Friday, July 31, 2009
Inflation dips to minus 1.54%; food still dearer
Inflation dips to minus 1.54%; food still dearer
The Financial Express, July 31, 2009, Page 3
fe Bureau, New Delhi
Inflation tumbled to (-) 1.54% for the week ended July 18, as compared to (-) 1.17% in the previous week, but food prices continued to rise.
The wholesale-price index based inflation remained negative for the seventh consecutive week. However, it is widely expected to rise in the coming months.
Among primary articles, the food articles group inflation stood at 1.2% as food prices rose. Minerals group registered a major drop in prices with inflation at (-) 16.8%. Iron ore prices fell by 24% but manganese ore and vermiculite turned costlier by 77% and 86%, respectively. During the week, prices of food items such as mutton rose by 14%, arhar by 9%, gram by 4%, and fruit and vegetables by 2%. Imported edible oil prices also increased by 4%, while coconut oil, sugar, butter, ghee and gur were expensive by 1% each. At its review of the monetary policy on Tuesday, the RBI said negative inflation may not persist beyond a few more months. The central bank did not announce any rate cuts, in line with the expectations. Due to uncertain monsoon and rising global commodity prices, the RBI raised its inflation target to 5% by March, 2010 from 4%. “We are expecting inflation to be around 7-7.25% by end-March, but mostly due to food issues,” said Kotak Mahindra Bank chief economist Indranil Pan.
“Concerns for inflation now come in the form of food items. Manufactured articles index is actually lower for this week. This could indicate that demand-driven inflation could take some time to take hold. Till that moment, RBI could stay on a pause mode,” he said.
Cereal prices rose about 11%, pulses 16.9%, milk by 4.8% and spices by 5.4%. Sugar, khandsari and gur went up about 33.1% while processed fish turned dearer by more than 42.7% over last year.
Inflation rate falls for 7th straight week to 1.54%
Inflation rate falls for 7th straight week to 1.54%
The Hindu Business Line, July 31, 2009, Page 10
Wholesale Price Index of all commodities at 236.8.
Our Bureau, New Delhi
The annual Wholesale Price Index fell for a seventh straight week, declining 1.54 per cent in the week to July 18 after falling 1.17 per cent on a year-on-year basis in the previous week, the Government said on Thursday.
Inflation was recorded at 12.54 per cent during the corresponding week of the previous year. The official WPI for ‘All Commodities’ for the latest reported week rose by 0.04 per cent to 236.8 points from 236.7 points for the previous week.
Primary articles
On a disaggregated basis, the Primary Articles group index rose by 0.3 per cent as the index for the ‘Food Articles’ group rose by 1.2 per cent due to higher inflation in case of mutton (14 per cent), arhar (9 per cent), gram (4 per cent), moong, jowar, fruits and vegetables, and masur (3 per cent each), bajra and urad (2 per cent each) and maize and ragi (1 per cent each). However, the prices of condiments and spices (1 per cent) declined.
Non-food articles
The index for ‘Non-Food Articles’ group rose by 1.7 per cent due to higher prices of logs and timber (35 per cent), copra (3 per cent), raw silk (2 per cent) and rape and mustard seed, raw cotton and gingelly seed (1 per cent each). However, the prices of sunflower (1 per cent) declined.
Minerals
The index for ‘Minerals’ group declined by 16.8 per cent due to lower prices of iron ore (24 per cent) and felspar (3 per cent). However, the prices of vermiculite (86 per cent), manganese ore (77 per cent), silica sand (4 per cent) and barytes (2 per cent) moved up.
Fuel and power
The Fuel and Power group index declined by 0.1 per cent due to lower prices of aviation turbine fuel (7 per cent).
Manufactured products
The Manufactured Products group index declined by 0.1 per cent as the index for ‘Food Products’ group declined by 0.4 per cent due to lower prices of oil cakes (3 per cent) and cottonseed oil (1 per cent). However, the prices of imported edible oil (4 per cent) and rice bran oil, coconut oil, sugar, butter, ghee and gur (1 per cent each) moved up.
Beverages, tobacco…
The index for ‘Beverages Tobacco and Tobacco Products’ group rose marginally due to higher prices of soft drinks (all kinds) (1 per cent). The index for ‘Textiles’ group declined by 0.2 per cent due to lower prices of hessian cloth (3 per cent) and hessian and sacking bags (2 per cent).
Chemicals and products
The index for ‘Chemicals and Chemical Products’ group rose marginally due to higher prices of acid (all kinds) (1 per cent). The index for ‘Non-Metallic Mineral Products’ group declined by 0.1 per cent due to marginal fall in cement prices.
Basic metals…
The index for ‘Base Metals Alloys and Metal Products’ group rose marginally due to higher prices of foundry pig iron and basic pig iron (1 per cent each). However, the prices of other iron steel, steel ingots and lead ingots (1 per cent each) declined.
For the week ended May 23, the final WPI for ‘All Commodities’ stood at 234.3 points compared with the provisional estimate of 232.3 points and the annual rate of inflation based on final index, calculated on point-to-point basis, stood at 1.34 per cent compared with 0.48 per cent.
DLF net crumbles 79% to Rs 396 cr
DLF net crumbles 79% to Rs 396 cr
The Economic Times, July 31, 2009, Page 10
Our Bureau NEW DELHI
DLF, the country’s largest property firm, has reported a 79% decline in its net profit for the quarter ended June 2009 to Rs 396 crore on poor demand for homes, offices and shops as well as higher interest costs.
The company, however, said the activity in the real estate sector has picked up, indicating that the worst may be over. “The construction activity has gained momentum and response to new launches has been encouraging,” DLF vice chairman Rajiv Singh said.
DLF said it had sold 2.5 million sqft of home space in Delhi and Bangalore in June quarter.
The company’s sales were down 57% to Rs 1,650 crore for the quarter. The results are in line with market expectations.
An ET NOW poll of 15 analysts expected company’s profit at Rs 400 crore and sales at Rs 1,452 crore. The company said it was continuing with its deleveraging exercise and had cut down its net debt by Rs 2000 crore. This has resulted in its debt-equity ratio going down to 0.5 from 0.6 as on March 31. The company had a net debt of Rs 14,000 crore at the beginning of the June quarter, causing its interest cost to shoot up 432% year-on-year to Rs 287 crore in the quarter. DLF plans to further reduce its debt-equity ratio to 0.3 by the end of this fiscal.
DLF's Q1 profit drops 80% as debt cutting continues
DLF's Q1 profit drops 80% as debt cutting continues
Business Standard, July 31, 2009, Page 4
BS Reporter / New Delhi
DLF Ltd, the country’s largest real estate developer, today reported a decline of 79 percent in its consolidated net profit for the first quarter of 2009-10.
Profit dropped to Rs 396 crore for the three months ended June 30, as compared with a profit of Rs 1,864 crore for the corresponding period last year. This follows a drop of 93 per cent in the fourth quarter profit for the previous fiscal year.
Revenue for the first quarter of FY10 came down by 57 per cent to Rs 1,649.9 crore, as compared with Rs 3,810.6 crore for the corresponding period last year. The company vice chairman, Rajiv Singh, said: “After a few difficult quarters last fiscal, we have seen a fairly good first quarter of the current fiscal. The construction activity has gained momentum and response to new launches has been encouraging.”
Parsvnath Q1 net plunges 81%, co in talks to raise $100-150m
Parsvnath Q1 net plunges 81%, co in talks to raise $100-150m
The Economic Times, July 31, 2009, Page 4
Our Bureau NEW DELHI
DELHI-BASED Parsvnath Developers on Thursday said it is in talks with investors to raise $100-150 million in fresh equity through qualified institutional placement (QIP) within the next two months. The company said that the real estate sector had seen off the worst after its net profit for the June quarter increased 20% on a sequential basis over the March quarter even as it fell as much as 81% over the same quarter last year.
