Indian Economy-News & Updates

[Splurgenxs]

India inflation to drop to 6.5% this month

India's overall inflation rate, which has remained near the double-digit mark since December, 2010, is likely to fall sharply to 6.5 per cent this month and stay "low" until 2013, says a report.

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Contrary to many forecasters, global financial services major Credit Suisse envisages wholesale price index (WPI) inflation to drop to 6.5 per cent by January, below the estimate floated by the RBI, and is likely to remain there until the April-June quarter.



After the second quarter of this calender year, WPI is likely to "further fall to below 6 per cent to come through. Contrary to the view of many forecasters, we expect WPI inflation to remain below 6 per cent until 2013," the report by Credit Suisse said.

Even though food inflation has turned negative, overall inflation, which also factors in manufactured products, fuel and non-food primary items -- has remained near double digits since December, 2010.


As per official data, food products witnessed 3.36 per cent deflation during the week ended December 24. The headline inflation numbers for December will be available next week. The rate of price rise stood at 9.11 per cent in November.

The RBI, which is scheduled to come out with its third quarterly monetary policy review on January 24, has already hiked interest rates 13 times since March, 2010, to tame inflation.

Credit Suisse, however, believes the central bank is likely to cut rates only in March.

"Coupled with a sustained period of sub-7 per cent growth, the RBI is likely to cut rates from March. We look for at least 125 bps of repo rate reductions in 2012/13," the report said.

The report noted that speculation on the impact the depreciating rupee will have on inflation is highly overdone, as commodity prices are falling.

The Indian rupee has depreciated by 15 per cent against the US dollar since the end of July, while the Korean won, the second weakest Asian currency, fell by 9 per cent during the same period and China's renminbi appreciated by 1 per cent.

What really matters to Indian WPI inflation is the percentage year-on-year change in rupee-denominated international commodity prices, which is falling, the report said and noted, "The risks to the headline WPI rate are on the downside."

With economic activity expected to continue to disappoint for a while longer, the RBI is expected to lower the Cash Reserve Ratio (CRR) in March, with the first repo rate reduction coming in April, Credit Suisse said.

 

[CaptainJackSparrow]

India Industrial Output Rises More Than Forecast in Sign Economy Resilient​

India’s industrial production rebounded from the worst month since March 2009, a sign consumer demand is withstanding record interest-rate increases.

Output (INPIINDY) at factories, utilities and mines increased 5.9 percent in November from a year earlier after a revised 4.7 percent decline in the previous month, the Central Statistical Office said in a statement in New Delhi today. The median of 27 estimates in a Bloomberg News survey was for a 2.1 percent gain.

Manufacturing in India and China improved in December, according to the Purchasing Managers’ Index, showing the world’s fastest-growing major economies have so far been resilient to Europe’s debt crisis. Today’s data gives scope for the Reserve Bank of India to keep borrowing costs unchanged on Jan. 24 for a second straight month to help fight inflation.

“There has been an upturn in consumer spending,” said Madan Sabnavis, chief economist at Mumbai-based ratings company Credit Analysis & Research Ltd. “The RBI will keep rates on hold until inflation is firmly down.”

Sabnavis expects the central bank to leave the repurchase rate at 8.5 percent this month.

India’s rupee has gained 2.9 percent against the U.S. dollar this year after being Asia’s worst-performing currency in 2011, helping cut import costs and ease inflationary pressures. The BSE India Sensitive Index has climbed 3.8 percent since Jan. 1 after losing a quarter of its value last year.
Bond Yields

The yield on the 8.79 percent bonds due November 2021 rose two basis points, or 0.02 percentage point, to 8.25 in Mumbai, according to the central bank’s trading system. The rupee advanced 0.6 percent to 51.5837 per dollar in Mumbai, according to data compiled by Bloomberg. The Sensitive Index (SENSEX) fell 0.9 percent.

Manufacturing gained 6.6 percent in November from a year earlier after a 5.7 percent drop in October, today’s report showed. Electricity output climbed 14.6 percent, while mining fell 4.4 percent.

India’s inflation rate exceeded 9 percent every month last year, reducing purchasing power in a nation where the World Bank estimates more than three-quarters of the people live on less than $2 a day.

The Reserve Bank raised its repurchase rate by 375 basis points since the start of 2010, the fastest round of increases since the central bank was established in 1935, according to data compiled by Bloomberg.
Slowing Inflation

India’s benchmark wholesale-price inflation probably eased to 7.40 percent in December from 9.11 percent in November, according to the median of 23 estimates in another Bloomberg News survey. India’s commerce ministry will unveil the data on Jan. 16.

