Real Estate Intelligence Service, Monday, October 26, 2009

India Inc making up for lost time in raising funds

India Inc making up for lost time in raising funds
Business Standard, October 26, 2009, Page 1

Ranju Sarkar / New Delhi

Reasons vary from fear-psychosis to retiring debt to growth capital

The lull has given way to a storm. After a year of waiting on the sidelines, India Inc is raising money with a vengeance. In the last four months alone, companies have raised nearly Rs 90,000 crore in equity and debt. And the party looks set to be a long one, with companies planning to raise another Rs 100,000 crore in the next six months.

While some such as Hindalco, JSW Steel, India Cements, Essar Oil, Tata Steel and Jet Airways have already announced plans to raise a combined Rs 70,000 crore, there are many who are redrawing proposals to enter the market to raise money.

The money that has been raised since the beginning of July includes Rs 43,572 crore in equity through qualified institutional placements, initial public offers and rights issues. Around Rs 45,000 crore have come from debt issues.

The reasons for the fund-raising deluge after the one-year drought are many. For some, it is the fear that the good markets may not last for long and they want to raise money to ensure they are not drained for liquidity like last year.

A Subba Rao, president & chief financial officer of GMR Infrastructure, believes in the fear psychosis theory. “Today there’s water, so collect it. Tomorrow, there could be a drought,” he says.

This is best illustrated by real estate companies. After their bigger peers like Unitech and DLF raised money, over half a dozen companies have lined up initial public offerings, or IPOs.

Hari Prakash Pandey, deputy general manager (finance) and CFO, HDIL, a Mumbai-based real estate company, agrees. “It is the fear psychology that’s driving companies to raise money. There’s still fear that something may happen and good markets may not last. Today, a window is available to raise equity. So companies are saying let’s go and raise capital,” he says.

But others see a more long-term vision than mere fear-psychosis. For them, companies are also raising money to reduce debt, complete existing projects or for meeting their future capital needs. S Ramesh, COO, Kotak Investment Banking, says some companies, which were not able to complete projects earlier, are raising money to create a buffer, while a few others like Larsen & Toubro are raising money to meet their future needs.

‘‘With consumption picking up, companies realise that they may need to soon invest in new projects,’’ says Ramesh. Some like Tata Motors raised money to refinance debt taken for acquisitions while others are raising money to complete projects on which they went slow in the downturn or because of the liquidity crunch last year.

Real estate companies, which kicked-off the QIP rush, raised equity to reduce debt. “Companies were over-leveraged. In a downturn, even a 1:1 debt equity ratio looked high. As debt comes down and sales pick up, internal accruals could be released for growth,” says Pandey. This will help real estate companies as they were paying interest rates of 12-15 per cent on these loans with annual interest outgo of Rs 400-500 crore.

This may not be easy. Aditya Sanghi, managing director, investment banking, Yes Bank, says investors have become choosy and want to back stories which have an outcome. “If 15-20 real estate companies want to raise Rs 1,000 crore, I am not sure if the market is ready for it.”

But still the market has enough appetite for companies with strong fundamentals seeking growth capital.

What has helped in this process is the easing up of the foreign currency loan markets in the last few months with the spreads on the Libor (London Inter Bank Offered Rate) coming down. Spreads are the rate paid over the benchmark Libor as the cost of borrowing for overseas bonds.

Indian companies can save 150-200 basis points on interest costs by borrowing in dollars, inclusive of the hedging costs. GMR’s Rao says companies can borrow five-year money fixed Libor at an effective cost 9.75 per cent (covered for the interest rate risk as well). Five-year money from Indian banks costs 11-11.50 per cent.

The problem, however, is that not many banks are willing to lend for five years. Most of them do not want to tenure to cross a year. Besides, the loans are not comparable as no rupee loan is available at a fixed rate for five years. The interest rate on a five-year loan is reset every year. But companies can borrow from insurance companies or mutual funds, or from public markets, like Tata Capital did, at 11.5-12 per cent.