“We see things improving from here on in the property market. With better sentiment and the government announcing a number of measures, including tax benefits for developers of affordable homes and interest subsidy for homebuyers, we think real estate market will bounce back soon,” Parsvnath Developers chairman Pradeep Jain said, adding that demand has slowly started picking up.
The company reported a net profit of Rs 14 crore on revenues of Rs 113 crore for the June quarter. Revenue declined 70% from the year-ago quarter. The company attributed lower sales and profits to poor demand for homes as homebuyers, worried about their personal economic future, stayed away from the residential market last quarter.
Mr Jain said the company planned to raise $100-150 million (approx. Rs 500-700 crore) via QIP, “We will use 60% of QIP fund to repay debt and rest to strengthen our business.”
The company has been able to reduce its debt by Rs 400 crore to Rs 1,600 crore in nine months since September ‘08, he added. Parsvnath’s scrip closed 1.5% up at Rs 116.95 on Thursday. The company’s earnings were announced after the market hours.
IT outsourcing to pick up next year: Study
IT outsourcing to pick up next year: Study
The Economic Times, July 31, 2009, Page 20
Our Bureau BANGALORE
MIRRORING the global trend, India’s IT outsourcing is expected to remain subdued this year, though it’s likely to pick up during the second half of the next year. Springboard Research in its latest study, ‘Inside the End-Users’ Mind - India IT services demand side analysis’ said most enterprises have reported an impact on their IT budgets because of the economic slowdown, with nearly a third of them slowing their ITrelated investments
“For CIOs, the economic slowdown is clearly an opportunity to manage their costs and they have shown an open-minded approach towards IT outsourcing, further accelerated by an emerging emphasis on improving business performance,” said Sudip Saha, senior research analyst for IT Services at Springboard Research.
According to the research body, the Indian IT services market is expected to grow from $4.1 billion in 2007 to $8.1 billion in 2011, recording a CAGR of 18.6%.
The study said that 65% of the IT decision makers in Indian enterprises expect an increase in their investment in IT outsourcing by their company in the next two years, with 29% expecting investment to remain constant.
Mr Saha said many of the Indian companies will not be able to cut down on costs with their internal IT teams and would be looking at outsourcing for budgetary controls.
Fundraising ceremony for developers again
Fundraising ceremony for developers again
The Economic Times, July 31, 2009, Page 15
Private equity players are building up funds for small companies in the realty business
Anirvan GHOSH
SMALL AND medium businesses (SMBs), especially in the real estate sector, have reasons to cheer. Private equity firms say they will raise more than $300 million by October, most of which will be used to fund SMBs in the infrastructure and realty space.
Mumbai-based Sage Capital is raising $100 million by September. The funds will be used exclusively to fund SMBs in the areas of infrastructure, real estate and energy. The fund will be looking at small firms, which have a topline of Rs 50 crore or above. It plans to invest from Rs 30 crore to a maximum of Rs 70 crore in each of these firms. Sage Capital’s managing director Manish Kanchan confirmed his fund’s plans but refused to name the companies he is zeroing on. “It has been easier to raise funds in the second half of this year, and we can get cheaper valuations,” he says about Sage’s decision to raise fund at this point in time.
Saffron Asset Advisors plans to raise $105 million by October. “We are looking at smaller players in the real estate sector with serious growth potential,” says managing director Ajoy Veer Kapoor. Saffron has already lined up a few projects for investment through the new fund, and will be announcing these shortly, he adds. The firm eventually plans to raise $500 million over eight years. Standard Life will invest $75 million in fund, which will invest in projects across India, and in SMBs in Tier 2 and 3 cities. Saffron earlier raised 220 million euros through its Euronextlisted Yatra Capital for investing in the Indian real estate market. Venture capital firms invested $117 million over 27 deals during the first six months of 2009, according to a joint study by Venture Intelligence and Global India Venture Capital Association. That was substantially lower as compared to $413 million invested in 67 deals during the first half of 2008 and $402 million invested in 75 deals in the second half.
Things seem to be getting rosier this second half. ASK Investment Holdings is raising $100 million this year, and intends to pick up between 26% and 50% stake in residential projects. “We are into just a notch above low-cost homes,” says managing director Sunil Rohokale.
CSC Group, which is building affordable housing in Bangalore, is in talks for a $15 million funding from such PE players. “We have the model to scale up fast, and are in talks with them,” says CSC’s CEO PC Sukanand.
Most property project delays in Ghaziabad, Gurgaon: Study
Most property project delays in Ghaziabad, Gurgaon: Study
Business Standard, July 31, 2009, Page 2
BS Reporter / Mumbai
Ghaziabad and Gurgaon, the satellite towns in the National Capital Region (NCR), led in terms of the highest proportion of property projects delayed in the country, which were scheduled for completion in 2008 and onwards, a new study has found.
Both these suburbs have 71 per cent of projects delayed, as against the total number of projects scheduled for completion in 2008 and onwards, a study by real estate research firm PropEquity said.
Ghaziabad had 84 projects delayed out of 118 and Gurgaon had 78 of 110. In absolute terms, Bangalore, the country’s IT hub, witnessed the highest number of delays among projects scheduled for completion in 2008 and onwards, while Pune came second.
In Bangalore, 309 of the 575 projects were delayed and the average delay in these projects was nine months. In Pune, 305 of 665 projects were delayed, with an average of eight months. Mumbai came third, with 233 of 501 projects, with an average delay of nine months, the study said.
“A lot of developers were diverting funds meant for a project to other projects, hence cash flow was an issue. Their order book was more than what they could actually execute. Many smaller developers jumped into the property sector and they could not complete the projects, resulting in delays,” said Samir Jasuja, founder and chief executive of PropEquity.
In terms of unsold properties in the 10 cities, Pune, Mumbai and Hyderabad came first, second and third, respectively. Pune, Mumbai and Hyderabad had 36,435 units, 32,120 and 31,536 units unsold in June 2009. In terms of regions, the East had 5 per cent of properties unsold between January to June 2009, and the North, West and South had 23 per cent, 40 per cent and 31 per cent of properties unsold respectively in the period, the study found.
Thane, Mumbai and Gurgaon ranked first, second and third, respectively, in terms of percentage price drop in apartments in the country, as economic downturn and dwindling incomes of home buyers impacted property sales and led to a drop in prices. Between May of 2008 and 2009, Thane (a far eastern suburb of Mumbai), Mumbai and Gurgaon witnessed a drop of 22 per cent, 20 per cent and 19 per cent, respectively.
But in terms of absorption of projects during January-June 2009, Mumbai came the highest with 17,689 units, while Pune and Noida came second and third with 13,899 and 6,808, respectively.
“These cities had a lot of new launches and witnessed high absorption. Mumbai is driven by end-users, while Pune had a mix of end-users and investors,” said Jasuja.
Jasuja feels absorption will improve and unsold portions come down as developers increasingly launch affordable projects. “Delays will continue, as execution is becoming a challenge for developers who are finding it difficult to arrange finances,” he said.
Realty developers seek more sops
Realty developers seek more sops
The Hindu Business Line, July 31, 2009, Page 14
Our Bureau, Mumbai
The Confederation of Real Estate Developers Associations of India, while welcoming the subsidising of home loans and extension of tax holidays for projects by the Government, said incentives to developers were disappointing.
Mr. Santosh Rungta, President, CREDAI, said the tax holiday under 80 I B (10) for a mere year to projects approved by March 2008 would not bring about any significant impact on the real estate market and could, at best, benefit a few micro markets.
Moreover, it would create unequal competition among developers as projects approved after March 2008 would not qualify for the incentive.
The real estate sector would only benefit if the tax holiday was extended up to March 2012, he said, adding that it would encourage developers to take up new projects and expedite ongoing ones.