Kaushik Basu, chief economic adviser in the finance ministry, said today that inflation in December may be less than 7.5 percent. The price gauge in January may fall to a little over 7 percent, he said.

The food-price index in India fell for a second straight week, declining 2.9 percent in the period ended Dec. 31 from a year earlier, the commerce ministry said in a statement today.

India’s inflation reading would still be higher than the levels in Brazil, Russia and China, which including India make up the so-called BRIC nations. Consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China last month.

“An inflation rate of more than 7 percent is a clear deterrent against any rapid change in the monetary policy stance in India,” Siddhartha Sanyal, chief India economist at Barclays Plc, said before the report. He expects the Reserve Bank to start reducing rates in the second quarter this year.
China’s Scope

China has scope to loosen fiscal and monetary policy, making it better placed than India to weather a global economic slowdown, Stephen Roach, non-executive chairman of Morgan Stanley Asia, said today.

China is bringing inflation under control and has a small budget deficit, Roach said in an interview with Bloomberg Television. In contrast, India has a currency under pressure, an “inflation problem” and a large fiscal shortfall, he said.

Higher borrowing costs in India are curbing demand in some industries such as automobiles.

India’s automakers group this week cut its estimate for annual local passenger-car sales, projecting deliveries may not grow for the first time in nine years.

Industrial output strengthened in November as cement production by companies including Ambuja Cements Ltd. increased 16.6 percent from a year earlier after stalling the previous month, according to commerce ministry data released last month. Steel production gained 5.1 percent.

The Purchasing Managers’ Index in India rose to 54.2 in December, the most in six months, HSBC Holdings Plc and Markit Economics said Jan. 2. In China, the index was at 50.3 from 49 in November, the Beijing-based logistics federation said Jan. 1.

To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

India Industrial Output Rebounds, Giving Central Bank Scope to Hold Rates - Bloomberg

 

[Anish1]

India is now a $1.883 trillion economy in nominal terms and will cross the $2trillion barrier in 2012.

 

[Shardul.....the lion]

Japan keen on Bangalore-Chennai highway project

Japan keen on Bangalore-Chennai highway project
New Delhi, Jan 12, DHNS:

India advises discussion at the level of prime ministers

The Government of Japan on Thursday evinced interest to build the proposed Bangalore-Chennai expressway.

Japan’s Minister for Land, Infrastructure, Transport and Tourism (MLITT) Takeshi Maeda, during his meeting with the Union Road Transport and Highways Minister C P Joshi here, said the country is keen on executing the project, especially with a Japan-based company being involved in preparing a detailed project report.

Speaking to reporters after the meeting, Joshi said: "We told them (Japan government) that we have a very transparent system, where you have to enter into the bidding process.

If Japan government is interested in taking up the project on government to government (G-G) basis, then you have to discuss it at the higher level." The project could be discussed at the Prime Ministerial level, he added.

However, G-to-G negotiations might deprive Indian entrepreneurs the opportunity to participate in the bidding, as projects are straightaway given to a country and would be executed by companies from there.

In the highways sector, 100 per cent foreign direct investment (FDI) is allowed and the Japanese companies can also tie-up with domestic companies to bid for the project, the Minister said. Currently, Egis-Secon, a private company, is preparing the Detailed Project Report (DPR) expected to be ready by March 2012.

“After getting the DPR, the government will decide how to implement the project -whether to go for competitive bidding or adopt any other method,” the minister said.

The expressway, first of its kind in the country, will be built with public-private participation on build-operate-transfer (BOT) basis.

The 100 per cent access-controlled road would cut down travelling time between Bangalore and Chennai to just three hours from the current five to six hours.

As per the proposal, the expressway will have six lanes and vehicles can travel at a speed of 120 km per hour.

The proposed road will run parallel to the existing National Highway–4 and pass through Kolar, Palamaner, Chittur and Ranipet.

 

[IND151]

@ wanglaokan....:. this thread is abt indian economy. kindly dont post anything not related t0 d topic.

 

[IndoUS]

Just open up a new thread man there are already a couple running on it, post there. as for others report and move on.

 

[IndoUS]

Come on both of you open a new thread, and post there, this is going way off-topic. Seethru move on, you will only get banned.

 

[DMLA]

Coming back to the INDIAN ECONOMY! Finally great news on the inflation front! RBI should latch onto the good numbers and start reducing the interest rates ASAP! Let us make sure we get atleast 8% growth this year!

link: India

India’s headline inflation fell to 7.47 per cent for December 2011, lowest in two years, as compared to 9.11 per cent for the previous month and 9.45 per cent during the corresponding month of the previous year.
Headline inflation, which also factors in manufactured items, fuel and non-food primary items, has been above the 9 per cent-mark since December, 2010.