Arvind Parakh, director (business development) & CFO, JSL, says companies that have strong balance sheets can leverage them overseas. With the convertible bond market overseas opening up, companies are raising money through convertible bond issues. A few like Sesa Goa, Larsen &Toubro and Tata Motors have already raised money through a combination of QIP and foreign currency convertible bonds, or FCCBs.

FCCBs are back in vogue as premiums have gone up to 30 per cent. “Four months back, the premium was low (15-16 per cent) and the coupon was ruling at 5-6 per cent. It did not make sense for promoters as it was a zero-sum game,” says Rao. Now, investment banks are recommending FCCB issues as they see good demand and a new set of investors.

The pure bond market is also opening up for Indian companies. Last week, State Bank of India raised $750 million (Rs 3,500 crore) through five-year bonds. Other banks and PSUs may soon raise more. Seshagiri Rao, deputy MD, JSW Steel, says that with three-four issues from banks and PSUs, the bond markets could open up for Indian companies.

(With inputs from Deepak Korgaonkar and Swapnil Mayekar, BS Research Bureau)

Companies' Q2 results show healthy rise in net profit

Companies' Q2 results show healthy rise in net profit
Business Standard, October 26, 2009, Page 2

Deepak B Korgaonkar / Mumbai

The 452 companies that have so far declared their financial results for the quarter ended September have posted a healthy 28.5 per cent rise in net profit, but only a single-digit growth of 3 per cent in net sales.

The net profit growth reported by India Inc during this quarter was the highest since the one in June 2007, when a sample of 381 companies showed a 35 per cent jump in net profit.

The profit margins also improved. The operating profit margin is up 320 basis points to 21.9 per cent in September, while net profit margin is up 255 basis points to 12.4 per cent.

Automobiles, cement, real estate, paints, gas distributions, auto ancillaries and engine sectors have all posted over 50 per cent growth in net profit. Also, a smart turnaround by sugar, petrochemicals, shipping and textile sectors, and reduction of losses by food processing, glass and electronics sectors has pushed up the profit growth rate.

The growth in profitability was helped by lower interest costs. For manufacturing companies, this increased by 9.8 per cent against over 20 per cent growth in earlier quarters.

Out of 452 companies, the net profit of as many as 98 has more than doubled.

Thirty-six companies reported net profit growth between 50 per cent and 100 per cent, while 36 others reported a net profit against a net loss in the same quarter of the previous year.

The automobile sector has stolen the show by reporting over 100 per cent growth in net profit.

The six auto companies reporting quarterly numbers so far have posted a combined Rs 1,613 crore net profit against Rs 794 crore reported in the same period last year.

Jubilant Organosys, Finolex Industries and Garware Offshore are among the those who have turned losses to profit, while Subex, Upper Ganges Sugar and SRF Polymers have reduces their losses by more than 50 per cent.

However, non-ferrous metals, hotels, tea and coffee, entertainment, bearings, ferro alloys, pesticides and mining sectors have reported a fall in their net profit.

US grows fastest in 2 yrs as stimulus takes hold

US grows fastest in 2 yrs as stimulus takes hold
Business Standard, October 26, 2009, Page 8

Bloomberg / Washington

Economy grew at a 3.2 per cent from July through September

The economy in the US probably grew in the third quarter at the fastest pace in two years as government stimulus helped bring an end to the worst recession since the 1930s, economists said before reports this week.

The world’s largest economy grew at a 3.2 per cent pace from July through September after shrinking the previous four quarters, according to the median estimate of 65 economists surveyed by Bloomberg News. Other reports may show sales of new homes and orders for long-lasting goods increased.

Americans flocked to auto showrooms and real-estate offices last quarter to take advantage of government programs such as “cash-for-clunkers” and tax credits for first-time homebuyers. Growing demand caused stockpiles to keep falling, which will prompt companies to rev up assembly lines and help sustain the recovery into 2010 even as unemployment climbs.

