Indian Economy - News & Updates - Archive

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Spare some big thought for foodgrain glut​

18 May 2009, 0327 hrs IST, Prabha Jagannathan, ET Bureau

NEW DELHI: The new government will have to work out a foodgrain management policy focussed on clearing surplus stocks, especially those of wheat.


As on April 1, the Food Corporation of India (FCI) held nearly three times the minimum wheat stock requirement of 4 million tonnes. The new government can explore a few options in this regard: subsidise exports, push stocks through the public distribution system (PDS) and work on norms to increase buffer stocking.

While the PDS option is usually not favoured by governments in the first half of their stints in power as perceived gains dissipate by election time, the government could increase the capacity of the 2 million-tonne strategic long-term buffer.

While granaries are bursting at the seams, prices are plummeting. Wheat stocks are currently pegged at 13.4 million tonne, and the output this season is pegged at around 78 million tonne. Prices have plunged to Rs 1,020 a quintal (0.1 tonne) in the Capital as against a minimum support price of Rs 1,080 a quintal and to Rs 930 a quintal in UP.

Carrying cost per tonne of wheat is pegged at Rs 2,400 a tonne a year, going up every month by by Rs 200 a tonne. Wheat quality, already poor, will also deteriorate rapidly, making it fit only for fodder. With food subsidy already at around Rs 50,000 crore, no new government can afford to delay this decision.

Globally too, there is a glut, with the International Grains Council (IGC) projecting an eight-year increase in stocks. Prices have dipped as a result, and exports are unviable. Against a free-on-board price of $280-$250/ tonne at Kandla or Mundra for Indian wheat, better quality wheat sells between $185 a tonne and $220 per tonne.

Given the glut and exporters’ reluctance to pick up stocks, the commodities market regulator, the Forward Markets Commission on Friday approved the removal of the two-and-a-half-year-old ban on futures trading of wheat on Friday while leaving the ban on rice, urad and toor futures in place.

While rice stocks are also surplus — at 21.6 million tonne on April 1 against a buffer norm of 11.2 million tonne — the government will have to play cautiously. For one, global trade in the commodity is only a fraction of wheat trade. Further, sending out signals of huge exports could send global prices down further.

Spare some big thought for foodgrain glut- Agriculture-Economy-News-The Economic Times

 

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Sensex creates history; two upper circuits in one day; kisses 14K; trade halted for day​

18 May 2009,

MUMBAI: Markets have stopped trading for the day as the benchmarks hit another upper circuit Monday as soon as the trade resumed after 2 hour break. Investors are euphoric after the United Progressive Alliance emerged victorious in the 2009 general elections.

Bombay Stock Exchange’s Sensex was locked at 14272.62 up 2099.21 points or 17.24 per cent. National Stock Exchange’s Nifty was locked at 4308.05, up 636.40 points or 17.33 per cent. According to media reports turnover including cash and F&O was less than Rs 1000 crore.

Marketmen are upbeat given the fact that there will be no interference by the Left Parties and other regional parties in day-to-day functioning of the government and less number of allies will lead to a stable government which will run its course of five years.

BHEL (32.72%), Larsen & Toubro (29.53%), DLF (25.82%), ICICI Bank (25.30%) and HDFC (23.46%) were the top Sensex gainers.

Amongst the sectoral indices, BSE Realty Index was up 25.37 per cent, BSE Capital Goods Index gained 23.47 per cent, BSE Bankex moved 20.27 per cent higher and BSE Oil&gas Index advanced 19.57 per cent.

Market breadth was positinve on the BSE with 833 advances and 11 declines.

The new government which is likely to be sworn in by Friday is expected to come-out with full budget within 45 days of resuming office, according to media reports.

Reforms in the banking sector, divestment of public sector undertakings, infrastructure, retail sector and insurance sector is likely to top the priority list.

Sensex had opened 10.73 per cent or 1305.97 points higher at 13479.39 points to 12011.10. National Stock Exchange’s Nifty was locked at 4203.30, higher by 14.48 per cent or 531.65 points.

