Indian Economy - News & Updates - Archive

[NSG_BlackCats]

IT export target of $50 bn will be delayed: NASSCOM​

NEW DELHI: IT industry association NASSCOM on Tuesday said the export revenue target of 50 billion dollar by 2010 will be delayed by 3-4 quarters
due to the global economic downturn, and warned of uncertainties in the near future.

The NASSCOM-McKinsey, however, presented an ambitious scenario for the Indian IT industry for the next 11 years saying the total revenue from export is expected to expand to 175 billion dollars by 2020 and revenues from the domestic market could achieve the 50 billion dollar mark.

"This, however, needs a concerted effort by both the industry and the government to ensure swift and sustained reforms in critical areas of education and infrastructure," NASSCOM said.

On the economic scenario, the organisation said the "global economic crisis will have far-reaching and as yet uncertain impact on the industry. Near term volumes and pricing is likely to come under pressure."

Commenting on the opportunities for the industry, Som Mittal, President, Nasscom, said, "The Indian IT industry is in the midst of unprecedented times because of the current economic environment. We expect the next few quarters to be extremely challenging with companies doing everything required to effectively overcome the challenges."

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Air India surprises with a 70% fare cut​

MUMBAI: There is certainly something to cheer about for air travellers. The national carrier and state-owned Air India has decided to cut fares by as much as 70% on 35 sectors, starting Tuesday. The massive cut in fares will take place despite a 6.7% increase in aviation turbine fuel (ATF) prices last week.

Air India’s direct competitors — Kingfisher Airlines and Jet Airways — have hiked fares by around 8% two days ago, while low-cost carrier SpiceJet said that it will increase fares in a few days. A senior Air India official confirmed the fare cuts to ET and said the company wants to increase its passenger load factor (PLF) to boost bottomlines. The load factor for domestic carriers dropped to around 65% in March from 73% in February.

“The reduced fares have no hidden conditions like being for a limited offer period. Passengers have to buy their tickets 10 days in advance through the website, travel agents or the company’s sales offices. These reductions in fares are mainly on tier-II routes connecting Mumbai and it is over and above our offer on the summer fares,” the
senior official added.

For example, on the Mumbai-Hyderabad sector, Air India has brought down the one-way fare to Rs 2,694 — this is all inclusive except the User Development Fee (UDF), and is a drop of 70%. Similarly, the one-way Mumbai-Mangalore fare is now down to Rs 2,494, which is down by almost 60% from the earlier price of Rs 5,875. Mark Martin, senior advisor, KPMG, said: “Airlines need to stimulate the market as load factors have been falling since August. Aggressive pricing is a gamble and it may hurt airlines in the long run.”

The plunging domestic air traffic has hit airlines hard which have been forced to hike fares. Ticket prices need to go down to attract more passengers. “Passengers have actually opted for travelling by trains,” said an analyst with domestic brokerage firm. A drastic cut in airfares would perhaps be able to prop up the balance sheet of the sagging airline industry, which is expected to post a combined loss of $2 billion for fiscal 2009, said industry trackers.

On Sunday, the Kingfisher and Jet Airways combine increased fuel surcharge by Rs 200 for sectors less than 750 kms and by Rs 300 for sectors over 750 kms after oil companies raised ATF prices for the third consecutive time in a month. Jet fuel prices vary at airports depending on local taxes. The average ATF prices are now at Rs 2,066 per kl, which accounts for 40% of an airline’s costs.

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[NSG_BlackCats]

Economy to grow by 6 percent, inflation to rise too: RBI​

MUMBAI: India's economy will grow by six percent this fiscal while inflation would rise to around four percent, the central bank said here Tuesday while announcing a 25 basis points cut in key rates in its annual economic policy review.

"With the assumption of normal monsoon, real GDP growth for 2009-10 is placed at around 6.0 percent," said Reserve Bank of India Governor D. Subbarao. GDP growth for 2008-09 was 7.1 percent.

The India Meteorological Department in its forecast of south-west monsoon had said last week it expects a normal rainfall at 96 percent of its long period average for the current year.