“The recovery is off to a decent but unspectacular start,” said Joe Brusuelas, a director at Moody’s Economy.com in West Chester, Pennsylvania. “While another large drawdown in inventories will be a drag on third-quarter growth, it sets the stage for a longer and stronger upturn in manufacturing.”

The Commerce Department’s report on gross domestic product is due October 29. The four consecutive decreases through the second quarter marks the longest stretch of declines since quarterly records began in 1947. The economy shrank 3.8 per cent in the 12 months to June, the worst performance in seven decades.

Stocks have rallied as earnings at companies from Caterpillar Inc to Morgan Stanley topped estimates. Profits exceeded expectations at about 80 per cent of the companies in the Standard & Poor’s 500 Index that have released results, according to Bloomberg data. That marks the highest proportion in data going back to 1993. The S&P 500 closed at a one-year high on October 19.

Consumer spending last quarter probably jumped at a 3.1 per cent annual rate from the previous three months, the biggest gain since the first quarter of 2007, the GDP report is also projected to show.

September readings on household purchases, due from the Commerce Department on October 30, may show the quarter ended on a soft note after the Obama administration’s car incentive expired the month before. Spending probably fell 0.5 per cent last month as car sales slowed after jumping 1.3 per cent in August, the biggest gain since 2001.

The so-called cash-for-clunkers program offered buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The plan boosted sales by about 700,000 vehicles, according to a Transportation Department estimate.

Will it last?
Business Standard, The Smart Investor, October 26, 2009, Page 1

Ram Prasad Sahu / Mumbai

While there are visible signs of a recovery in the real estate market, price hikes by developers and any increase in interest rates could halt this momentum.

The realty sector, which was the worst affected by the downturn last year, seems to be exhibiting early signs of a recovery. Price cuts on projects over the last six months and healthy pre-sales during the festive season seems to suggest that demand, which had all but disappeared in the third and fourth quarter of 2008-09, seems to be trickling back. Developers are tweaking their business model by launching smaller apartment sizes and playing the volume game to keep prices low and create buyer interest. What has helped matters, believes Ramnath S, director, Research, IDFC-SSKI, are factors such as job security and affordability, which are gradually improving, and a lot of companies likely to revise salaries upwards as against a freeze last year. The benign interest rate environment has also helped. Ramnath believes that pay commission hikes will also increase disposable income of government employees.

Higher sales...
While demand as of now seems to be buoyant in the residential space and is likely to gather momentum, is it significant? Says Sanjay Dutt, CEO, Business, Jones Lang LaSalle Meghraj, a realty consulting firm, “The slowdown hit the market shortly after the Navratri-Diwali season in 2008 after registering the usual 30-35 per cent upsurge in sales typical of the period. Sales increased 25-30 per cent this time around and is significant as this is the first upsurge in demand after a prolonged downturn.” Driving home the point, Ramnath cites the sales of DLF and Unitech, India’s largest listed realty companies, during the current financial year. “Unitech has launched about 17 million square feet (mnsqft) worth of properties across the country selling over 40 per cent of that. Incrementally, Unitech has launched about 6 mnsqft of affordable housing properties selling about 1 mnsqft of properties till date. DLF too has sold a total of about 4 mnsqft of properties till date. These events indicate an uptick in volumes in the sector.”

...leading to higher prices
The uptick has however led realty players to increase prices. Ramnath believes that new properties launched in Mumbai, for example, were offered at 10-15 per cent higher prices as against their lows in March 2009 quarter. Moreover, developers are now offering properties without any discount and freebies (such as waiver of stamp duty and registration charges). Says Dutt, “Developers in key cities have been hiking prices to test the flexibility of the market. At first, this trend was evident only in the luxury and semi-luxury segments, but it has now percolated down to the mid-income housing segment as well.” A good example is DLF’s Capital Greens project in Delhi. DLF increased its prices at Phase II of this project to Rs 6,750 per square feet in September 2009, which is at a 30 per cent premium to those in Phase I launched in April 2009.