Market experts views:

“Markets had previously worried that gains by leftist and smaller regional parties would weigh on the reform agenda and lead to a further blow-out in the already large fiscal deficit. In previous elections, both BJP- and Congress-led alliances had been unable to push through reforms, held down by allies with their own agendas. The government's rural jobs program and strong private sector investment have highlighted the positive effects of economic reform and liberalisation, and voters' shunning of smaller parties imply a desire for greater action on the reform front,” said a Moody’s Economy.com report

The report added, “Despite the strong endorsement from voters, the government is likely to have a tough job pushing through some much-needed reforms. Political constraints mean a scrapping of fuel subsidies are unlikely, nor reforms to outdated labour laws that constrain hiring and create high firing costs. Returning to the path of fiscal consolidation will also be challenging if the global recession becomes protracted, while the financial crisis will mean any steps to liberalise capital flows and foreign investment will be cautious.”

 

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Investors' wealth swells by Rs 4 lakh cr ($80 billion) within seconds​

Monday, May 18, 2009

MUMBAI: Investor wealth soared by a whopping Rs four lakh crore ($80 billion) within seconds of opening of trade on the Bombay Stock Exchange, as the markets were elated at the decisive win of the ruling UPA Government in the general elections.

The total investors' wealth, measured in terms of combined market capitalisation of all the listed companies, has increased by over Rs 4,08,410.60 crore in the opening trade to Rs 42,15,354.29 crore.

The 30-share Bombay Stock Exchange Sensex zoomed 1,305.97 points at 13,479.39, hitting the upper circuit within seconds of opening of trade, following which trading was halted for two hours.

Ashika Stock Brokers Research Head Mr Paras Bothra said “the buying spree is likely to continue after the market reopens and may touch another circuit limit.'' He further said “very low volumes were traded as most investors could not engage in any buyin g activity as the markets hit its upper circuit within seconds.''

Further, the 30 Sensex companies, which account for over 47 per cent of the total market capitalization of all the companies, saw their combined market valuation rise by nearly two lakh crore in the opening trade today.

 

[duhastmish]

This is well deserved - perk for investers. Thankgod with this rise there was little - raise in real estate and infrastructure sector too .

I see this rise to go 15,500 - 16,000 pts in next opening. If it goes above 16,000- points it will stay there for long.
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promise of economic reforms from kamal nath also a big issue ( although i dought mamta banerjee's stand on it ).
and more than upa its about absence of LEFT parties. which is giving boost to indian markets.
again congrats to all fellow investors. who were down n out for long.

I see a change in real estate sector too. it will go up again.
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New govt to continue offshore wealth recovery​

19 May 2009, 1007 hrs IST, M Padmakshan , ET Bureau

MUMBAI: In all likelihood, the new regime in power will follow up the work it has initiated in its last term to recover Indian wealth taken away to
various offshore banking destinations. Quite a few reasons are there to presume so.

First, the public interest litigation (PIL) being heard by the Supreme Court on this issue. Sources close to jurist Ram Jethmalani, who filed the PIL, said the legal pursuit will carry on irrespective of the governments. Also, more PILs on this issue may come up soon, as NGOs and other interested parties have decided to file PILs after the formation of the new government.

The second reason for a continuance in the efforts will be the moral support from several international experts on Asian economies. Then, there is also the international consensus on the need to rein in tax havens, which can bolster India’s efforts to renegotiate tax treaties signed with other countries, including Switzerland and other offshore destinations.

The UPA government’s view on this matter could be inferred from the affidavit filed before the Supreme Court. It said it had secured from the German government, details of Indians having deposits with LGT Bank, Liechtenstein, a well-known tax haven bordering Germany. It said the government received this information from Germany after a systematic and sustained pursuit.

This was a reply to the charges in the PIL in which it was alleged that the government was not committed to secure information offered by Germany. The affidavit also answered charges levelled by BJP and CPM that the ruling party was indifferent to the German government’s offer.

The Union government’s affidavit in the PIL has given details of the steps initiated, including telephone calls and emails sent to the concerned authorities in Germany.

The government also told the Supreme Court that it had approached the government of Switzerland for a relook into the Double Taxation Avoidance Agreement (DTAA) so that the Indian tax regime gets an easier access to information regarding Indian deposits in Swiss banks.