The interest subsidy of one per cent to home loan borrowers for Rs 20 lakh home loans was not adequate.
construction cost
Taking into account the escalation of construction cost, which have resulted in higher property value, it should be hiked by one or two per cent and the scheme extended for loans up to Rs 30 lakh.
Mr Rungta said the housing and real estate sector could substantially contribute to growth rate if more incentives were given for purchase of affordable homes.
Referring to the focus on slum development, he said expectations were that the Government would exempt (slum redevelopment) projects from direct and indirect taxes.
Thursday, July 30, 2009
FM sees revival, 6.7% growth
FM sees revival, 6.7% growth
The Economic Times, July 30, 2009, Page 11
Our Bureau NEW DELHI
FINANCE minister Pranab Mukherjee said on Wednesday he expects the economy to grow by 6.7% this fiscal as the economic downturn has been arrested and the manufacturing sector is witnessing a revival.
“Downturn has been arrested...It is possible to maintain the growth momentum ...(and) achieve the desired level of growth”, the minister said while winding up the debate on the Finance Bill in Rajya Sabha, which returned the Bill, completing the budget exercise for 2009-10.
Noting that signals of a pickup are visible in sectors like steel, cement and construction, Mr Mukherjee said, “We have ended 2008-09 at 6.7%. I do hope we will be able to maintain this level of growth (in 2009-10).”
The Reserve Bank of India on Tuesday projected a growth rate of 6% with an upward bias. Mr Mukherjee said even though the central bank’s projection was conservative, it upgraded the outlook of the economy.
Even global agencies like the International Monetary Fund (IMF) were of the opinion that the Indian economy would grow at 6%-plus, the minister said.
On concerns raised by the members on black money stashed abroad, he said the government was in the process of amending the double taxation treaties with almost 100 countries to provide for a legal framework for exchange of information on the menace. He also warned that if builders do not pass on the benefit of tax holiday to consumers, the same may not be extended in the future.
Pranab pegs growth at 6.7%
Pranab pegs growth at 6.7%
The Financial Express, July 30, 2009, Page 2
fe Bureau, New Delhi
A day after the Reserve Bank of India pegged economic growth at 6% for 2009-10, finance minister Pranab Mukherjee on Wednesday told the Rajya Sabha that he expected growth to stay at the 6.7% level recorded in 2008-09. Pointing to the positive trends in manufacturing sector output as well as core sector production in June, Mukherjee expressed hope that the trend gathered momentum ‘when the busy season comes.’
“With that momentum, it will be possible to achieve the desired level of growth. As you know, normally the RBI’s estimate is a bit conservative; I would not say very conservative, but a bit conservative. Even they have upgraded our GDP growth,” Mukherjee said. The finance minister said international rating agencies and the IMF, which had earlier thought India would grow at 5% or less this year, now agreed that India would have around 6.6% growth.
Explaining the fresh sops announced for the housing sector in the Lok Sabha as amendments to the Finance Bill, Mukherjee said housing activities were slowed down from middle of 2007 to 2008. Sending out a subtle warning to housing project developers, the minister said, “I am reiterating my expectation from developers, who will get this advantage, that it should get reflected in reduced price of houses which they will sell to buyers. Unfortunately, it happens in our country. They forget it and they do not pass it on.”
Responding to MPs’ queries on disinvestment under the UPA-II, Mukherjee said, “Disinvestment is a continuing process. There is nothing dramatic about it. From 1991 onwards, if I remember correctly, we have mobilised Rs 53,000 crore. It is an obvious and continuous process — by whatever nomenclature you may call it —disinvestment or people’s participation or strategic sale.” Dismissing the notion that the Centre was eager to push disinvestment to fix the soaring fiscal deficit, the finance minister said proceeds from stake sales would be invested in the National Investment Fund (NIF) as per the policy. “...From the corpus of the NIF, it may be used for specific social sector projects. Part of it will be utilised for meeting the public sector requirements like upgradation, modernisation and expansion. Therefore, it is not merely to meet the fiscal deficit,” he underlined.
Responding to BJP MP Ravi Shankar Prasad’s queries about Prime Minister Manmohan Singh’s commitment to initiate action on unearthing black money stashed abroad within 100 days, Mukherjee said that actions had been initiated. “Now we are going to accept the code which has been prescribed by G-8 countries by which the exchange of information will take place. The legal framework for that is the avoidance of double taxation. We have entered into such avoidance of double taxation agreements with various countries, which are nearly 100,” the minister said.
“We have taken up amending the provisions of those Acts so that exchange of information is possible. Certain countries have their own secrecy banking rules. Switzerland is well known for it,” Mukherjee said, in reference to a particular recent case where information was shared with India on the condition that it could not be made public.
“But in the context of the financial crisis, now they have agreed to share this information, provided there is a legal framework and it is required only for the purpose of tax collection, not for any other purpose. Keeping that in view, we are proceeding. Therefore, action to bring back the money, which has been stashed away, is also being taken,” the FM said.
Domestic market to lead IT growth
Domestic market to lead IT growth
The Hindu Business Line, July 30, 2009, Page 4
Nasscom projects 15-18% rise; core export markets stabilising.
Our Bureau, Chennai
The domestic market seems to be coming to the aid of the IT-BPO industry, because it is projected to grow 15-18 per cent, even as the export market is likely to grow a mere 4-7 per cent.
For sure, the export market is about thrice as much as the domestic market, but in a slowdown, anything helps.
Export revenues
The Hindu Business Line, July 30, 2009, Page 4
Nasscom projects 15-18% rise; core export markets stabilising.
Our Bureau, Chennai
The domestic market seems to be coming to the aid of the IT-BPO industry, because it is projected to grow 15-18 per cent, even as the export market is likely to grow a mere 4-7 per cent.
For sure, the export market is about thrice as much as the domestic market, but in a slowdown, anything helps.
Export revenues
The National Association of Software and Services Companies (Nasscom) on Wednesday said that the industry’s exports are expected to grow to between $48 billion and $50 billion, compared with $46.3 billion last year.
Last year, the industry’s export revenues grew 16.3 per cent, says Nasscom, but calculations show only a 14.6 per cent growth, from $40.4 billion in the previous year.
The root of the discrepancy lies in reckoning of Satyam Computer’s accounts, which are yet to be restated.
Disclosing Nasscom’s projections at the body’s annual meet here, the Chairman, Mr Pramod Bhasin, stressed that even a 4-7 per cent growth is good, given the economic environment.
He noted that core markets such as North America and verticals such as the banking and financial services industry “have started to stabilise”.
The domestic IT-BPO market is projected to grow at a higher rate — between 15 and 18 per cent — to reach around Rs 67,000 crore, compared with Rs 57,000 crore last year.
In dollar terms, domestic revenues were $12.5 billion in FY-09, Nasscom said.
Fiscal 2009 figures grew 21 per cent over Rs 47,000 crore in fiscal 2008.
The domestic market witnessed enhanced focus in the year ended March 2009 with “large transformational deals in telecom and e-governance, with contract value of outsourcing deals growing by 32 per cent, Mr Bhasin told newspersons after releasing the Nasscom outlook for the industry in 2009-10.
Growth break-up
Within the export segment, IT services have grown in FY-09 by 14.7 per cent to $26.5 billion; BPO exports are up by 16.5 per cent to $12.7 billion; engineering services and product exports up 11 per cent to $7.1 billion.
The industry employed nearly 2.2 million in 2009 fiscal, adding about 200,000 jobs in the fiscal year ended March 2009 (FY09).
In the previous year, the industry added between 250,000 and 300,000, according to Mr Som Mittal, President, Nasscom. In February 2009, Nasscom had said that the industry might add, aided by job offers at campuses, a net of one lakh jobs in FY10. TCS, for instance, has made 24,500 campus offers for this year.
Mr Pramod Bhasin, Chairman of Nasscom and CEO, Genpact said, “The demand will be there for people, but the focus would be on quality. The industry has spent a lot over the years in training, and this trend may not continue over time."