Market’s liking it too
The improving fundamentals of developers on the back of price hikes, increased liquidity through QIPs, asset sales and pre-sales observed over the last few months is not lost on the market. The BSE Realty index, the worst performer of 2008 is up 248 per cent since its March 2009 lows. This indicates that current valuations are not cheap. In a bid to cash in on the recovery, leading realty companies are planning to raise money from the primary markets to the tune of over Rs 14,000 crore. This could also suck out liquidity and may cap appreciation of prices of listed scrips, say analysts.

Profitability impact
Ramnath believes that improvement in profitability will depend on future projects. “Profitability will improve only after subsequent new projects are launched at higher prices as compared to previous projects which we believe is unlikely in the current scenario. Developers are likely to hold on to current (increased) price levels until demand increases significantly from current levels.” The worrying factor for realty players continues to be the commercial and retail space, which suffer from oversupply and will take at least another two quarters to recover. In a recent report on the sector, a J P Morgan report says that rentals for office space have already corrected by 30-40 per cent from their peak levels on the back of slow demand and leasing activity and vacancy rates remain high at over 10-15 per cent across key markets.

The research firm believes that while demand from domestic corporates has started to firm up, IT/ITES demand is likely to remain subdued. We review the operations of the largest players by market capitalisation in the sector.

DLF: Attractive price points and a revival in the fortunes of the sector have helped India’s largest realty player lure buyers for its residential properties. The company is likely to maintain its mid-income housing focus which has yielded good results in Delhi where it was able to sell 1,400 units (2 mnsqft) and 1,250 units (1.8 mnsqft) at the Delhi Capital Greens project (phase I and II, respectively) and 0.5 mnsqft in Bangalore over the last six months. Including the above, the company has launched about a third of the proposed 15-16 mnsqft residential projects for the fiscal. The story is not as rosy on the commercial and leasing segments. While the company sold over a 1 mnsqft of commercial and office space in the first quarter and demand seems to be improving, the fortunes of this space is likely to see a significant upswing only next year. Its leasing business, too, is going through a similar business cycle.

While things are looking up, the slow and gradual pick up in volumes will continue to be a drag on its revenues. Analysts estimate that its September quarter revenues will be down by half y-o-y. Ebidta margins are likely to shrink 900-1,000 bps to about 50 per cent as the company realigns its focus towards affordable housing segment (below Rs 30 lakh per unit). The company plans to exit non-core business (wind power, SEZs) and land bank to raise Rs 5,500 crore in 2009-10. This will help it to improve its cash position, manage debt repayments of Rs 1,165 crore and increase pace of execution. Though the stock trades at a discount to its NAV, a fall of 10-15 per cent in its share price would make it attractive from a long term perspective.

HDIL: Increasing prices of transfer of development rights (TDR), which had bottomed in the March quarter of 2008-09, augurs well for HDIL. TDR prices have spiked 80 per cent from levels of Rs 1,100 per sqft in March 2009 quarter and will benefit HDIL which is executing the first phase of the airport slum rehabilitation project where it has TDRs of nearly 45 mnsqft. Almost all the revenues in the current fiscal are likely to come from the sale of about 3 million sqft of TDRs. The company launched three residential projects totalling 1.9 mnsqft in Andheri and Kurla, in Mumbai. Considering the high demand (it has managed to sell 80 per cent of the 1,814 units at these sites), the company raised prices between 5-14 per cent. In addition to these, HDIL plans to launch 2 mnsqft of residential projects in Mumbai in the current fiscal. A key concern for HDIL was the debt levels, which have come down significantly post the Rs 1,688 crore QIP in July 2009. The company has used over 80 per cent of this to repay debt and bring down its net debt-equity ratio to manageable levels of 0.44. While the residential project launched in different parts of Mumbai will yield revenues in 2010-11 and 2011-12 (the company follows the completion method of accounting) and the increasing prices of TDRs are a plus, the current quarter revenues and operating profit are expected to come down by 64 per cent and 79 per cent to Rs 200 crore and Rs 97 crore, respectively. At the current levels, the stock is expensive.

