-trillion (USD 4.5 trillion) economy by 2020," financial services company Edelweiss Capital said in its report--'India 2020: Seeing, Beyond,' which was released here today.
The report focuses on three super themes--financial services, private domestic consumption and physical infrastructure.
According to the report, gross domestic savings would grow by 3.8 times from Rs 19 trillion in FY09 to Rs 72 trillion in FY20.
"Over the next 10 years, the incremental financial savings (Rs 172 trillion) will equal four times the total financial services over the past 40 years," it said.
The report has forecast that domestic consumption expenditure is set to triple from Rs 30 trillion in FY09 to Rs 113 trillion in FY20.
"There will be a movement from essential items of consumption such as food, clothing and footwear, among others, to discretionary items and economic enablers such as healthcare, education, recreation, amongst others," the Edelweiss report said.
Investment in infrastructure is also set to witness a threefold increase from Rs 21 trillion during the 11th Plan (FY2008-12) to Rs 62 trillion between FY10 and FY 20, the report said.
The report has also said a massive growth is expected over several sectors such as banking, broking, asset management, life insurance, domestic pharma and healthcare, media and entertainment, education, premium urban housing and organised retail sector.
GDP set to jump fourfold to $4.5 trillion by 2020: Edelweiss- Indicators-Economy-News-The Economic Times
The economy is set to grow four times over the next ten years to a hefty Rs 205 trillion from Rs 53 trillion in the last fiscal, says a report.
"Driven by a nominal annual growth rate of 13 per cent, GDP is set to quadruple over the next ten years and the country is likely to be a Rs 205-trillion (USD 4.5 trillion) economy by 2020," financial services company Edelweiss Capital said in its report--'India 2020: Seeing, Beyond,' which was released here today.
The report focuses on three super themes--financial services, private domestic consumption and physical infrastructure.
According to the report, gross domestic savings would grow by 3.8 times from Rs 19 trillion in FY09 to Rs 72 trillion in FY20.
"Over the next 10 years, the incremental financial savings (Rs 172 trillion) will equal four times the total financial services over the past 40 years," it said.
The report has forecast that domestic consumption expenditure is set to triple from Rs 30 trillion in FY09 to Rs 113 trillion in FY20.
"There will be a movement from essential items of consumption such as food, clothing and footwear, among others, to discretionary items and economic enablers such as healthcare, education, recreation, amongst others," the Edelweiss report said.
Investment in infrastructure is also set to witness a threefold increase from Rs 21 trillion during the 11th Plan (FY2008-12) to Rs 62 trillion between FY10 and FY 20, the report said.
The report has also said a massive growth is expected over several sectors such as banking, broking, asset management, life insurance, domestic pharma and healthcare, media and entertainment, education, premium urban housing and organised retail sector.
Jade
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India to be fastest growing economy by 2018: Economist - India Business - Biz - The Times of India
NEW DELHI: India is the second largest growing economy after China, but it will overtake its neighbouring country by 2018, the Economist Intelligence Unit (EIU), the research arm of London-based Economist magazine, said Tuesday.
"We forecast that India will overtake China as the fastest growing major economy by 2018. We expect India's growth on an average of eight percent in the next five years," EIU senior analyst Anjalika Bardalai told reporters on the sidelines of 14th Business Roundtable here.
She said the Indian economy would grow at 6.8 percent during the current fiscal, at 7.7 percent in 2010-11, and 8 percent the year later.
But the statistical arm of the Indian government, the Central Statistical Organisation, has projected the economy to grow by 7.2 percent in the current fiscal.
"Our growth projection is based on expenditures in the economy and is not based on factor cost as done by the Indian government," Bardalai explained.
The Indian government measures growth on the basis of factor cost. Factor cost is the cost of factors of production used to produce final goods and services.
India's GDP during the three quarters in the current fiscal grew at 6.1 percent, 7.9 percent and 6 percent. While during 2008-09 it grew at 6.7 percent and in 2007-08 at 9.1 percent.