The primary articles index declined by 1.6 per cent to 197.9 from 201.1 for the previous month.

The index for manufactured products rose by 0.6 per cent to 140.6 from 139.8 for the previous month.

C Rangarajan, chairman of the Prime Minister's Economic Advisory Council told NDTV Profit that a fall in headline inflation is a welcome sign. "Headline inflation is likely to slip below 7 per cent by March 2012. We expect non-food manufacturing inflation to come down in the future as well," he said.

He further said that high levels of manufacturing inflation are still disturbing. "The rupee's fall and commodity prices have been key reasons behind this," he explained.

He suggested that the liquidity problems should be met through open market operations (OMOs) rather than reducing the cash reserve ratio (CRR).

The index for 'Food Articles' group declined by 3.1 per cent to 190.8 from 196.9 for the previous month due to lower prices of fruits and vegetables (13 per cent), condiments and spices (6 per cent), urad (5 per cent), poultry chicken (3 per cent), tea (2 per cent) and jowar, rice, arhar, ragi and barley (1 per cent each).

However, the prices of pork (8 per cent), fish-marine (5 per cent), maize (3 per cent), bajra, egg, beef and buffalo meat, mutton and masur (2 per cent each) and gram, coffee, wheat and milk (1 per cent each) moved up.

The index for non-food articles jumped 1.3 per cent to 178.6 from 176.3 for the previous month due to higher prices of gaur seed (20 per cent), flowers (14 per cent), linseed (8 per cent), soyabean (6 per cent), mustard seed (5 per cent), raw silk (4 per cent), sunflower and raw rubber (3 per cent each), safflower, groundnut seed and niger seed (2 per cent each) and gingelly seed and fodder (1 per cent each). However, the prices of cotton seed (6 per cent), castor seed (4 per cent), coir fibre, raw cotton and raw jute (3 per cent each) and copra (1 per cent) declined.

The fuel and power index rose by 0.6 per cent to 172.6 from 171.6 (Provisional) for the previous month due to higher prices of naphtha (5 per cent), aviation turbine fuel, light diesel oil and bitumen (4 per cent each) and furnace oil (3 per cent). However, the prices of petrol (3 per cent) declined.

The sharp moderation in the food inflation contributed to the overall easing of prices. Prices of food contribute about 14 per cent to the overall wholesale price index basket. Food prices fell for the second consecutive week as food inflation remained in the negative zone at -2.90 per cent for the week ended December 31, 2011.

The RBI, which is scheduled to come out with its third quarterly monetary policy review on 24 January, has already hiked interest rates 13 times since March, 2010, to tame inflation.

Analysts expect the central bank to abstain from its hawkish monetary tightening measures as the WPI inflation has primarily been on a declining trend.

An analyst survey ahead of the data release, suggested that the inflation would fall to around 7.4 per cent.

WHOLESALE INFLATION in 2011


December 7.47 per cent
November 9.11 per cent
October 9.73 per cent
September 10 per cent
August 9.78 per cent
July 9.36 per cent
June 9.51 per cent

Alternate Source: http://www.bloomberg.com/news/2012-...-low-reducing-pressure-on-interest-rates.html

 

[Shardul.....the lion]

Inflation at two-year low, but RBI may not cut rates
Inflation at two-year low, but RBI may not cut rates - The Economic Times

NEW DELHI: Cheaper food items pulled down headline inflation to a two-year low of 7.47 per cent in December, 2011, but this may not be enough for the Reserve Bank to slash key interest rates as rising prices of manufactured items remain a cause for concern.

Having remained perilously close to the double-digit mark throughout 2011, WPI inflation experienced a significant moderation only in December, declining from 9.11 per cent in the previous month. It was 9.45 per cent in December, 2010.

"Manufactured inflation and inflation in the power group of items have also declined, though only marginally, (and) therefore, continue to be a cause of concern," Finance MinisterPranab Mukherjee said.

He, however, expressed optimism that headline inflation would moderate to 6-7 per cent by March-end, on account of the moderation in food prices.

The latest numbers are the lowest since December, 2009, when headline inflation stood at 7.15 per cent.

"The RBI, while framing its monetary policy, will have to take into account not only the decline in food inflation and headline inflation, but also factor in manufactured inflation," Prime Minister's Economic Advisory Council Chairman C Rangarajan said.