"It is time that the government and educational institutions spend more time on training and education,” he said.
Last year, the industry’s export revenues grew 16.3 per cent, says Nasscom, but calculations show only a 14.6 per cent growth, from $40.4 billion in the previous year.
The root of the discrepancy lies in reckoning of Satyam Computer’s accounts, which are yet to be restated.
Disclosing Nasscom’s projections at the body’s annual meet here, the Chairman, Mr Pramod Bhasin, stressed that even a 4-7 per cent growth is good, given the economic environment.
He noted that core markets such as North America and verticals such as the banking and financial services industry “have started to stabilise”.
The domestic IT-BPO market is projected to grow at a higher rate — between 15 and 18 per cent — to reach around Rs 67,000 crore, compared with Rs 57,000 crore last year.
In dollar terms, domestic revenues were $12.5 billion in FY-09, Nasscom said.
Fiscal 2009 figures grew 21 per cent over Rs 47,000 crore in fiscal 2008.
The domestic market witnessed enhanced focus in the year ended March 2009 with “large transformational deals in telecom and e-governance, with contract value of outsourcing deals growing by 32 per cent, Mr Bhasin told newspersons after releasing the Nasscom outlook for the industry in 2009-10.
Growth break-up
Within the export segment, IT services have grown in FY-09 by 14.7 per cent to $26.5 billion; BPO exports are up by 16.5 per cent to $12.7 billion; engineering services and product exports up 11 per cent to $7.1 billion.
The industry employed nearly 2.2 million in 2009 fiscal, adding about 200,000 jobs in the fiscal year ended March 2009 (FY09).
In the previous year, the industry added between 250,000 and 300,000, according to Mr Som Mittal, President, Nasscom. In February 2009, Nasscom had said that the industry might add, aided by job offers at campuses, a net of one lakh jobs in FY10. TCS, for instance, has made 24,500 campus offers for this year.
Mr Pramod Bhasin, Chairman of Nasscom and CEO, Genpact said, “The demand will be there for people, but the focus would be on quality. The industry has spent a lot over the years in training, and this trend may not continue over time."
"It is time that the government and educational institutions spend more time on training and education,” he said.
IT exports to grow 4-7% in FY10: Nasscom
IT exports to grow 4-7% in FY10: Nasscom
The Economic Times, July 30, 2009, Page 12
Our Bureau CHENNAI
THE IT industry, despite being optimistic on recovery by mid-2010, has projected a single-digit growth of 4-7% for its software and services export during 2009-10. Its projections for the domestic IT and BPO sector growth were pegged higher at 15-18% for the same time period. Nasscom released the annual report at its HR summit held in Chennai on Wednesday.
IT software exports stood at $46.3 billion for FY09, a 14% growth from $40.4 billion in FY08. Domestic services and BPO revenues amounted to Rs 57,000 crore, a 21% growth from Rs 47,000 crore in FY08. Nasscom had projected a growth of 22% in mid-2008 and subsequently scaled it down to 16%.
“We predicted double-digit growth, albeit scaled down, in the middle of the slowdown, because we were still delivering for contracts made in previous years,” said Nasscom chairman Pramod Bhasin. “But, now we are projecting slower growth, thanks to the dwindling contracts during the slowdown last year.”
He also said that MNCs and large companies had contributed significantly to the figures. Case in point is that adjusting for Satyam’s revenues, export growth in 2009 comes to 16.3%. Cross currency impact accounted for a further 2.4% suppression in growth.
Among exports, services accounted for 57% of revenues, BPO for 27.5% and products & engineering software for 15.5%. In the domestic sector, the split between the three segments was 66.6%, 15.6% and 17.7%, respectively.
“Industry outlook is definitely on the domestic segment and unexplored markets like South America, West Asia, and blocks of Europe,” said Nasscom president Som Mittal. In the domestic segment, BPO grew by 40%, services by 20% and overall outsourcing deals by 32%. “So, recovery will be driven by the BPO sector mainly,” Mr Bhasin said.
Nasscom projects single digit export earnings for IT, ITeS
Nasscom projects single digit export earnings for IT, ITeS
The Financial Express, July 30, 2009, Page 12
fe Bureaus, Chennai, New Delhi
For the first time in the history of the Indian software exports, the sector will grow at a single digit rate.
According to figures released by the IT industry body Nasscom, the IT-BPO export revenues are expected to grow between 4-7% to stand between $48-50 billion in the financial year 2009-2010. In the last financial year, the IT export revenues grew by 16.3% to clock revenues of $46.3 billion. On Wednesday, Nasscom released industry figures for the financial year 2008-09 along with the outlook for the current fiscal.
Som Mittal, president, Nasscom told FE that the growth projections have been arrived at considering the fact that the economic downturn has led to severe cuts in the IT budgets across the globe, especially in discretionary spending. “There are other factors as well like there has been a shift from onsite to offshore, which has brought down the revenues though the effort continues. Moreover, in some sectors the transactional volume has come down like in the BPO industry. There have also been cases where companies have started in-sourcing the work instead of outsourcing it as they had more employees to do it in-house,” he said. .
The total revenues of the IT and BPO industry, which includes exports and the domestic market was at $58.8 billion for the financial year 2008-09, a growth of around 13% year-on-year. However, the growth in the domestic market exceeded the export market growth rate at 21% with revenues of Rs 570 billion in FY08-09. Even in the current fiscal, IT-BPO Domestic revenues are expected to grow at a healthy rate of 15-18%, to reach Rs 650-670 billion. Within the export segment, IT services have grown by 14.7% to clock revenues of $26.5 billion and BPO exports are up by 16.5% registering revenues of $2.7 billion.
Mittal said that there are huge opportunities in the domestic space especially in the government vertical along with sectors like retail, manufacturing and utilities among others which remain highly under penetrated in terms of IT investment.
He added that the SMB market which accounts for roughly 50% to 60% of the potential market in India continues to be largely unaddressed. They are also expected to increase their IT spends to increase efficiency in these tough times.
Moreover, there are emerging verticals with significant growth potential for the BPO industry like aviation, hospitality and retail.
“Social infrastructure like schools, colleges and hospitals needs to be developed to increase the IT business penetration in tier-II cities,” he said.
R Chandrasekaran, president and MD, Cognizant said that migration of more onshore work to offshore would open up the possibility of adding more jobs in India. Nasscom is also working on a curriculum for the finishing school model to impart skill upgradation to passing out graduates aspiring for jobs in IT, he added.
The reason behind the move is that the industry will not be hiring at the same rate this year and students passing out this year can engage themselves in these skill upgradation courses to be better prepared for the job market.
While the IT and BPO industry, added a total of 22 lakh people in the last financial year, up 10% from the year-ago period, this year, “the hiring will be tens of thousands compared to hundreds of thousands like in the last many years,” warned Mittal.
While IT services exports added around 9.22 lakh people, the BPO exports industry was a close second with addition of 7.86 people.
Emphasising the need to rework on the model that the IT industry used to operate on, Mittal said that US is the biggest market for the industry and will continue to remain so despite other emerging geographies fast catching up.
“The industry can look for newer geographies like Middle East or look for new verticals within the existing geographies of US and Europe,” he said.
Mittal added that healthcare, utilities and energy are the sectors where growth will be coming in the future. Moreover, the industry needs to focus on a newer customer base.
“So far we have mainly focussed on the Fortune 500 companies. But the spend outside the Fortune 500 is the same as of the Fortune 500. So, we need to address that market,” he said.
FDI continues to drop, May sees 43% fall
FDI continues to drop, May sees 43% fall
The Economic Times, July 30, 2009, Page 11
FOREIGN INVESTORS KEEP AWAY AS INFLOWS DECLINE SHARPLY TO $2.2 BILLION
Our Bureau, NEW DELHI
FOREIGN direct investments (FDI) in May dropped 43% to $2.2 billion compared to the $3.9 billion received in the same month of the previous year, department of industrial policy & promotion (DIPP) secretary Ajay Shankar said.