The central bank also expects the annual rate of inflation to rise to four percent from the April 4 figure of 0.18 percent. It also said inflation would turn negative before it rises again.

"Keeping in view the global trend in commodity prices and domestic demand-supply balance, WPI (wholesale price index) inflation is projected at around 4.0 percent by end-March 2010," the policy review added.

"WPI inflation, however, is expected to be in the negative territory in the early part of 2009-10," said RBI.

"This transitory WPI inflation in negative zone may not persist beyond the middle of 2009-10," the statement added.

Consumer price inflation is expected to fall from its present high levels.

Deposits with commercial banks is set to grow by 18 percent this fiscal, while liquidity is set to increase by 17 percent.

RBI cut key rates Tuesday by 25 basis points in a move to infuse more liquidity into the system and stimulate lending growth.

The RBI cut the repo rate by 25 basis points from the current 5 percent to 4.75 percent, while the reverse repo rate has been brought down to 3.25 percent from 3.5 percent earlier.

The repo rate is the rate at which the RBI borrows from the banks, while the reverse repo rate is the interest rate paid to banks for RBI's borrowings from them.

However, RBI kept the cash reserve ratio (CRR) unchanged at 5 percent. CRR is the minimum cash reserve balance banks must maintain against customer deposits. RBI had last cut key rates March 4.

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[Screaming Skull]

India FY10 deficit seen at 6.5-7% of GDP​

21 Apr 2009,

NEW DELHI: India's fiscal deficit is expected to be between 6.5 percent and 7 percent of gross domestic product (GDP) in 2009/10, a top policy adviser said on Tuesday.

Chief Economic Adviser Arvind Virmani said fiscal stimulus already announced would amount to 3.5 percent to 4 percent of GDP in the year to March 2010. "As far as I can see, that is a reasonable stimulus," he said.

In February, the government had estimated the fiscal gap at 5.5 percent of GDP for 2009/10.

Virmani also said inflation was expected to decline in the first half of the fiscal year that began on April 1 and rise in the second half.

 

[Screaming Skull]

India, China most attractive mkts for wealth mgmt: Barclays​

Tuesday, Apr 21, 2009

India is the second most attractive market for wealth management after China, even as revenue growth in this sector in Asia is expected to fall significantly over the next two years, Barclays Capital says.

According to investment banking firm Barclays Capital survey of Asia's leading wealth managers, "China and India continue to be viewed as the most attractive markets in Asia, both in terms of potential for business expansion and expected revenue growth rate."

China has emerged as the most attractive market with a quarter still forecasting revenue growth of over 15 per cent per annum over the next two years.

While in case of India, a fifth of the respondents predicted over 15 per cent revenue growth in wealth management over the next two years, the survey said adding that Southeast Asia, including Singapore has been ranked third where 12 per cent of wealth managers believed there is a scope for revenue growth.

Meanwhile, Korea is viewed as the least attractive market in Asia, with 29 per cent of wealth managers forecasting negative revenue growth, Barclays Capital added.

The survey further highlighted that the revenue growth in wealth management industry in Asia is expected to drop significantly over the next two years, amid changing regulatory environment.

"It is evident that wealth managers share the view that the financial markets will operate under significantly different regulatory conditions in future," said Kevin Burke, Head of Distribution, Asia Pacific at Barclays Capital.

"Despite this (different regulatory conditions) and other challenges facing the industry, it is encouraging to see that around 40 per cent of the region's leading wealth managers anticipate very respectable growth in their non-Japan Asia revenues over the next two years," he added.

The Wealth Management survey, conducted by Barclays Capital involved 123 respondents from 53 key wealth management organisations in seven countries across non-Japan Asia including asset managers, insurance companies, local and global retail banks and private banks.

The survey also showed that equity and forex remain the most popular asset classes for both flow and structured products.

The use of equity has generally declined from last year as investors search for capital protection, and the use of structured products has declined across the board as investors search for simpler and more transparent products.