As per official data released today, food prices rose at a lower rate of 0.74 per in December, compared to 8.54 per cent expansion in the previous month. During the month, prices of vegetables, particularly onions and potatoes, fell sharply by between 30 per cent and 60 per cent on an annual basis.

However, inflationary pressure continued in manufactured items, which which have a weight of around 65 per cent in the WPI basket. Prices of manufactured products, went up by 7.41 per cent year-on-year in December, as against 7.70 per cent in the previous month.

 

[lepziboy]

Rupee rises for 7th day, stays near 2-month highs

Mumbai: The Indian rupee opened stronger to gain for the seventh session in a row, hovering around two-month highs in early trades on Friday, on expectations of sustained dollar flows into shares and debt.

The rupee opened at 50.20 to the dollar. During trade on Thursday, it hit 50.07, its strongest since Nov. 14 before closing at 50.25/26.

Gains in Asian shares and a firmer euro after successful bond sales in Spain and France will boost risk sentiment and aid the rupee, traders said.

http://zeenews.**********/business/...r-7th-day-stays-near-2-month-highs_37378.html

 

[CaptainJackSparrow]

India's growth likely to be strong in CY 2013 at 9.5%: E&Y​

India's growth likely to be strong in CY 2013 at 9.5%: E&Y

 

[Dance]

India Growth Outlook Weaker, Inflation Elevated​

India’s economic growth is weakening more than anticipated and inflation remains “high” as the rupee’s fall threatens to stoke price pressures, the central bank said, signaling it may leave interest rates unchanged.
“The growth slowdown, high inflation and currency pressures, complicate policy choices,” the Reserve Bank of India said in a report yesterday before its rate decision in Mumbai. The “critical factors” ahead will be “core inflation and exchange rate pass-through,” it said, adding that keeping the “liquidity deficit” in acceptable limits is also a priority.
India faces slower expansion as the global recovery falters and inflation which at 7.47 percent is the fastest among the so- called BRIC nations. Brazil, Russia and China, the group’s other members, have cut rates or lowered reserve requirements for lenders in recent weeks as they strive to shield growth from the impact of Europe’s debt crisis.
“The RBI is faced with a complex job of curbing inflation and at the same time protecting growth,” said Madan Sabnavis, chief economist at Mumbai-based CARE Ratings. “The prudent action at this juncture will be to keep rates on hold.”
The rupee, Asia’s worst-performing currency in 2011 with a 16 percent slide, climbed 0.5 percent to 50.0825 per dollar at the close in Mumbai yesterday. The BSE India Sensitive Index rose 0.1 percent.
The Reserve Bank will keep its repurchase rate at 8.5 percent today for a second month, all 21 economists in a Bloomberg News survey said. It is due to release its monetary- policy announcement at 11 a.m.
Cash Reserve Ratio
Five respondents predicted it will cut the cash reserve ratio to alleviate a shortage of funds in the economy. The central bank has added 718.8 billion rupees ($14.4 billion) into the banking system since the start of November by purchasing government securities from lenders.
“Growth in India is moderating more than was expected earlier,” the central bank said. “While in the short run, moderating inflation will provide some space for monetary policy to address growth concerns” that will be “temporary respite” at best unless supply bottlenecks are tackled, it said.
India’s wholesale-price inflation slowed to a two-year low of 7.47 percent in December. By comparison, consumer prices rose 6.5 percent in Brazil, 6.1 percent in Russia and 4.1 percent in China last month.
The moderation in inflation is “likely to persist” in the three months through March, the central bank said in the report.
At the same time, it said “price pressures remain.” Risks stem from “suppressed domestic energy prices, the incomplete pass-through of rupee depreciation and slippage in fiscal deficit,” it said.
Maruti Price Rises
Maruti Suzuki India Ltd. (MSIL), maker of half the cars sold in India, has raised prices of all its models this month, citing higher raw material costs and the decline in the currency.
The Reserve Bank raised borrowing costs by a record 375 basis points in 13 moves from mid-March 2010 before pausing in December.
India’s economy may expand 7 percent in the fiscal year through March 31, according to a survey compiled by the central bank of forecasts from agencies including the International Monetary Fund and the Asian Development Bank, yesterday’s report showed. October’s survey projected growth of 7.6 percent.
Inflation may average 8.8 percent in the period, the survey said, the same as the previous estimate.
Indian expansion is set to be “below potential” in the current fiscal year before recovering at a “modest pace,” the Reserve Bank said. Lower external and investment demand has affected growth, it said.
“While headline inflation has eased, price pressures as reflected in demand-side inflation still persist in the economy, thus the RBI is unlikely to cut rates before April,” Arun Singh, a Mumbai-based senior economist at Dun & Bradstreet Information Services India Pvt., said before the report.
Prime Minister Manmohan Singh is under pressure to bolster the economy following street protests against price increases, corruption allegations and the struggle to attract more foreign investment. His government faces regional elections starting this month.