"The GDP will not return back to 9 percent and more as it was during 2005-08. Also the monetary pressure may not go down as expected," The Economist executive editor Daniel Franklin said.
Driven by increasing food prices, India's annual rate of inflation, based on the wholesale price index, rose to 9.89 percent in February from 8.56 percent in the previous month, according to an official data revealed Monday.
It also predicted inflow of investments through Foreign Institutional Investors (FII) at $75 billion by 2014.
NEW DELHI: India is the second largest growing economy after China, but it will overtake its neighbouring country by 2018, the Economist Intelligence Unit (EIU), the research arm of London-based Economist magazine, said Tuesday.
"We forecast that India will overtake China as the fastest growing major economy by 2018. We expect India's growth on an average of eight percent in the next five years," EIU senior analyst Anjalika Bardalai told reporters on the sidelines of 14th Business Roundtable here.
She said the Indian economy would grow at 6.8 percent during the current fiscal, at 7.7 percent in 2010-11, and 8 percent the year later.
But the statistical arm of the Indian government, the Central Statistical Organisation, has projected the economy to grow by 7.2 percent in the current fiscal.
"Our growth projection is based on expenditures in the economy and is not based on factor cost as done by the Indian government," Bardalai explained.
The Indian government measures growth on the basis of factor cost. Factor cost is the cost of factors of production used to produce final goods and services.
India's GDP during the three quarters in the current fiscal grew at 6.1 percent, 7.9 percent and 6 percent. While during 2008-09 it grew at 6.7 percent and in 2007-08 at 9.1 percent.
"The GDP will not return back to 9 percent and more as it was during 2005-08. Also the monetary pressure may not go down as expected," The Economist executive editor Daniel Franklin said.
Driven by increasing food prices, India's annual rate of inflation, based on the wholesale price index, rose to 9.89 percent in February from 8.56 percent in the previous month, according to an official data revealed Monday.
It also predicted inflow of investments through Foreign Institutional Investors (FII) at $75 billion by 2014.
jagjitnatt
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India Shining
sure it is. I see the growth sustainable for at least 20 more years. It is only after 2030 that economy will start slowing. Around 2050 India might surpass the GDP of china.
Can't wait for the future.
kak1978
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Source : Reuters By C.J. Kuncheria and Tony Munroe
NEW DELHI/MUMBAI (Reuters) - Standard & Poor's lifted its outlook on India to stable from negative on Thursday, citing an improving fiscal position and strong economic growth but warned on inflation, boosting stock and bond prices.
A deputy governor at the Reserve Bank of India (RBI) said the central bank was open to taking policy action ahead of its April 20 policy review. With headline inflation nearing 10 percent, the RBI is under increasing pressure to raise interest rates for the first time since the global downturn.
Earlier, the government reported food inflation eased for the second straight week in early March but fuel inflation rose.
In affirming its BBB- long-term and A-3 short term credit ratings on India, S&P said ratings remained constrained by a high debt burden and deficit, and said inflation is a worry.
"In our opinion, the recent high inflation rate could also derail the stable macroeconomic and interest rate environments," S&P credit analyst Takahira Ogawa said in a statement.
For a text of the S&P statement, click here
On Monday, India reported headline wholesale price index (WPI) inflation of 9.89 percent for February.
Analysts said WPI would reach double digits by March before retreating over the next few months, but a pick-up in economic growth would keep inflation high for the rest of the year.
India's 10-year bond yield fell 4 basis points after S&P raised the ratings outlook, while the 5-year swap rate shed 3 basis points. The 30-share BSE index ended up 0.2 percent on a late surge.
The partially convertible rupee was little changed.
S&P's outlook on India is now in line with Moody's and Fitch.
"The stable outlook reflects our view that India's fiscal consolidation at the central, state, and public enterprise levels over the next several years will likely restore the government's policy flexibility," S&P said.
EYES ON RBI
RBI Deputy Governor K.C. Chakrabarty said evidence showed demand factors were beginning to fuel inflation.