Commenting on the survey Peter Hu said, "The Barclays Asia Wealth Management Survey has gained real momentum with significantly more respondents every year, despite the market turmoil. I believe that this is testament to the credentials of the survey itself, as well as our commitment to servicing the wealth management industry in the region."

 

[Screaming Skull]

India, China may see largest gains in IMF quotas​

21 Apr 2009,

WASHINGTON: India, China, South Korea, Brazil and Mexico will see some of the largest gains in their quota shares in the International Monetary Fund to bring them closer to their evolving position in the world economy.

The five nations are among 54 members which will receive an increase in their quotas once the 2008 reform for improving IMF governance is implemented, the Fund said ahead of a gathering of finance ministers and central bank governors from around the world here from April 24 to 26.

While these 54 countries will get an increase in quota shares of 4.9 percentage points, 135 countries will see an increase in voting share of 5.4 percentage points due to the combined effects of the increase in quotas and basic votes.

As world finance leaders meet here to assess the global response to the world financial crisis and attempts to recover from the deepest recession since the 1930s, IMF said a top priority for the Fund's legitimacy and effectiveness is the completion of outstanding governance reforms.

The IMF will push to promptly ratify quota and voice reforms agreed in April 2008 and then launch the next phase, including further rebalancing of country representation by January 2011, it said. Quotas largely determine a country's voting power in the 185-member international institution.

IMF managing director Dominique Strauss-Kahn has said that top priority now should be to clean up the banking sector, which lies at the heart of the crisis.

"We all understand the stakes. 2009 will almost certainly be an awful year-we expect global growth to enter deeply negative territory," he said at a briefing last week on the Fund-World Bank Spring Meetings,.

"This is a truly global crisis, and nobody is escaping. It originated in advanced economies, and spread like wildfire across the world.

"Emerging markets are being hit hard, facing the double punch of a sharp drop in export demand and a sudden stop in capital inflows, and this threatens to undo the impressive gains in growth and convergence achieved over the past decade or so," Strauss-Kahn said.

Meetings of both the Group of Seven industrialised countries and the G-20 will be convened on April 24, ahead of the Saturday session of the IMF's policy-setting guidance body, the International Monetary and Financial Committee (IMFC).

Among other things, the committee is expected to be interested in measures being taken to prevent crises and to spot emerging ones earlier, IMF said. Steps are being taken by the IMF to enhance analysis of risks and linkages between the real economy and the financial sector.

The IMF is also working on the development of an early-warning exercise - joint with the Financial Stability Board - and revamping the Financial Sector Assessment Programmes which look at country financial sectors.

 

[Screaming Skull]

Worst in economy over, things beginning to improve: SBI Chairman​

Mumbai April 21, 2009,

The worst in the economy is over with data indicating that the situation is improving, State Bank of IndiaChairman O P Bhatt said today.

"The worst in the economy is over. Economic data indicate things are better," SBI Chairman O P Bhatt told reporters after bankers met Reserve Bank Governor D Subbarao here.

On the RBI cutting both the repo and reverse repo rates by 0.25 percentage points each, Bhatt said that the apex bank had sent a clear signal that interest rates should ease.

"It (the RBI rate cuts) is a very clear-cut signal that interest rates should ease," he said.

Different banks would respond differently to the rate cuts, he said, when asked whether he expected an industry-wide reduction in lending rates.

State Bank would take a decision on rates only after a meeting of its asset-liability committee (ALCO) on the issue, he said.

According to Bhatt, the non-performing assets (NPA) position in the industry was not unmanageable.

The premier public sector lender expects both its credit and deposit growth to be 25 per cent during this fiscal.

"We will grow higher than the industry," Bhatt said.

 

[Screaming Skull]

India likely to import 30 tonnes of gold in April​

21 Apr 2009,

NEW DELHI: India, which did not import gold in last two months, is expected to purchase 30 tonnes in April as demand for the precious metals have risen following dip in the prices.

"We expect India's gold import to be 30 tonnes during April as the sales have risen after the prices came down," state-run trading firm MMTC Chairman Sanjiv Batra on Tuesday said here.