Indiabulls Real Estate: Indiabulls Real Estate (IBREL) has been able to lease out 0.7 mnsqft of space at the One Indiabulls Centre (Mumbai) at Rs 175 sqft per month. Considering that this is higher than the earlier rates of Rs 150 per square feet, both at the Jupiter and Elphinstone Mills, and future negotiations are likely to be at the new rate, it should boost cash flow of its Singapore-listed subsidiary Indiabulls Properties Investment Trust, which undertakes the leasing operations. A rights issue by IPIT to the tune of Rs 600 crore should also help reduce a part of its Rs 636 crore debt. On the residential sales front, IBREL sold all the units (0.53 mnsqft) of the first phase of its Sky project in Mumbai and has also launched three residential projects next to its One Centre. While the company launched about 9 mnsqft in 2008-09, it is planning to launch about 10 mnsqft in 2009-10, of which 5 mnsqft has already been launched. The company has also been the highest bidder at Rs 1,376 crore for the Mantralaya development project in Mumbai, which could add 1.5 mnsqft to its land bank and about Rs 29 to its NAV. The Rs 1,500 crore IPO of IBREL’s subsidiary, Indiabulls Power, should help it to fund the capital requirements of power projects in Maharashtra.

While the cash flow from the proposed rights issue of IPIT, IPO of its power subsidiary and the QIP (Rs 2,650 crore) of IBREL should help matters, growth in its various businesses will depend on the pace of execution. In realty, while thus far the construction work at its NCR and Chennai work is going on, other properties are facing delays according to an ICICI Securities report. While cash is not an issue for IBREL (it has Rs 3,000 crore worth Rs 75 per share), any delay in execution of it’s residential, SEZs (not yet notified) or power projects could be costly. Analysts peg the sum of parts valuations (power and real estate) between Rs 335-355 indicating that returns of about 21 per cent from the current prices.

Unitech: Unitech has had positive newsflow recently with the government approving Telenor’s (a partner in telecom venture) proposal to hike the stake in Unitech Wireless to 74 per cent. The company has had a good first seven months (March to September) going by the response to its launches aggregating to 21.30 mnsqft of residential and commercial property. The company has managed to book sales Rs 4,000 crore from the sale of 10.11 mnsqft. It plans to launch about 30 mnsqft and achieve about 20 mnsqft of pre-sales in this fiscal, says an analyst. Of the past projects which total an area of 22.31 mnsqft, the company has delivered about a fifth and expects to complete delivery of the rest by March 2011. Improved cash flow from the sale of hotels and plots (Rs 940 crore), two QIPs (Rs 4,400 crore) and Rs 386 crore from Unitech Wireless have helped bring down debt levels to about 0.6 times from 1.7 times last year.

Like DLF, the company is eyeing the affordable housing segment and has launched projects under the Unihomes brand catering to budgets between Rs 10-30 lakh range. After the sale of about 900 units at its Unihomes project in Noida, the company is planning to launch more apartments under this brand. Analysts estimate that the company is likely to have a strong second quarter on the back of higher project and asset sales. Considering the recent spurt in sales at its new launches and balance sheet deleveraging is already factored into the current price and it is trading at a premium to its NAV, expect little upside to flow through in the current fiscal.

Mumbai, Delhi are leading realty market revival

Mumbai, Delhi are leading realty market revival
The Financial Express, October 26, 2009, Page 4

Mona Mehta

Following the real estate sector’s revival, Raheja Universal Private Ltd (RUPL) has outlined a vision for development of 35 million sq ft of realty projects, 23 million sq ft of pipelines and how it foresees spearheading pan-India presence. Ashish Raheja, managing director of Raheja Universal Private Ltd, spoke to Mona Mehta on the ‘realistic pricing’ challenges the company would want to overcome amidst expanding its realty presence to other cities

Could you give details of ongoing real estate projects in the commercial, residential and retail segment? What are your expansion plans in India?