Another central bank deputy governor had said previously that the RBI was unlikely to make a policy change outside its quarterly cycle except in unforeseen developments.
Asked if the RBI could change policy before its April meeting, he said: "Any day. This is online, real-time policy. If the governor feels action is to be taken, he will take action."
Chakrabarty is one of four RBI deputy governors and is not directly involved in setting interest rate policy.
"If action is necessary, it will be taken. For that we need to examine the reason for inflation, how much is driven by supply factors and how much is from demand factors," he told reporters.
C. Rangarajan, the influential chairman of the Prime Minister's economic advisory panel, said the RBI may look to drain cash before taking any interest rate action.
"The RBI may want to wait for a few weeks to see if food prices will decline on account of the rabi (winter crop) output. Then it might want to tighten liquidity and if inflation still persists, then it will act on policy rates," he said.
FOOD INFLATION EASES, FUEL UP
Steepening inflation has spurred markets to price in a 25 to 50 basis point interest rate hike in April. Bond yields were steady on Thursday as the latest data did little to change those expectations.
"It (WPI) should peak towards the middle of the year and come off a little bit towards the end of the year, but still be high," said Brian Jackson, an emerging market economist with the Royal Bank of Canada in Hong Kong.
"You're still getting some pressure from the fiscal side on total demand, and that sort of highlights that current policy rates are not appropriate given where we are."
Data released on Thursday showed the food price index rose 16.30 percent in the year to March 6, lower than an annual rise of 17.81 percent in the previous week.
It was the second straight weekly easing of food price inflation and analysts expect the trend to continue as the winter-sown harvest reaches the market.
The fuel price index rose 12.68 percent in the year to March 6, up from 11.38 percent in the previous week. The federal government had hiked state-set motor fuel prices at the end of February.
Policymakers have said headline inflation would ease over the next two months, after the finance minister said it could top 10 percent in March following a reading of 9.89 percent in February.
But in a sign the government was giving the green light to a rate hike, a top policy adviser said on Wednesday the Reserve Bank of India ought to carefully consider a return to a normal monetary policy.
The central bank has to balance managing the government's record $100 billion borrowing plan for the 2010/11 fiscal year with supporting growth and taming inflation.
Rising prices have sparked opposition-backed street protests and made India's government reluctant to push through reforms such as relaxing fuel price controls, even though the ruling Congress party faces no risk of losing power any time soon.
NEW DELHI/MUMBAI (Reuters) - Standard & Poor's lifted its outlook on India to stable from negative on Thursday, citing an improving fiscal position and strong economic growth but warned on inflation, boosting stock and bond prices.
A deputy governor at the Reserve Bank of India (RBI) said the central bank was open to taking policy action ahead of its April 20 policy review. With headline inflation nearing 10 percent, the RBI is under increasing pressure to raise interest rates for the first time since the global downturn.
Earlier, the government reported food inflation eased for the second straight week in early March but fuel inflation rose.
In affirming its BBB- long-term and A-3 short term credit ratings on India, S&P said ratings remained constrained by a high debt burden and deficit, and said inflation is a worry.
"In our opinion, the recent high inflation rate could also derail the stable macroeconomic and interest rate environments," S&P credit analyst Takahira Ogawa said in a statement.
For a text of the S&P statement, click here
On Monday, India reported headline wholesale price index (WPI) inflation of 9.89 percent for February.
Analysts said WPI would reach double digits by March before retreating over the next few months, but a pick-up in economic growth would keep inflation high for the rest of the year.
India's 10-year bond yield fell 4 basis points after S&P raised the ratings outlook, while the 5-year swap rate shed 3 basis points. The 30-share BSE index ended up 0.2 percent on a late surge.
The partially convertible rupee was little changed.
S&P's outlook on India is now in line with Moody's and Fitch.
"The stable outlook reflects our view that India's fiscal consolidation at the central, state, and public enterprise levels over the next several years will likely restore the government's policy flexibility," S&P said.