India, the largest importer of the precious metal, had bought 24 tonnes of gold in April last year.

Out of 30 tonnes of gold import, Batra said MMTC is likely to import 10 tonnes of gold this month.

Batra said the dip in prices will have a positive impact on the sales during Akshaya Tritiya, a festival considered auspicious for buying gold. Gold prices was today ruling at Rs 14,350 per 10 grams in the spot market, down 10.5 per cent from the peak of Rs 16,035 on February 20.

According to the Bombay Bullion Association, India has resumed imports after a gap of two months. There was no import in February and March as traders stayed away from the market due to high prices, which was over Rs 15,000per 10 grams.

As the prices have fallen, the country has imported about 10-15 tonnes of gold in the first fortnight of this month.

Batra noted that better performance of equity markets will hopefully keep the prices steady and trigger demand for gold, which will gather momentum by Diwali this year.

 

[Screaming Skull]

FIIs pull-out Rs 191-cr from equity market​

21 Apr 2009,

MUMBAI: Foreign institutional investors on Tuesday pulled out a net Rs 191.01 crore from the stock market by selling their equities, amid a volatile market where BSE's benchmark index fell 81.39 points or 0.74 per cent.

In today's trade, FIIs were gross seller of shares worth Rs 1,658.72 crore, while they bought equities worth Rs 1,467.71 crore resulting in a net sale of Rs 191.01 crore, the provisional data available with Bombay Stock Exchange shows.

On Monday, FIIs were the net investor in shares worth Rs 332.6 crore, the latest data available with market regulator Securities and Exchange Board of India (SEBI) shows.

Domestic institutional investors also booked profit and were the net seller of shares worth Rs 187.69 crore. Non-resident Indian entities followed FII trend and sold shares worth Rs 0.45 crore.

However, brokers, on the behalf of their clients, and proprietors were enthusiastic about market and invested a net Rs 52.36 crore and Rs 36.38 crore respectively, as per BSE data.

The BSE benchmark Sensex closed at 10,898.11, down 0.74 per cent or 81.39 points.

 

[Screaming Skull]

RBI projects WPI inflation at 4 pc by end of FY10​

21 Apr 2009,

MUMBAI: RBI Governor D Subbarao on Tuesday projected that India's WPI inflation to be around 4 per cent by the end of this fiscal, taking into account global commodity prices and domestic demand-supply balance.

Inflation fell to 0.18 per cent, the lowest ever in the last three decades, even as prices of food articles like cereals and vegetable hardened during the week ended April 4.

"Keeping in view the global trend in commodity prices and domestic demand-supply balance, we project WPI inflation at around 4 per cent by end-March 2010," Subbarao told reporters here after the apex bank unveiled its annual credit policy statement.

"CPI (consumer price index) inflation continues to be at near double-digit level, but is expected to moderate in the coming months," he said.

Subbarao said headline WPI (wholesale price index) inflation decelerated sharply after August, reflecting the fall in global commodity prices.

The Governor said WPI inflation is expected to be in the negative zone in the early part of the current fiscal.

"This is only of statistical significance and is not a reflection of demand contraction as is the case in advanced economies," Subbarao said.

 

[Screaming Skull]

Bollywood March collections nosedive​

New Delhi April 22, 2009,

Box office collections for Bollywood films in March stood at about Rs 60 crore, the lowest in three years, said analysts. A further drop is expected in April.

So far, Bollywood films have been generating an average monthly collection of about Rs 110 crore. The leanest month before this was May 2008, when collections were Rs 90 crore. The reason for the low April figure is the launch of the Indian Premier League Twenty20 format cricket tournament.

Analysts expect April gross collections to further drop by 15-20 per cent compared with March. The 250-plus multiplexes across the country are expecting losses of about Rs 200 crore if the scenario continues till June.

The main factor is a drastic fall in theatre occupancy to below 20 per cent due to non-release of new films because of the stalemate between film producers and multiplex owners over a new revenue-sharing formula.