Therefore, the government is under obligation to continue with the exercise of renegotiating the DTAA with Swiss authorities and also with several countries known to be having strict banking secrecy laws that prevent access to information on deposit holders, according to legal experts.

Additionally, there is also moral support in favour of the government, coming from international experts and economists specialising in Asia’s economies.

Joseph Tan, chief economist at Credit Suisse, the second largest Swiss bank, was quoted by international media recently as saying that India has to claw back every cent it can get.

The prospect of revenue is the impetus to crack down on tax evasion and tax havens. The $85 billion stimulus package underway requires mobilisation of such resources, the report added.

Indian initiative in this direction also coincides with international consensus on reining in on tax havens that reportedly conceal over $11 trillion stashed away from developing as well as developed countries.

The G20 meet held in London last month too voiced its concern over continuing existence of banking secrecy laws that block any information on deposits held in these banks.

New govt to continue offshore wealth recovery- Finance-Economy-News-The Economic Times

 

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In one minute, India best mkt in world with 48% gain in ’09​

CHENNAI: The 2111-point surge on 'Magnificent' Monday pushed the Indian stock market ahead of competition as the best performing market across the
world, giving investors an astounding 48% gains in 2009.

With factors like the government's stability and the Left's fate settled, investors furiously bought index constituents in the 30-share BSE sensex, keeping the 'India story' alive and kicking.

From sub-10,000 point levels at the end of 2008, the Indian benchmark has gained over 4,600 points in less than six months — thanks to the rally that started from early March.

Before Monday, sensex had gained 26% in 2009 but the two minute bull blitz leading to the unprecedented over 2,000-point gain turned out to be the game-changer for the open slot of the best performing market this year. Marketmen expect India to turn into one of the lowest risk, highest growth investment destination globally.

India could outperform emerging markets (EMs) in the coming 12-months especially if the government delivers on the policy front, said Ridham Desai of Morgan Stanley. He has an year-end target of 15,300 for sensex.

"Global investors will be chasing outperformance and Indian economy can offer them the best chance with 7-8% GDP growth in the next few years. While investors were earlier chasing value, now they will be chasing growth. The mindset has changed and there is lot of money waiting to come into India," said Seturam Iyer, chief investment officer at Shinsei AMC.

With political risk less of an issue, Indian stock market — still under owned by FIIs — is being re-rated. With the re-rating process still unfinished, many expect India to continue to outperform other countries like China, Brazil, Taiwan, Russia and Vietnam.

In terms of year-to-date performance, India's sensex is followed by China's Shanghai SE A-Share index with 45.6% gains, Taiwan's TAIEX (up 43.3%), Russia's RTS-2 (33.2% gain) and Indonesia's Jakarta Composite (up 31.2%), Bloomberg data shows.

Even if equity markets head lower sharply later in the year, $10-15 billion of capital may be transferred from global financial investors to Indian corporates and their major shareholders before that, Credit Suisse analyst Nilesh Jasani said.

While some experts feel that there could some consolidation before the market moves on, analysts at Credit Suisse believe that Indian stock market could overshoot considerably, global markets permitting, from pre-budget period to July.

With investors in stock markets in developed nations such as Australia, France, the US, the UK and even Switzerland registering 1-6% losses or at best, flat gains in 2009, experts believe India's outperformance will bring in more FIIs, hedge funds and big institutional investors.

In one minute, India best mkt in world with 48% gain in ?09 - India Business - Business - The Times of India

 

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GE Hitachi to develop nuclear power plants with L&T​

20 May 2009, 0102 hrs IST, PTI


NEW DELHI: GE Hitachi Nuclear Energy, advanced reactors and nuclear services provider, on Tuesday said it will develop nuclear plants in India in
collaboration with Larsen & Toubro.

GE Hitachi Nuclear Energy (GEH) has signed a nuclear power plant development agreement with Larsen & Toubro Ltd, GE Hitachi Nuclear Energy said in a statement.

Under the agreement, GEH and L&T will plan for the construction and engineering management resources that will be needed to build the proposed Advanced Boiling Water Reactor (ABWR) for nuclear power station, it said.