EYES ON RBI
RBI Deputy Governor K.C. Chakrabarty said evidence showed demand factors were beginning to fuel inflation.
Another central bank deputy governor had said previously that the RBI was unlikely to make a policy change outside its quarterly cycle except in unforeseen developments.
Asked if the RBI could change policy before its April meeting, he said: "Any day. This is online, real-time policy. If the governor feels action is to be taken, he will take action."
Chakrabarty is one of four RBI deputy governors and is not directly involved in setting interest rate policy.
"If action is necessary, it will be taken. For that we need to examine the reason for inflation, how much is driven by supply factors and how much is from demand factors," he told reporters.
C. Rangarajan, the influential chairman of the Prime Minister's economic advisory panel, said the RBI may look to drain cash before taking any interest rate action.
"The RBI may want to wait for a few weeks to see if food prices will decline on account of the rabi (winter crop) output. Then it might want to tighten liquidity and if inflation still persists, then it will act on policy rates," he said.
FOOD INFLATION EASES, FUEL UP
Steepening inflation has spurred markets to price in a 25 to 50 basis point interest rate hike in April. Bond yields were steady on Thursday as the latest data did little to change those expectations.
"It (WPI) should peak towards the middle of the year and come off a little bit towards the end of the year, but still be high," said Brian Jackson, an emerging market economist with the Royal Bank of Canada in Hong Kong.
"You're still getting some pressure from the fiscal side on total demand, and that sort of highlights that current policy rates are not appropriate given where we are."
Data released on Thursday showed the food price index rose 16.30 percent in the year to March 6, lower than an annual rise of 17.81 percent in the previous week.
It was the second straight weekly easing of food price inflation and analysts expect the trend to continue as the winter-sown harvest reaches the market.
The fuel price index rose 12.68 percent in the year to March 6, up from 11.38 percent in the previous week. The federal government had hiked state-set motor fuel prices at the end of February.
Policymakers have said headline inflation would ease over the next two months, after the finance minister said it could top 10 percent in March following a reading of 9.89 percent in February.
But in a sign the government was giving the green light to a rate hike, a top policy adviser said on Wednesday the Reserve Bank of India ought to carefully consider a return to a normal monetary policy.
The central bank has to balance managing the government's record $100 billion borrowing plan for the 2010/11 fiscal year with supporting growth and taming inflation.
Rising prices have sparked opposition-backed street protests and made India's government reluctant to push through reforms such as relaxing fuel price controls, even though the ruling Congress party faces no risk of losing power any time soon.
gowthamraj
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Wrong this year growth should atleast be 7.5. Wait and see
kak1978
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S&P lifts India outlook; inflation, rates in focus
Source : Reuters By C.J. Kuncheria and Tony Munroe
NEW DELHI/MUMBAI (Reuters) - Standard & Poor's lifted its outlook on India to stable from negative on Thursday, citing an improving fiscal position and strong economic growth but warned on inflation, boosting stock and bond prices.
A deputy governor at the Reserve Bank of India (RBI) said the central bank was open to taking policy action ahead of its April 20 policy review. With headline inflation nearing 10 percent, the RBI is under increasing pressure to raise interest rates for the first time since the global downturn.
Earlier, the government reported food inflation eased for the second straight week in early March but fuel inflation rose.
In affirming its BBB- long-term and A-3 short term credit ratings on India, S&P said ratings remained constrained by a high debt burden and deficit, and said inflation is a worry.
"In our opinion, the recent high inflation rate could also derail the stable macroeconomic and interest rate environments," S&P credit analyst Takahira Ogawa said in a statement.
For a text of the S&P statement, click here
On Monday, India reported headline wholesale price index (WPI) inflation of 9.89 percent for February.
Analysts said WPI would reach double digits by March before retreating over the next few months, but a pick-up in economic growth would keep inflation high for the rest of the year.
India's 10-year bond yield fell 4 basis points after S&P raised the ratings outlook, while the 5-year swap rate shed 3 basis points. The 30-share BSE index ended up 0.2 percent on a late surge.