The company is actively pursuing premium residential projects across its core region of operation – Mumbai — and has already sketched plans to launch many new projects across South and North Mumbai.

With strong brand equity and an indelible footprint in Mumbai, we have now embarked on an ambitious venture to replicate our signature in Navi Mumbai and other cities across India, some of them being Goa, Mangalore, Nagpur, Chandigarh and Pune.

The total saleable area of on-going and forthcoming projects is to the tune of 18 million sq ft approximately. This includes residential towers, signature residential towers, office towers, residential complexes, corporate parks and townships.

What is your take on the revival gaining ground in the Indian realty market?

During the second half of 2008, the onset of the economic slowdown led both buyers as well as developers to sit up and take stock of the real estate scenario. In the residential segment, end-users became apprehensive about taking up long-term loan obligations due to job market uncertainties. Moreover, they adopted a ‘wait and watch’ policy to take advantage of consistent price declines. On the supply side, developers became concerned about increasingly limited funding options and a substantial decline in aggregate demand.

Now, there are signs of revival in the real estate sector with the metros Mumbai and Delhi leading the way.

Demand in Mumbai has always been real and with some re-calibration of product and pricing by developers as well as positive steps like bank rate cuts and overall economic stability, buyers are flocking to quality developers as they realise that this might be the best time to buy. The recovery in the commercial and retail segment is a little slower than the residential one but surely reviving.

How many affordable housing projects is Raheja Universal planning to launch?

We believe that the affordability is a critical aspect. However, its relative nature has to be recognised. In Mumbai, as you move from the northern suburbs towards the island city, the value of what is an “affordable” increases drastically. Looking at the extreme shortage of options and land, even a Rs 2-crore apartment in South Mumbai can be termed affordable. Similarly, apartments in the range of Rs 40-50 lakh are affordable in suburbs like Andheri- Malad-Kandivali-Borivali area.

The same cannot be said for other tier-II cities where anything above Rs 10 to Rs 25 lakh may not be termed as affordable.

What are your views on the price correction in the Indian real estate market?

There has definitely been a price correction across certain geographies and asset classes due to the effect of the economic slowdown. This has been more drastic in locations or segments where there has been oversupply and speculation like in Retail and IT. Overall there has been up to 35% drop in prices which even after recovering by 15% is still down by 20%. Developers have accordingly re-calibrated their product to cater to the market.

Tell us about the new land and real estate deals Raheja Universal plans to enter into?

Apart from strategic deals in Mumbai Metropolitan Region, we also have plans for key cities outside Mumbai namely Goa, Mangalore, Chandigarh, Nagpur and Pune.

We are also keenly following the developments in the real estate markets across India to put into place an expansion plan that is well thought out and based on strong positive fundamentals.

Proposed MAT rate could be cut by 1%

Proposed MAT rate could be cut by 1%
The Financial Express, October 26, 2009, Page 1

Surabhi, New Delhi

In the wake of concerns raised by India Inc over the contentious provisions in the draft Direct Taxes Code, the finance ministry has begun reviewing two of its key proposals relating to minimum alternate tax (MAT) and general anti-avoidance rules (GAAR).

Based on representations from trade and industry, the Central Board of Direct Taxes (CBDT) is looking at the possibility of reducing the MAT rate from the proposed 2% on the value of gross assets. “We are looking at various options at present. The rate could be brought down by 0.5% to 1%,” an official said.

The Direct Taxes Code has proposed a radical shift in the concept of MAT from gross profits to gross assets. While banks will be charged at a rate of 0.25%, all others will pay at 2%. The move is aimed at widening the corporate tax base by preventing evasion.