Despite the sharp decline, the government was confident of the flow of foreign capital into the country improving. Speaking on the sidelines of a Confederation of Indian Industry (CII) seminar, Mr Shankar cited the country’s “promising” industrial output in June for a better FDI show in the months to come. “We think, with liquidity improving and confidence in the economy rising, these (FDI) numbers should pick up,” he said.
But the FDI numbers since January have been anything, but promising. In April, FDI inflows fell 38% to $2.34 billion from $3.74 billion a year ago. And in the calendar year 2009 up to April, FDI inflows slipped by nearly 46% from the year-ago period to $8.5 billion, as per the latest figures released by DIPP.
Not surprisingly, the government had scaled down the FDI target by $5 billion from $35 billion last fiscal.
The reason for the depleted overseas capital inflows is the reluctance of foreign investors to put their money in risky emerging markets. But some experts see India’s 6.7% growth in 2008-09, when developed countries struggled with recession, bringing back foreign investors.
In the first six months of 2008-09, FDI inflow was $27.3 billion compared to $24.5 billion in 2007-08. Cumulative FDI inflow from April 2000 to March 2009 was about $90 billion, as per DIPP data.
The department collects data on foreign investment from RBI and releases monthly updates. Mauritius, with which India has a double taxation avoidance agreement, is the largest contributor of FDI into India, followed by Singapore and the US.
Cement to grow 9%: Scindia
Cement to grow 9%: Scindia
The Economic Times, July 30, 2009, Page 11
NEW DELHI: The country’s cement industry is likely to grow about 9% during the current financial year on account of the government’s emphasis on infrastructure development. In a written reply to the Rajya Sabha, the minister of state for commerce and industry Jyotiraditya M Scindia said, “With thrust being given by the government for development of infrastructure, housing and rural connectivity, the cement industry is likely to witness growth of around 9% during the year 2009-10.”
NHB looks for partner for its JV Mortgage Guarantee Co
NHB looks for partner for its JV Mortgage Guarantee Co
The Financial Express, July 30, 2009, Page 13
fe Bureaus, kolkata
The proposed Indian Mortgage Guarantee Company, in which National Housing Bank (NHB) will have a majority stake, is scouting for a partner after AIG subsidiary United Guarantee Corporation shed its stake. While other partners will remain in the joint venture, there may be a restructuring in the shareholding pattern.
“We have already done a fair amount of work towards that and talked to a few potential partners,” NHB chairman and managing director S Sridhar said. While he did not mention any time frame, he said, “It will depend on how soon we complete an agreement with the partner,” he said.
The mortgage guarantee firm, which is likely to start with a capital of Rs 120 crore, and has been in the works since 2002, aims to provide an efficient platform for Indian banks to transfer their loan risks. Sridhar, talking at the banking conclave organised by Ficci said the National Housing Bank will remain the majority stakeholder since it will drive the joint venture.
“NHB needs to have some supplementary expertise from the people who have done mortgages. Even RBI guidelines require that one of the partners must be experienced in that. We are looking for partners in the developed country markets,” he said.
In the earlier structure, NHB held a 43% stake, AIG 41%, International Finance Corporation and Asian Development Bank held 8% each in the JV. But the AIG subsidiary quit the JV last year.
Sobha Q1 net nosedives to Rs 12.7 crore
Sobha Q1 net nosedives to Rs 12.7 crore
The Economic Times, July 30, 2009, Page 4
Our Bureau BANGALORE
REALTY major Sobha Developers has seen its net profit nosedive for the first quarter ended June 30, 2009 at Rs 12.7 crore against Rs 50.5 crore for the same period in FY09. Income from operations stood at Rs 177.1 crore (Rs 346.8 crore in the comparable quarter).
Sobha, which bore the after-shocks of the global economic slowdown, has seen a revival in fortunes in Q1 compared to the fourth quarter (Q4) ended March 31, 2009. Net profit in Q1 at Rs 12.7 crore is up 76.39% from Q4 while total income at Rs 178.6 crore was up sequentially 15.6%. “The real estate industry has seen clear signals of revival in demand during the first quarter. With the Indian economy growing at a rate of 6-7% and expected to achieve a higher growth rate in the next couple of years, real estate infrastructure industries are poised to play a more significant role. It will be a domestic driven industry growing at a much faster pace,” a company filing made with the bourses added. On its part, Sobha Developers has realigned debt, brought on board a private equity partner besides successfully completing a QIP raising Rs 500 crore.
According to the filing, these steps have added the much-needed comfort in operations and have helped the company focus on progress in various projects across key cities including Bangalore. The company intends to focus on debt reduction and cost optimisation and believes it is wellequipped to capitalise on the early revival in the Indian economy.
As of June 30, 2009, the company has completed 50 residential/commercial in-house projects and 146 contractual projects covering 31.9 million square feet of built-up space. At present, it has 31 residential/commercial ongoing projects totalling 9.2 million square feet. The company has contractual projects in Karnataka, Kerala, Andhra Pradesh, Orissa, Tamil Nadu, Punjab, Haryana, NCR besides Maharashtra. Sobha’s projects span various segments including plotted development, multi-storey buildings, row houses, villas and integrated townships. On the bourses, the Sobha scrip was down 1.2% at Rs 219 with 3.5 lakh shares changing hands on the BSE.
Sobha Developers net down 75%
Sobha Developers net down 75%
The Hindu Business Line, July 30, 2009, Page 14
Our Bureau, Bangalore
Sobha Developers recorded a net profit of Rs 12.7 crore for the quarter ended June 30, 2009, down 75 per cent from Rs 50.5 crore recorded during the corresponding quarter of last year. The turnover was down 49 per cent at Rs 178.6 crore (Rs 348.1 crore).
Mr J.C. Sharma, Managing Director, Sobha Developers, said that downsizing staff and restructuring employee benefits have resulted in reduced employee costs. Last year, during the corresponding quarter, the company had over 3,000 employees, which has now come down by about 1,000 employees. Besides, the company had also effected a 15 per cent cut in employee salaries. Costs were down 44 per cent to Rs 143 crore (Rs 254.1 crore).
Residential projects
He added that there has been a 45 per cent sequential growth in sales for the company, and “the process of this improvement is expected to continue in the coming months.” The company plans to launch residential projects in the National Capital Region, Mysore, Coimbatore, Bangalore and Thrissur this financial year. “We will not be competing in the Rs 20-lakh segment, but wish to compete in the 1,000-sq-ft-plus segment,” he said. The residential units would be priced about Rs 35 lakh (all inclusive), he added.
The company plans to raise about Rs 150-200 crore more during this year, in addition to the Rs 750 crore it had raised through private placements and qualified institutional placements. “We are confident of achieving our targets,” Mr Sharma said, of the Rs 900 crore, the company planned to raise in all.
HDIL net dips 66% to Rs 101cr
HDIL net dips 66% to Rs 101cr
The Economic Times, July 30, 2009, Page 4
Our Bureau MUMBAI
MUMBAI-BASED real estate company, Housing Development Infrastructure (HDIL) on Wednesday reported a 66% decline in its net profit at Rs 101.47 for the first quarter ended June 30, 2009. The company’s net profit for the same period in the last fiscal was Rs 317.94 crore. This is attributed to the slowdown that the real estate sector had been passing through since late 2008.
The company’s net profit however increased on a quarter-on-quarter basis from Rs 61.9 crore in last quarter to Rs 101.47 crore this quarter reflecting a revival in the sector. The total sales of the company stood at Rs 318.62 crore during the quarter compared to Rs 601.13 crore in the corresponding period last year. Sarang Wadhawan, managing director, HDIL said: “We expect to see significant positive changes over the next two quarters.” The real estate sector throughout the country had been going through a difficult period in the light of the slowdown.