A typical multiplex has between 160 and 200 seats. Occupancy for a successful Bollywood film is 75-95 per cent. “These are the worst times for the multiplex business. With no sign of availability of new films, chains are looking at facing losses for at least another two months,” said Vishal Kapur, chief operating officer of Fun Cinemas, which operates 19 multiplexes.

Analysts say monthly fixed cost of operating a multiplex is Rs 40-50 lakh depending on size and location. “A multiplex has to generate monthly gross collections of Rs 1-1.25 crore to cover fixed costs. The additional revenue comes from sale of food and beverages,” said a senior executive of a leading chain.

For March, and now April, the average monthly collections from individual multiplexes have fallen to Rs 20-25 lakh, compared with the earlier Rs 80 lakh to Rs 1 crore-plus.

“We are hoping for some big releases from May. There are 11 months to go in this fiscal and we hope to more than recover the current losses if we get good films for even eight months,” said a top executive of a Mumbai-based chain, requesting anonymity.

The decline in box-office collections has also impacted online movie ticket bookings adversely. Says Roopesh Shah, head of marketing for bookmyshow.com, a specialised portal for online theatre bookings in big cities: “Online bookings of movie tickets on our portal has gone down by over 40 per cent in March. It may further go down for the current and next months if no new films are released.”

 

[Screaming Skull]

Record number of mobile users added in March​

New Delhi April 22, 2009,

Buoyed by the entry of new telecom players and entry of Reliance Communications in the GSM space, the Indian telecom industry clocked the highest subscriber-addition in a month, by adding 15.87 million subscribers in March 2009. According to the latest data released by the Telecom Regulatory Authority of India, (Trai), while the wireless (GSM, CDMA and WLL (Fixed)) segment witnessed addition of 15.64 million users, the wireline segment saw an increase for the first time in two years, by adding 230,000 to its subscriber base.

At the end of March, the wireless subscriber base stood at 391.76 million as compared to 376.12 million in the previous month of the year. The wireline subscriber base grew to 37.96 million as compared to 37.73 million in February 2009.

On a year-on-year basis, however, the wireline segment witnessed a decline of 3.7 per cent from 39.42 million in March 2008.

This growth has lead to an increase in the total telecom teledensity (number of people having a telephone connection per 100 )to 36.98 per cent at the end of March 2009 from 35.65 per cent in February this year.

Broadband penetration in the country is also witnessing a steady increase. The total broadband subscriber base crossed the 6 million mark, to reach 6.22 million by the end of March 2009, as compared to 5.85 million by the end of February 2009.

With its foray in the GSM space, Reliance Communications led the subscriber growth in the wireless segment with the addition of 3.02 million subscribers in March, to take its wireless subscriber base to 72.66 million.

In the wireless segment Bharti Airtel led the subscriber growth with addition of 2.73 million subscribers in December to take its wireless subscriber base to 82.9 million. State-owned Bharat Sanchar Nigam Ltd (BSNL) came in second with a total of 2.9 million subscribers resulting in a subscriber base of 52.14 million. Meanwhile Bharti Airtel and Vodafone Essar added 2.8 million customers each to take their subscriber base to 93.92 million and 68.76 million respectively. Tata TeleServices added about 1.25 million subscribers to about 35.12 million subscribers.

 

[Screaming Skull]

6% growth in worst-case scenario: CEA​

New Delhi April 22, 2009,

The country’s economy is expected to grow by around 6 per cent in the current fiscal, even in the worst-case scenario of global recession prevailing till March 2010, according to Arvind Virmani, chief economic adviser in the Ministry of Finance.

The growth projection matches with the Reserve Bank of India’s (RBI) estimate of 6 per cent expansion in Gross Domestic Product (GDP) in 2009-10. But it is higher than the median forecast of 5.7 per cent by professional forecasters, according to a survey done by the central bank.

“The worst-case scenario assumes that the global economy would be still in recession till March 2010. Even in that scenario, I expect the Indian economy to grow by 6 per cent, plus or minus 0.5 per cent,” Virmani told Business Standard.