GEH will serve as the technology provider of certain ABWR nuclear island equipment and components, as well as related engineering and technical advisory services.

"The agreement with L&T is an important step in gearing up to meet the country's power needs through nuclear energy," GE Energy (India, Srilanka & Bangladesh) CEO Kishore Jayaraman said . GEH is in discussions with NPCIL for selecting the site to set up the potential multi-unit ABWR plant.

In March 2009, GEH announced an ABWR development agreement with the Nuclear Power Corporation of India (NPCIL), India's only nuclear utility, operating 17 reactors.

GE Hitachi to develop nuclear power plants with L&T - India Business - Business - The Times of India

 

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Annual inflation seen at 0.61 pc on May 9​

20 May 2009, 1415 hrs IST, REUTERS

MUMBAI: Annual inflation rate is expected to have risen in early May due to a rise in prices of some primary articles and manufactured goods, a
poll of analysts showed on Wednesday.

The median forecast of 12 analysts was for a 0.61 per cent rise in the wholesale price index in the 12 months to May 9, compared with a 0.48 per cent rise the previous week.

"The price rise is more from non-food primary articles and manufactured goods," said Sujan Hajra, chief economist at Anand Rathi Securities. The inflation rate had fallen to 0.18 per cent in early April, the lowest since annual records started in 1977/78. It has trended up since then, although the annual rate dipped on May 2.

The wholesale price index had been on a downward trend since September, after a fall in global commodity prices and cuts in fuel prices. It steadied in February before turning up in April. Analysts said the annual inflation rate could turn down again and be negative by late June or early July, reflecting sharper rises in the wholesale price index a year ago.

"For both food and manufactured products, the week-on-week trends are actually up, but not up high enough for us to think there won't be a negative inflation in June-July," said Atsi Sheth, economist, Reliance Equities. The wholesale price index is more closely watched than the monthly consumer price index (CPI) because it includes more products and is published on a more frequent basis.


Annual inflation seen at 0.61 pc on May 9- Indicators-Economy-News-The Economic Times

 

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J&K Budget likely to see reforms in recruitment rules​

20 May 2009, 1331 hrs IST, PTI

SRINAGAR: Reforms in recruitment rules, tackling burgeoning unemployment and tapping power generation potential are some of the issues which may
find a place in Jammu and Kashmir's upcoming budget.

As part of his pre-budget discussions, Jammu and Kashmir Finance Minister Abdul Rahim Rather held a meeting with academicians, transport associations and representatives of the Kashmir Chamber of Commerce and Industry here.

During the meeting, certain issues concerning the power situation of the state, agricultural productivity, implementation of e-governance among others were discussed.

The minister said everything possible would be done to boost the economy and restore confidence of major stakeholders in the state.

He said even though the government has many problems at hand on the economic front, everything would be done to fulfil the aspiration of the people.

The government is committed to help vulnerable sections in coming out of the economic morass, while formulating budget "I would take every stakeholder on board and work out a strategy to accommodate genuine suggestions put up by them," Rather said.

The state government deferred budget session in view of the general elections and the subsequent enforcement of model code of conduct.

J&K Budget likely to see reforms in recruitment rules- Policy-Economy-News-The Economic Times

 

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India continues to be most favoured BPO destination​

NEW DELHI: India continues to be the most favoured back-office of the world, but the West Asia and North Africa region is slowly emerging as a promising offshoring destination, global management consulting firm A T Kearney says.

According to A T Kearney’s Global Services Location Index (GSLI), India, China and Malaysia have retained the top three spots since the last five years.

“India, China and Malaysia continue to lead the index by a wide margin through a unique combination of high people skills, favorable business environment and low cost,” the report said.

In particular, India has remained at the forefront of the outsourcing industry and actually has become an enabler for industry growth through expansion of Indian offshoring firms into other countries, it added.

The survey further said that West Asia and North Africa is emerging as a key offshoring region because of its large, well educated population and proximity to Europe.

“West Asia and Africa area has the potential to redraw the offshoring map and in the process bring much needed opportunities for its large, underemployed educated class,” GSLI project manager Johan Gott said.