The company also said it would issue securities worth $450 million and the EBITDA margins have improved by 9.39% compared to the fourth quarter last year. The company also declared that the debt equity ratio improved and stood at less than 0.5, post the qualified institutional placement (QIP). Earlier this month, the company had raised Rs 1,688.40 crore through QIP. The company’s stock fell by Rs 20.55 or 7.13% at Rs 267.85 on Wednesday.
On Monday, the company in an announcement to BSE informed that resignations of Dheeraj and Kapil Wadhawan, the former directors of the company, have been accepted. This was part of the company’s succession plans, the company officials maintain. Dheeraj and Kapil Wadhawan are also on the board of DHFL.
HDIL’s numbers reflect stabilisation in realty
HDIL’s numbers reflect stabilisation in realty
The Hindu Business Line, July 30, 2009, Page 15
Improved transferable development rights realisation.
Vidya Bala
BL Research Bureau Housing Development and Infrastructure’s (HDIL) financials for the quarter-ended June 2009 are a reflection of the stabilisation being witnessed in the Mumbai realty market.
While the 48 per cent decline in sales and the 66 per cent drop in net profit for the latest quarter over the June 2008 numbers is sufficient indication that the company is far from its peak performance, the sequential improvement (over the March 2009 quarter) suggests that profitability could be back on track.
HDIL’s revenues declined 18 per cent to Rs 295 crore compared with the March quarter; operating profits, nevertheless jumped 87 per cent to Rs 180 crore as a result of better prices from Transferable Development Rights (TDRs) as well as a decline in construction costs. The company has stated that it has sold about 1.8 million sq. ft. at an average price of Rs 1,500 per sq. ft.
Clearly, TDRs accounted for a chunk of the revenues for the June quarter. The average price of TDRs now is also a significant improvement from the Rs 1,000-1,200 per sq. ft. rate at which the company sold in the March quarter.
Operating profit margins at 60 per cent have not only improved over the March quarter, but also exceeded the 44 per cent clocked a year ago, probably reflecting lower material costs. However, the current OPMs do not appear sustainable, as the company had launched residential projects at massive discounts in the June quarter. The effect of this would be felt in its profit margins only after a few quarters. A 40-45 per cent OPM appears more sustainable.
Net profits at Rs 107 crore were a good 73 per cent higher than the March quarter. Pressure from interest costs appears to have abated with a 44 per cent decline in interest cost on a sequential basis. HDIL may see further relief in the coming quarters as a good Rs 1,400 crore of the Rs 1,689 crore raised through qualified institutional placement went to repay loans. With this, the company would not have any principal repayment commitments until October 2010.
HDIL has deployed the rest of the QIP proceeds towards its key project — airport land rehabilitation. The project is expected to gather pace as a result of the infusion.
Going forward, the sustainability of the revived TDR sales/prices (peak rate for the quarter was Rs 2,070 per sq. ft.) and residential sales could hold the key to reviving volumes. In this regard, a marginal improvement in property prices is already visible in the Mumbai market.
Wednesday, July 29, 2009
RBI leaves rates untouched
RBI leaves rates untouched
The Financial Express, July 29, 2009, Page 1
fe Bureau, Mumbai
The Reserve Bank of India (RBI) kept policy rates unchanged in its first-quarter review of monetary policy for 2009-10, indicating that it was preparing to abandon pumping more money into the economy as inflation concerns return. But the finance ministry, while welcoming RBI’s focus on growth, said the time was not ripe for such an ‘exit’ policy. Finance secretary Ashok Chawla told reporters, “An exit policy is certainly at the back of the mind of central banks all over the world. But there is nothing at this point of time…”
In turn, RBI governor D Subbarao has blamed high government borrowing that “clearly militated against the low interest-rate regime the economy requires in the current situation”. On the way forward, his policy said RBI would have to reverse the expansionary measures to “anchor inflation expectations and subdue inflationary pressures while preserving the growth momentum”. According to the finance secretary, however, “(RBI does) not see the need at this point in time of reversing the accommodative and balanced policy, which they have been following so far.”
The end of the soft monetary policy, which was initiated last October, was criticised by industry. Ficci president Harsh Pati Singhania said, “There are signs of revival in business confidence and some reduction in policy rates at this stage would have helped to provide a fillip to corporate investment, thereby boosting economic growth.”
Industry expected a slight easing of the reverse repo—the rate at which RBI buys surplus cash from banks from the current 3.25%. CII director-general Chandrajit Banerjee also said, “The economy could grow at around 7%, as the fiscal and monetary measures have (an) impact on domestic demand.”
In choppy trade, the BSE Sensex closed 43.10 points lower at 15,331.94. But bankers said they did not anticipate lending rates to rise immediately. SBI chairman OP Bhatt said “There is ample liquidity in the system. Rates will remain the same as long as liquidity is comfortable. As credit growth picks up, there may be some pressure on rates.”
Credit rating agency Moody’s said, “Although the global climate is still a little unstable, cutting rates cannot help to immediately boost domestic activity. Instead, policymakers are counting on previous rate cuts to influence market rates now.”
RBI has raised its inflation forecast for the year to 5 % from its April estimate of 4% and pushed the GDP estimate for 2009-10 to 6%, with an upward bias. “The overall macroeconomic scenario continues to be uncertain, although it is expected that the fiscal and monetary stimulus measures will supplement domestic demand in 2009-10. On balance, an uptrend in the growth momentum is unlikely before the middle of 2009-10,” the policy stated.
RBI has argued that inflation will rise because of the large government expenditure and the accompanying borrowing programme, 54% more than in 2008-09. Subbarao said the abrupt increase in government borrowing has resulted in a hardening of yields, which clearly militated against the low interest-rate regime.
According to him, “The first challenge is to manage the balance between the short-term compulsions of providing ample liquidity and the potential build-up of inflationary pressure on the way forward by maintaining the accommodative monetary stance until demand conditions further improve and credit flow takes hold.”
Endorsing the position, ICICI Bank MD & CEO Chanda Kochhar said, “The strong commitment to managing the government borrowing programme in a manner that is not disruptive to markets and does not crowd out private sector investment should give confidence to market participants.”
Subbarao said the challenges for RBI included maintaining policy rates and liquidity conditions conducive to spurring private investment demand, which has been dented by the crisis. RBI has said the government needs to return to a path of fiscal consolidation, which would lend credibility to the fiscal stance and also give predictability to economic agents. It is also necessary to focus on the quality of fiscal adjustment even while pursuing quantitative targets.
According to Subbarao, RBI’s steps had augmented actual and potential liquidity of over Rs 5,61,700 crore since last October.
Rates unchanged, RBI hints at tightening
Rates unchanged, RBI hints at tightening
The Economic Times, July 29, 2009, Page 1
Pegs Growth Rate At 6%, Prods Banks To Lend
Our Bureau MUMBAI
INDIA Inc should take the hint. While prodding banks to cut rates and assuring easy money to stoke growth, the Reserve Bank of India (RBI) indicated on Tuesday that interest rates will not remain low forever and banks will not continue to sit on a mountain of cash.
As inflation rises, interest rates will harden and the surplus money sloshing around in the system will be mopped up by RBI. But till there are “robust signs of recovery”, the central bank has promised liquidity to help a decent GDP growth, which it has pegged at 6% with an upward bias. RBI’s decision to keep key interest rates unchanged in Tuesday’s quarterly monetary policy statement perhaps marks the end of a rate-cut cycle.
In the policy document, RBI governor Duvvuri Subbarao said, “The accommodative monetary stance is not the steady state stance. On the way forward, RBI will have to reverse the expansionary measures...The exit strategy will be modulated in accordance with the evolving macroeconomic developments.”