The partially convertible rupee was little changed.
S&P's outlook on India is now in line with Moody's and Fitch.
"The stable outlook reflects our view that India's fiscal consolidation at the central, state, and public enterprise levels over the next several years will likely restore the government's policy flexibility," S&P said.
EYES ON RBI
RBI Deputy Governor K.C. Chakrabarty said evidence showed demand factors were beginning to fuel inflation.
Another central bank deputy governor had said previously that the RBI was unlikely to make a policy change outside its quarterly cycle except in unforeseen developments.
Asked if the RBI could change policy before its April meeting, he said: "Any day. This is online, real-time policy. If the governor feels action is to be taken, he will take action."
Chakrabarty is one of four RBI deputy governors and is not directly involved in setting interest rate policy.
"If action is necessary, it will be taken. For that we need to examine the reason for inflation, how much is driven by supply factors and how much is from demand factors," he told reporters.
C. Rangarajan, the influential chairman of the Prime Minister's economic advisory panel, said the RBI may look to drain cash before taking any interest rate action.
"The RBI may want to wait for a few weeks to see if food prices will decline on account of the rabi (winter crop) output. Then it might want to tighten liquidity and if inflation still persists, then it will act on policy rates," he said.
FOOD INFLATION EASES, FUEL UP
Steepening inflation has spurred markets to price in a 25 to 50 basis point interest rate hike in April. Bond yields were steady on Thursday as the latest data did little to change those expectations.
"It (WPI) should peak towards the middle of the year and come off a little bit towards the end of the year, but still be high," said Brian Jackson, an emerging market economist with the Royal Bank of Canada in Hong Kong.
"You're still getting some pressure from the fiscal side on total demand, and that sort of highlights that current policy rates are not appropriate given where we are."
Data released on Thursday showed the food price index rose 16.30 percent in the year to March 6, lower than an annual rise of 17.81 percent in the previous week.
It was the second straight weekly easing of food price inflation and analysts expect the trend to continue as the winter-sown harvest reaches the market.
The fuel price index rose 12.68 percent in the year to March 6, up from 11.38 percent in the previous week. The federal government had hiked state-set motor fuel prices at the end of February.
Policymakers have said headline inflation would ease over the next two months, after the finance minister said it could top 10 percent in March following a reading of 9.89 percent in February.
But in a sign the government was giving the green light to a rate hike, a top policy adviser said on Wednesday the Reserve Bank of India ought to carefully consider a return to a normal monetary policy.
The central bank has to balance managing the government's record $100 billion borrowing plan for the 2010/11 fiscal year with supporting growth and taming inflation.
Rising prices have sparked opposition-backed street protests and made India's government reluctant to push through reforms such as relaxing fuel price controls, even though the ruling Congress party faces no risk of losing power any time soon.
Source : Reuters By C.J. Kuncheria and Tony Munroe
NEW DELHI/MUMBAI (Reuters) - Standard & Poor's lifted its outlook on India to stable from negative on Thursday, citing an improving fiscal position and strong economic growth but warned on inflation, boosting stock and bond prices.
A deputy governor at the Reserve Bank of India (RBI) said the central bank was open to taking policy action ahead of its April 20 policy review. With headline inflation nearing 10 percent, the RBI is under increasing pressure to raise interest rates for the first time since the global downturn.
Earlier, the government reported food inflation eased for the second straight week in early March but fuel inflation rose.
In affirming its BBB- long-term and A-3 short term credit ratings on India, S&P said ratings remained constrained by a high debt burden and deficit, and said inflation is a worry.
"In our opinion, the recent high inflation rate could also derail the stable macroeconomic and interest rate environments," S&P credit analyst Takahira Ogawa said in a statement.
For a text of the S&P statement, click here
On Monday, India reported headline wholesale price index (WPI) inflation of 9.89 percent for February.