Revenue secretary PV Bhide had recently pointed this out. “The country has over 4.50 lakh registered corporate bodies of which only 50,000 corporates pay taxes. A simplistic interpretation of this could either mean that these are inefficient corporates or there is income being concealed. Our endeavor is to reduce this,” he said.

But tax experts argue that a 2% MAT on gross assets could end up to be as much as or even more than 25% of the profit of a company. Moreover, they say companies in sectors with a long gestation period like infrastructure would have to end up paying the tax even if they make a loss.

Commenting on the revised proposal, Amitabh Singh, partner Ernst and Young said, “Instead of tinkering with the tax rate, we should look at the very principle of MAT. The earlier principle of MAT on gross profits was more appropriate. Alternatively, a low enough rate under the proposed model with a facility to carry forward could also be feasible.”

CBDT is also planning to dilute the stringent provisions of the proposed GAAR. At present, the Code proposes that under GAAR the revenue department can make a presumption that an arrangement is entered into by two entities for tax benefit (tax avoidance) alone, unless it is rebutted by the taxpayer.

The income tax department now plans to bring in specific provisions outlining situations and conditions when such a presumption would be made so that all deals and transactions are not scanned for tax evasion.

The department is also looking at the proposed tax regime for long term savings by individuals. The Code seeks to bring savings into retirement funds into the exempt-exempt-tax (EET) regime from the current exempt-exempt-exempt system (EEE).

The CBDT’s decision to review the Code comes after finance minister Pranab Mukherjee announced earlier this month that the government would re-examine seven crucial proposals in the draft Direct Taxes Code including those relating to minimum alternate tax (MAT) and EET regime for savings. The other proposals that would be reviewed include capital gains taxation in the case of non-residents; the Income Tax Act and the double taxation avoidance agreements (DTAA); General Anti-Avoidance Rule (GAAR); issues relating to effective management control and taxation of foreign companies in India, and taxation of charitable organisations.

High growth unlikely till FY12: CEA

High growth unlikely till FY12: CEA
Business Standard, October 26, 2009, Page 6

Hit by the global financial crisis, the Indian economy is unlikely to fully return to the high growth path till 2011-12, Chief Economic Advisor Arvind Virmani says.

But for the impact of global financial meltdown, Indian economy has entered the high growth phase, in which the underlying medium-term rate of GDP growth is about 8.75 per cent (plus or minus 0.25 per cent), says the recently released book, The Sudoku of India's Growth, penned by Virmani.

However, global crisis is expected to pull down the growth below this trend, says the book, adding that the economy is likely to close the gap with the high growth phase in 2010-11.

"Given the unprecedented financial meltdown in the US economy and the depression in the rich/advanced economies, the actual growth rate is expected to be well below this trend...and will partially, but significantly, close the gap in 2010-11," Virmani says.

"The Indian economy is unlikely to recover fully from this and return to its high growth journey till 2011-12," says the book.

Virmani says India has the potential for high growth, provided it continues with its open door policy and moves up gradually along the path of liberalisation, privatisation and globalisation.

No premature withdrawal of stimulus, says PM

No premature withdrawal of stimulus, says PM
The Hindu Business Line, October 26, 2009, Page 1

Prakash Chawla

Cha-Am-Hua Hin (Thailand), Oct 25 (PTI)

Prime Minister Manmohan Singh today said the global economy was not fully out of trouble and ruled out any premature withdrawal of stimulus packages announced by the government to boost the industry.

"It is too early to say whether we are completely out of trouble", Singh said, adding, "...stimulus packages should not be withdrawn or phased out prematurely."

Prime Minister was in the Thai resort to participate in the twin summits of the Association of Southeast Asian Nations (ASEAN) and East Asian leaders.

"There is a fair amount of agreement that probably the time is not right to withdraw the stimulus," he told reporters here referring to his discussions with the leaders of 16 Asia Pacific nations.