No one knows when the U-turn will happen, but the money market is already talking about a rate hike next year. “I think the central bank will hike interest rates in April...It will watch inflation, particularly food prices, very carefully and move swiftly when it goes for an unwinding,” said Pradeep Madhav, MD of the biggest bond house, STCI Primary Dealer.
In the next few weeks, only a few banks may give in to RBI’s persuasion and go for a token rate cut.
BEHIND CLOSED DOORS
Guv: There’s room for lending rates to come down
Bankers: But we won’t be able to cut rates further... look at corporates, they haven’t cut prices. Overall demand will rise when companies also lower prices of their products
Guv: So far, lending rate cuts have been less than adequate...
Bankers: Not exactly. A comparison of this quarter’s corporate numbers with the preceding quarter and June ‘08 will show that interest cost has come down
Guv: Loans are getting restructured, so what’s the view on credit quality?
Bankers: Non-performing assets could rise in a few sectors, but bad loans will not go up to the extent the market fears
Guv: Infrastructure projects are a must to boost growth. Can you fund them?
Banks: One-year deposit is as high as 72% of total liability, compared to 52% a few years ago... depositors are not renewing their money with banks. It’s tough to fund long-term assets with such short-term liabilities
India Inc: no news, good news
India Inc: no news, good news
The Financial Express, July 29, 2009, Page 1
fe Bureau, Mumbai
Corporate India on Tuesday said it could live with interest rates unchanged by RBI, though the real estate and textiles sectors were clearly disappointed that rates had not come down.
A dipstick survey of companies by FE spanning the manufacturing and services sectors show they are pinning greater faith on government spending to improve top lines, rather than policy rates to keep their bottom lines strong. This is because in the current financial year up to June, aggregate credit flow to the commercial sector dwindled to just Rs 5,697 crore, compared with Rs 30,631 crore in the same period of 2008-09--a massive 81% decline, according to RBI data.
However, Niranjan Hiranandani of the eponymous Hiranandani Constructions said, “Due to the unchanged policy, the cost of property construction is expected to increase, leading to lower supply of properties. This will ultimately increase real estate prices in the long term.” He further added that any concession is beneficial in today’s difficult times. Shree Cement Ltd CMD HM Bangur said, “I think there will be adequate finance available in the system for growth and, hence, it is positive.”
RBI data shows that as on May 22, while bank credit to the real estate sector has risen 52% over that of last year, growth in credit for housing has dipped sharply to just 5%.
Echoing the feeling of relief that RBI had not increased rates, Ispat Industries executive director (finance) Anil Surekha said, “As long as rates are unchanged, it’s always good. I think this indicates that the government will not allow banks to increase interest rates. This comes as a good sign for industry as a whole.” “No change is always good,” echoed Grasim president & deputy CFO Sanjeev Bafna.
Until April, the slowdown had caused a drastic fall in domestic as well as international demand, with international prices falling between 15%-40% for various categories of steel. However, following the stimulus package announced by the gov-ernment, and with the higher spend on infrastructure, the sector has seen a recovery.
The sectoral flow of credit from banks to industry slipped to 21.2% by May 22, compared with 27.1% in 2008-09. Overall credit to all sectors declined to 17.6%, against 24.2% year on year.
The Financial Express, July 29, 2009, Page 1
fe Bureau, Mumbai
Corporate India on Tuesday said it could live with interest rates unchanged by RBI, though the real estate and textiles sectors were clearly disappointed that rates had not come down.
A dipstick survey of companies by FE spanning the manufacturing and services sectors show they are pinning greater faith on government spending to improve top lines, rather than policy rates to keep their bottom lines strong. This is because in the current financial year up to June, aggregate credit flow to the commercial sector dwindled to just Rs 5,697 crore, compared with Rs 30,631 crore in the same period of 2008-09--a massive 81% decline, according to RBI data.
However, Niranjan Hiranandani of the eponymous Hiranandani Constructions said, “Due to the unchanged policy, the cost of property construction is expected to increase, leading to lower supply of properties. This will ultimately increase real estate prices in the long term.” He further added that any concession is beneficial in today’s difficult times. Shree Cement Ltd CMD HM Bangur said, “I think there will be adequate finance available in the system for growth and, hence, it is positive.”
RBI data shows that as on May 22, while bank credit to the real estate sector has risen 52% over that of last year, growth in credit for housing has dipped sharply to just 5%.
Echoing the feeling of relief that RBI had not increased rates, Ispat Industries executive director (finance) Anil Surekha said, “As long as rates are unchanged, it’s always good. I think this indicates that the government will not allow banks to increase interest rates. This comes as a good sign for industry as a whole.” “No change is always good,” echoed Grasim president & deputy CFO Sanjeev Bafna.
Until April, the slowdown had caused a drastic fall in domestic as well as international demand, with international prices falling between 15%-40% for various categories of steel. However, following the stimulus package announced by the gov-ernment, and with the higher spend on infrastructure, the sector has seen a recovery.
The sectoral flow of credit from banks to industry slipped to 21.2% by May 22, compared with 27.1% in 2008-09. Overall credit to all sectors declined to 17.6%, against 24.2% year on year.
Banks may not take RBI’s call
Banks may not take RBI’s call
The Economic Times, July 29, 2009, Page 13
While A Few May Cut Lending Rates Marginally, Most Banks Likely To Hold Rates At Current Levels
Our Bureau MUMBAI
AFEW lenders may fall in for RBI’s moral suasion and cut their lending rates marginally, but most banks are likely to maintain status quo. The general consensus seems to be that rates are likely to go up from the next calendar year.
RBI governor D Subbarao has been categorical that lending rates have to come down even without a revision in policy rates. “There is scope for reduction of lending rates within the policy rate adjustment already done by RBI... The lending rate should have come down to 9.5% but they are now at around 10.5% and above so there is scope for banks to reduce lending rates. We have also said that as deposits contracted at higher rates mature and get repriced, the cost of funds will go down for banks and they can reduce lending rates further,” he said.
Incidentally, a host of bankers made it clear to the governor on Tuesday that there was no scope for bringing down lending rates from their current levels. During an interaction with the RBI governor, CEOs of some of the bigger banks said that net interest margins were under pressure. They also told him that while banks had lowered the interest rates for borrowers, corporates have refrained from lowering the cost of their products. In fact, bankers pointed out to RBI that the first quarter results declared by companies clearly indicate that their expenses on account of ‘interest paid to lenders’ have come down over the preceding and year-earlier quarters. This indicates that the cost of funds for corporates has come down.
“Banks have passed on the benefit of easing interest rates to borrowers,” MV Nair, CMD of Union Bank of India, told ET. “Going forward, interest rates are not likely to fall from their current levels.”
Chanda Kochhar, MD & CEO, ICICI Bank, said, “We have cut our prime lending rate by 1.5%, the maximum by any private sector bank. Going forward, the rates would be dependent on credit growth. The rates currently are likely to be stable with a very minimal downward bias.”
Adds Neeraj Swaroop, regional CEO (India & South Asia), Standard Chartered Bank, “Over 90% of our lending is not linked to BPLR and judging our interest rates by BPLR doesn’t reflect the actual situation. Our rates have come down as much as the market rates have come down. We keep reviewing our BPLR from time to time.”
However, some bankers, on condition of anonymity, said they expected any reduction in lending rates to be marginal, at 25 bps. “We do not expect any changes in interest rates immediately. Historically, there is a time lag in terms of repricing of deposits. Therefore, a reduction in lending rates can happen only at a later date. Meanwhile, we feel that rates have almost bottomed out, given that inflation is expected to rise in the second half coupled with high chances of pick-up in credit,” said M Narandran, ED, Bank of India.
Most bank CEOs told the governor that there has been a pick-up in credit. Private and foreign bankers point out that BPLR has lost its relevance. “The borrower owes us no loyalty. If our rates are not competitive, they will go to some other bank. There are very few loans which are linked to the BPLR,” said an official from Axis Bank.