India Growth Outlook Weaker, Inflation Elevated - Bloomberg

 

[Shardul.....the lion]

Rupee Leads Asia Currency Gains on Reduction in Reserve Ratio

Rupee Leads Asia Currency Gains on Reduction in Reserve Ratio - Businessweek

Jan. 24 (Bloomberg) -- India’s rupee led gains in Asian currencies as the central bank unexpectedly lowered the cash- reserve requirement for lenders for the first time since 2009 and signaled future interest-rate cuts to support growth.

The rupee appreciated past 50 a dollar, a level last breached in November, as the Reserve Bank of India reduced the amount of funds banks must set aside as reserves to 5.5 percent from 6 percent, while keeping the benchmark rate unchanged. Indonesia, the Philippines and Thailand have all cut borrowing costs to spur their economies amid Europe’s debt crisis.

“Asian central banks are taking steps to prop up growth and support their economies and currencies,” said Vikas Babu, a trader at state-run Andhra Bank in Mumbai. “Developments in Europe will be a key determining factor on the outlook.”

The rupee advanced as much as 0.3 percent to 49.9250 per dollar, the strongest level since Nov. 14, and traded at 49.9750 as of 2:25 p.m. in Mumbai, according to data compiled by Bloomberg. The Philippine peso rose 0.2 percent to 43.17 and Indonesia’s rupiah declined 0.5 percent to 8,990.

Onshore financial markets were closed in China, Hong Kong, Taiwan, Singapore, South Korea and Malaysia for the Chinese New Year holiday.

International investors boosted holdings of Indian debt by $3.4 billion this month through Jan. 20 to $29.4 billion and investments in stocks rose $1.4 billion, exchange data show.

Policy makers left borrowing costs at 8.5 percent, as predicted by all 21 economists in a Bloomberg News survey. Economic growth is weakening more than anticipated and inflation remains “high” as the rupee’s 9 percent loss in the past 12 months threatens to push up prices, the central bank said yesterday.

Importer Demand

Thailand’s baht declined, retreating from its strongest level in almost three weeks, on speculation importers increased demand for the dollar to take advantage of the more favorable exchange rate.

The currency slipped 0.1 percent to 31.44 per dollar. It advanced 1.7 percent in the last five days as global funds bought $1.5 billion more of the nation’s bonds than they sold in seven days of net purchases through yesterday, according to the Thai Bond Market Association. Official data last week showed imports climbed 19.1 percent in December from a year earlier after sliding 2.4 percent the previous month.

“Importers are likely to buy the dollar today because it’s a lot cheaper than last week,” said Norawit Suparinayok, a foreign-exchange trader at Bangkok Bank Pcl. “Many people expect the dollar’s weakness will be short-lived amid the lingering European debt crisis. It’s a good opportunity to buy the dollar at the current level.”

No Intervention

Indonesia’s rupiah fell, snapping a four-day gain, on speculation the central bank refrained from intervening to support the currency after it gained by the most in two years last week.

Bank Indonesia hasn’t been in the market today, according to Wiling Bolung, head of treasury at ANZ Panin Bank in Jakarta. The rupiah appreciated 1.5 percent last week on optimism a credit-rating upgrade by Moody’s Investors Service will boost demand for Indonesian assets.

“Bank Indonesia is always monitoring the market and it will come in when it thinks it’s the right time,” Bolung said. “It will be a quiet day today because of the holidays.”

--With assistance from Khalid Qayum in Singapore. Editors: Simon Harvey, Andrew Janes

 

[davidson]

India's FY12 growth may sink below 7%: Shankar Acharya

Even though the Reserve Bank of India, in its third quarter monetary policy review, slashed cash reserve ratio (CRR), it is not able to impress economist Shankar Acharya of ICRIER.

In an interview to CNBC-TV18, Acharya warned that India's growth may sink below 7% in FY12. This is after RBI revised growth forecast to 7% from 7.6% in FY12.

He reasons that the CRR cut is mainly on account of tight liquidity situation. Expecting the RBI's rate cuts to be gradual, Acharya is worried that inflation may not be easing sharply from current levels.

India's FY12 growth may sink below 7%: Shankar Acharya - CNBC-TV18 -

 

[Splurgenxs]

Food inflation at -1.03%, in negative zone for 4th straight week
Rupee hits fresh 10-week high at 49.65 to dollar