These findings come amid US president Barack Obama’s recent comment that “It’s a tax code that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York”.

The survey further said the global financial crisis has slowed recent offshoring moves, the percentage of companies’ staff offshore may very well increase as a result of the crisis. Layoffs at home are not translating to layoffs among offshore workers as companies seek to reduce costs.

“While cost remains a major driver in decisions about where to outsource, the quality of the labor pool is gaining importance as companies view the labor market through a global lens driven by talent shortages at home, particularly in higher, value-added functions,” said Norbert Jorek, a partner with A T Kearney and managing director of the firm’s Global Business Policy Council.

In addition to Egypt and Jordan, ranked at sixth and ninth, respectively, some other emerging offshoring destinations were Tunisia (17th), United Arab Emirates (29th) and Morocco (30th).

Saharan Africa also showed strength. Ghana ranked 15th, Mauritius 25th, Senegal 26th and South Africa 39th. “The dynamics of global offshoring are clearly shifting as companies re-evaluate the political risks, labor arbitrage and skill requirements in the context of the likely aftermath of the global economic crisis,” A T Kearney chairman and managing officer Paul A Laudicina said.

GSLI analyses and ranks the top 50 countries worldwide for locating outsourcing activities, including IT services and support, contact centers and back-office support.

India continues to be most favoured BPO destination- ITeS-Infotech-The Economic Times

 

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India buys $20-bn US treasury bills in just 6 months​

21 May 2009, 0945 hrs IST, Gayatri Nayak, ET Bureau

MUMBAI: It's not just hedge funds and battered institutions that have rushed to pick up US government bonds, long considered the safest investment World's top tax havens that hoard billions
despite abysmal returns. These securities have also become irresistible to central banks of emerging markets such as India.

India has lent close to $20 billion to the US government over six months since the collapse of iconic investment bank Lehman Brothers.

According to the latest data shared by the US treasury department, India’s outstanding exposure to US government bonds rose from $18.3 billion in October ‘08 to $38.2 billion in March ‘09. The latest tranche of investment into treasuries has made India the fourth-largest creditor to the US after China, Japan and Russia during this period.

While India’s outstanding debt exposure to the US government pales in comparison with the top three investors, the $20 billion incremental investment is significant considering the low base prior to Lehman’s collapse.

India has now emerged among the top 15 lenders to the US, moving up by at least five notches over the period under review. Though corporates, banks and other financial institutions can subscribe to US treasury bonds, in the case of India, RBI accounts for a large chunk of the investments.

“Essentially, it’s an indicator of flight to safety by central banks. The general view among central banks is that the dollar may not depreciate much in the medium to long term,’’ Sailesh Jha, director, Asian Economic Research, Barclays Capital, told ET.

India buys $20-bn US treasury bills in just 6 months- Finance-Economy-News-The Economic Times

 

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Indian, Brazilian industries target $10 billion trade by 2010 ​

MUMBAI: The Indian and Brazilian industries on Wednesday said that trade between the two nations may reach $10 billion by 2010.


"The bilateral trade between the two countries has grown from a mere USD 500 million in 2000 to USD 3.12 billion in 2007 and is targeted to reach USD 10 billion by 2010," CII International Trade Panel Chairperson Harshbeena Zaveri said.

A delegation of Brazilian industrialists and officials of the CII today discussed steps to consolidate the existing trade between the countries besides exploring new business opportunities.

Indian companies are increasingly setting up operations in Latin America in sectors like IT, steel, chemicals, autos and pharmaceuticals, Zaveri said.

"In fact, with the western markets slowing, the time is ripe for Indian and Latin American companies to set up their engagements with each other," she said.

India's major exports to Brazil include mineral fuel, chemicals, iron and steel while the imports include cereals and rubber.

Indian, Brazilian industries target $10 billion trade by 2010 - Foreign Trade-Economy-News-The Economic Times

 

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Credit begins to flow to India Inc​

21 May 2009, 0332 hrs IST, ET Bureau

MUMBAI: Money has begun flowing to India Inc from banks, albeit in a small way. However, banks are seen still biased towards government bonds
despite sustained growth in deposits.