Analysts said WPI would reach double digits by March before retreating over the next few months, but a pick-up in economic growth would keep inflation high for the rest of the year.
India's 10-year bond yield fell 4 basis points after S&P raised the ratings outlook, while the 5-year swap rate shed 3 basis points. The 30-share BSE index ended up 0.2 percent on a late surge.
The partially convertible rupee was little changed.
S&P's outlook on India is now in line with Moody's and Fitch.
"The stable outlook reflects our view that India's fiscal consolidation at the central, state, and public enterprise levels over the next several years will likely restore the government's policy flexibility," S&P said.
EYES ON RBI
RBI Deputy Governor K.C. Chakrabarty said evidence showed demand factors were beginning to fuel inflation.
Another central bank deputy governor had said previously that the RBI was unlikely to make a policy change outside its quarterly cycle except in unforeseen developments.
Asked if the RBI could change policy before its April meeting, he said: "Any day. This is online, real-time policy. If the governor feels action is to be taken, he will take action."
Chakrabarty is one of four RBI deputy governors and is not directly involved in setting interest rate policy.
"If action is necessary, it will be taken. For that we need to examine the reason for inflation, how much is driven by supply factors and how much is from demand factors," he told reporters.
C. Rangarajan, the influential chairman of the Prime Minister's economic advisory panel, said the RBI may look to drain cash before taking any interest rate action.
"The RBI may want to wait for a few weeks to see if food prices will decline on account of the rabi (winter crop) output. Then it might want to tighten liquidity and if inflation still persists, then it will act on policy rates," he said.
FOOD INFLATION EASES, FUEL UP
Steepening inflation has spurred markets to price in a 25 to 50 basis point interest rate hike in April. Bond yields were steady on Thursday as the latest data did little to change those expectations.
"It (WPI) should peak towards the middle of the year and come off a little bit towards the end of the year, but still be high," said Brian Jackson, an emerging market economist with the Royal Bank of Canada in Hong Kong.
"You're still getting some pressure from the fiscal side on total demand, and that sort of highlights that current policy rates are not appropriate given where we are."
Data released on Thursday showed the food price index rose 16.30 percent in the year to March 6, lower than an annual rise of 17.81 percent in the previous week.
It was the second straight weekly easing of food price inflation and analysts expect the trend to continue as the winter-sown harvest reaches the market.
The fuel price index rose 12.68 percent in the year to March 6, up from 11.38 percent in the previous week. The federal government had hiked state-set motor fuel prices at the end of February.
Policymakers have said headline inflation would ease over the next two months, after the finance minister said it could top 10 percent in March following a reading of 9.89 percent in February.
But in a sign the government was giving the green light to a rate hike, a top policy adviser said on Wednesday the Reserve Bank of India ought to carefully consider a return to a normal monetary policy.
The central bank has to balance managing the government's record $100 billion borrowing plan for the 2010/11 fiscal year with supporting growth and taming inflation.
Rising prices have sparked opposition-backed street protests and made India's government reluctant to push through reforms such as relaxing fuel price controls, even though the ruling Congress party faces no risk of losing power any time soon.
Justin Joseph
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I think India will be fastest growing big Economy by 2015-16.
But this is a wrong thread for such news.
Plz move it to Indian economy section.
But this is a wrong thread for such news.
Plz move it to Indian economy section.
su-47
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great news, but i do feel there is room for improvement. If we can decrease corruption we can increase average growth to 10% easy. We need to strengthen anti-corruption department.
also, we need to ensure that the growth is more equivalent. I once read an article about how India might end up half California half sub-Saharan Africa if economic growth doesn't benefit poor.
with more funds available to govt we should build more schools and lift more Indians out of poverty. I want a future where no one can point fingers at us and talk of poverty in india.
also, we need to ensure that the growth is more equivalent. I once read an article about how India might end up half California half sub-Saharan Africa if economic growth doesn't benefit poor.
with more funds available to govt we should build more schools and lift more Indians out of poverty. I want a future where no one can point fingers at us and talk of poverty in india.