However, in the best-case scenario of the global economy recovering after September 2009, he predicts the growth rate of around 7 per cent in 2009-10.

In this case, the growth rate in the current fiscal would be similar to the previous one that ended in March 2008, where growth was bouyant in the first half before the global economic crisis put a spanner on expansion. “The implication (of best case scenario) is that the growth as a whole may average out to be the same as the previous year,” he added.

Both the World Bank and International Monetary Fund have predicted the world economy to contract by 0.5 to 1.7 per cent for the first time in 60 years. India’s growth, according to the two global institutions, is also expected to fall below the 5 per cent mark.

Virmani, however, did not give up the sector-wise break-up of growth except to say that agricultural output, which has nearly 18 per cent weight in GDP, would post a normal growth rate of 2.5-3 per cent.

The government, along with the RBI, had implemented series of measures aimed at boosting economic demand. In particular, excise duty on most products has been reduced by 6 percentage points. The central bank too has reduced repo rates — the rate at which it lends to commercial banks — by 4.25 percentage points since September 2008. These measures are expected to cushion the impact of economic slowdown at a time when private investment, which drove economic growth, has slumped because of uncertainty.

 

[NSG_BlackCats]

Delhi Metro completes work on longest tunnel​

NEW DELHI: The Delhi Metro achieved another feat by completing the construction work of its longest ever underground tunnel at Khan Market.
The tunnel, with a length of 1.775 kilometres, is part of the under construction corridor between Central Secretariat and Badarpur and is the longest ever constructed by single tunnel boring machine (TBM) in Delhi Metro, DMRC spokesman Anuj Dayal said.

Till now, two 1.45 kilometre long tunnels constructed between Malviya Nagar and Hauz Khas were the longest tunnels.

Another major achievement is that the construction was completed in just 152 days. Dayal said of the 1.775 kms, 37.5 metres of tunneling was completed in a day with the installation of 25 rings which is an Asian record.
The tunneling work for this stretch was started on November 21st, 2008. The Central Secretariat — Khan Market stretch of 2.53 kilometres is actually the longest distance between any two Metro stations under Delhi Metro.

 

[Screaming Skull]

RBI increases exposure to US govt bonds by 70%​

23 Apr 2009

MUMBAI: Indian investors—essentially the Reserve Bank of India—have increased exposure to US government bonds by 70%—among the highest by a major Asian economy after the collapse of investment bank Lehman Brothers in September 2008.

According to the data put out by the US treasury, India has increased its exposure to US government securities to $34.6 billion as on end February `09—an increase of 70% over the $20.3 billion in September 2008. During the same period, China pumped in an additional $126 billion since September to take its total exposure to $744 billion.

Although some financial institutions and corporates also invest in US treasuries, RBI’s purchases are expected to account for 99% of the overall investments. The Indian central bank’s behaviour is in keeping with its contemporaries with the exception of South Korea. Indeed, Asian central banks have been buying more of US treasuries despite a sharp fall in their foreign exchange reserves, indicating a shift in their portfolio.

However, while investments in US bonds have gone up, returns on US bonds have not. With the US Federal Reserve Board bringing down its key rates by 175 basis points since September, yields on 10-year US treasuries have fallen below 1%. The decline in rates has, however, not slowed the tide of central bank investments in US treasuries.

China has been the most aggressive among the investors and has replaced Japan as the largest foreign investor in US government bonds. Explaining the decision of Asian central banks to increase purchases despite a fall in returns, HDFC Bank economist Shivom Chakravarty said: “It may be recalled that during this period, the concern was preservation of capital rather than return on capital as the financial crisis was at its peak.”

The crisis caused investors to shun debt issued by even top-rated corporates, resulting in a scamper for US treasury bonds. The dollar was also seen strengthening against major global currencies, which further added to the investor confidence in US paper.During the period, India’s reserves dipped by $42 billion in US dollar terms.

A larger part of this reduction was because of revaluation of non-dollar assets in reserves. Even China and other Asian economies
have not seen their reserves grow by much during this period points out a recent report on emerging markets by ANZ Bank.