After reporting a Rs 25,266-crore dip in credit in the last fortnight of April, banks have lent Rs 5,881 crore to companies, individuals and other businesses during the fortnight ended May 8, according to the latest figures released by the Reserve Bank of India.

Total loans amounted to Rs 27,52,056 crore as on May 8. Although banks have reported a better loan growth on a sequential basis, the loan growth in the comparable fortnight last year was much higher at Rs 17,500 crore.

Similarly, in the same fortnight, investment in government and other approved securities (that qualify for statutory liquidity ratio or SLR) rose Rs 33,363 crore against a dip of Rs 12,359 crore in the previous fortnight.

Bank treasury heads say that demand for loans was lacklustre, prompting them to invest idle cash in the government securities market. Banks have also been parking surplus funds in other non-SLR avenues such as mutual funds schemes.

Though bank lending is still to pick up, deposits are steadily flowing in. Banks mobilised deposits worth Rs 29,259.6 crore during the fortnight ended May 8 to take outstanding deposits to Rs 39,23,004.5 crore as on May 8, 2009.

With fears that banks may further cut interest rates on deposits, many banks have witnessed a sharp growth in deposits, as people rushed to invest in bank FDs.

Credit begins to flow to India Inc- Finance-Economy-News-The Economic Times

 

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Tata Tech eyes $1b revenue in seven years: Patrick McGoldrick​

22 May 2009, 0751 hrs IST

MUMBAI: Tata group company Tata Technologies is targeting revenues of $1 billion over the next five to seven years. According to Patrick Mc-Goldrick
, the company’s CEO and MD, profits have doubled on a year-on-year basis over the past three years. “Today, we clock revenues of $300 million,” he said.

Tata Technologies is a player in engineering services outsourcing and product development IT services. Offshore revenues, said Mr McGoldrick, has doubled over the past three years and there is reason to be optimistic. “There is a growing aerospace business. We are extremely bullish about the offshoring opportunities in this segment,” he added.

Today, Tata Technologies has a global presence with operations in North America, Europe and the Asia Pacific. The revenue from the offshoring business is a little under a fifth of the total business with onshore bringing in the other part.

“Our aspiration is to see 60% of our business coming from the offshore segment with onshore accounting for the balance 40%,” said Tata Technologies’ president & COO, Warren Harris. From a staff of over 4,000, Tata Technologies expects to almost double that to 7,800 by the time it has a turnover of $500 million.

Around 15% of Tata Technologies’ revenues come from Tata Motors. Overall, 60% of the company’s revenues come from the automobile industry. “In the next three to five years, we expect 80% of our revenues to come from the automobile industry with the rest being accounted for by manufacturing,” said Mr Harris.

Globally, the automobile industry is going through a tumultuous period with a large number of US companies under intense pressure. “There are a lot of bankruptcies in the US market. Having said that, it needs to be understood that this is an industry that is cyclical,” said Mr Mc-Goldrick , while maintaining that the current scenario also presented an opportunity . “There is certainly a tremendous upside,” he added.

In 2005, Tata Technologies acquired INCAT, an engineering and design services company. The following year, it bought over iKS, a company specialising in engineering knowledge and enterprise. Elaborating on the gameplan for inorganic growth, Mr Mc-Goldrick said this would be clearly determined by two drivers. “One will be that of capacity and scale. Apart from that, the geographic locations and the key capabilities will be a factor,” he added.


Tata Tech eyes $1b revenue in seven years: Patrick McGoldrick- Earnings-News By Company-News-The Economic Times

 

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Govt considering Rs 10,000-cr package for shipping industry​

22 May 2009, 1128 hrs IST

NEW DELHI: The Centre is considering a Rs 10,000-crore package for the shipping industry to help it tide over the global economic crisis, a senior
government official said.

"We know that the shipping industry in the country is facing difficulties. We are actively considering a package of Rs 10,000-crore to help the industry," Shipping Joint Director-General C B S Venkataramana told reporters here.

He was speaking at a seminar on logistics park organised by industry body CII here on Friday.

Govt considering Rs 10,000-cr package for shipping industry- Policy-Economy-News-The Economic Times