‘There is scope for banks to reduce lending rates’
‘There is scope for banks to reduce lending rates’
The Economic Times, July 29, 2009, Page 13
As Deposits Mature And Get Re-Priced, Banks’ Cost Of Funds Will Go Down And They’ll Have Room For Cutting Lending Rates
Unlike his predecessors, RBI governor D Subbarao is quite direct on what action banks should take place on the interest rate front. The governor has repeatedly stressed on the central bank’s efforts to work in a transparent manner. Following his monetary policy meeting with chairmen of banks, Mr Subbarao addressed the media on RBI’s take on the economy and what transpired in his meeting with bankers . Excerpts:
On the scope for bank lending rates to come down…
There is scope for a reduction in lending rates within the policy rate adjustment already done by RBI. Even if we take into account the inflation rate and returns to depositors, the lending rate should be around 9.5%, but they are 10.5% and above… so there is scope for banks to reduce lending rates. We have also said in the policy statement that as deposits mature and get repriced, the cost of funds will go down for banks and they will have room for reduction of lending rates.
On when can the market expect a reversal of the exapansionary monetary policy…
We will look at non-oil imports, we will look at credit growth, we will look at inflation and we will look at manufacturing. However, it will be inappropriate and improper to speculate on the future. We have been debating to exit strategies in our internal meetings, but are not in a position to give any more details. In fact, central banks around the world have been talking of exit strategies… you must have heard Fed chairman Ben Bernanke’s statements and US president Barack Obama’s roadmap.
On the math behind RBI’s 6% growth rate estimate…
We debated a lot internally on the growth rate for the economy. Besides numbers, we also looked at when the forecasts were made. Several of the forecasts were made before the monsoon situation became clear. But let us first consider the risk factors for the economy. A lot will depend on agriculture. We all know the rainfall situation at present is 19% below normal. The foodgrain production-weighted rainfall index number is at 69 against 129 at this time last year. The agriculture performance could spill into industry and services, with a lag effect. Exports have been negative for the past eight months. Although exports only account for 15% of the economy, they are significant, but they will depend on the state of the global economy. Lastly, investments (in the economy) also have to pick up, although some bankers said credit from the housing and retail side have picked up.
On RBI’s stance on open market operations…
We will follow the calendar that we have laid out in respect of OMOs and MSS desequestering. But let me clarify that the calendar is only indicative. It is very difficult to predict liquidity, but we do try to estimate it regularly. Should the numbers deviate from our estimates, we will tailor the OMO programme accordingly. But, by and large, we will stick to the calendar. We want to give the market as much certainty as we have, but cannot give you what we do not have.
On the need for a government roadmap for fiscal consolidation…
The government has given a number of 6.8% for the current year and I believe in the mediumterm policy document, there are numbers for the next year and the year after.... we have said it will be good for the economy, the government, the central bank for everybody if those numbers are fleshed out. They have to be backed up by expenditure and revenue numbers. Also, in the process, the focus is on the quality of fiscal adjustment, i.e, how much do you spend on capital expenditure and how much do you spend on plan expenditure. Since I have been with the finance ministry in the past, now I can step back and speak more comfortably about fiscal adjustments from the Centre. But, it’s really the quality of fiscal adjustments that will be important. We do not expect market borrowings to be higher than what was mentioned in the Budget. Even the fiscal implications of the measures announced this week are small. Having said that, should there be any increase in borrowings from the government, RBI should (be able to) manage that.
On analysts’ concerns that restructuring is dressing up of books…
The focus on restructuring is not to hide anything. It is to provide liquidity to sectors that would have found it otherwise unviable. It’s so that they can get over difficult conditions and get back to business. Besides, its not that restructuring does not require provisioning. In fact, we are providing floating provisioning facility to banks for the restructured assets. So, the risk management systems are still in place. Some of the restructured loans could turn sour, but bankers tell us these are at acceptable levels. However, there is no proposal to extend the restructuring deadline from hereon. On continuation of floating provisions facility, we have an open stance and are awaiting international norms.
On the weakening correlation between CPI and WPI inflation indices…
Historically, the CPI has tracked WPI. The last time when I had come for the April policy, we had done some research which showed that the tracking has somewhat lagged. Now, we find that the correlation between CPI and WPI is further weakening. I had said earlier that all four CPI indices are at an elevated level and in the past month have moved up. So there is concern over prices that ordinary consumers are seeing in the market and that is a concern that we have kept in our mind while formulating this policy.
FM's new subsidy prompts realtors to promise more sub-Rs 20 lakh homes
FM's new subsidy prompts realtors to promise more sub-Rs 20 lakh homes
Business Standard, July 29, 2009, Page 16
Raghavendra Kamath & Neeraj Thakur / Mumbai/ New Delhi
Property developers plan more launches in the sub-Rs 20 lakh category of homes, after yesterday’s Budget concession.
The finance minister had said there would be an interest subsidy of 1 per cent for one year on loans up to Rs 10 lakh for properties worth less than Rs 20 lakh. This is expected to boost this housing segment.
Developers such as Unitech, Omaxe, Puravankara, Lodha Developers and Ansal had already moved into the sub-Rs 20 lakh category, as the economic downturn, coupled with fear of job losses and salary cuts, slowed sales of premium housing projects, lowering their cash flows.
''We will try to cater to the whole demand that would arise after the government's decision. Our Uni Homes project will benefit from this project," said R Nagaraju, general manager, corporate planning, Unitech, the country's second largest developer.
Unitech has recently launched a new brand, Uni Homes, for low income projects in the Rs 10-30 lakh range and is planning to launch projects in seven cities, including Noida, Greater Noida, Chennai, Bangalore and Kolkota. The first such project would be announced next week.
Ravi Ramu, director of Bangalore-based Puravankara, which has set up Provident Housing to launch affordable housing projects, said the extra savings made by home loan borrowers (due to the Budget decision) is expected to drive sales of its housing projects. Provident is planning to launch a few thousand homes in the Rs 14.9-18.9 lakh category this week in Bangalore.
The company is planning to launch around 12 million sq ft of projects under this category this fiscal in many parts of the country, he said.
The Delhi-based Raheja Developers and Mumbai-based Sunil Mantri Realty say they’re planning to launch 20,000 homes and 10,000 homes, respectively, in the sub-Rs 20 lakh categry in the next one year.
The FM's announcement is expected to save Rs 60 for every Rs 1 lakh on a home loan borrowing per month.
"The announcement has come in at the right time, when sentiment in the realty market is turning positive and home buyers and investors are returning. With developers moving to affordable housing from premium housing and government announcing incentives, the momentum is building. I feel it is a good opportunity for developers to focus on this segment now,'' said Sanjay Dutt, chief executive, business, at property consultancy Jones Lang LaSalle Meghraj.
However, developers are not enthused by the FM's announcement to give tax holiday for developers under section 80 1B (10) of the IT Act on profits from projects approved between April 1, 2007, and March 31, 2008.
"Tax holiday for 2007-08 is historical. We cannot take the benefits from this announcement as we have sold our projects. Otherwise, we would have tailormade our projects and passed on the benefits to buyers,'' Ramu of Puravankara said.
Business Standard, July 29, 2009, Page 16
Raghavendra Kamath & Neeraj Thakur / Mumbai/ New Delhi
Property developers plan more launches in the sub-Rs 20 lakh category of homes, after yesterday’s Budget concession.
The finance minister had said there would be an interest subsidy of 1 per cent for one year on loans up to Rs 10 lakh for properties worth less than Rs 20 lakh. This is expected to boost this housing segment.
Developers such as Unitech, Omaxe, Puravankara, Lodha Developers and Ansal had already moved into the sub-Rs 20 lakh category, as the economic downturn, coupled with fear of job losses and salary cuts, slowed sales of premium housing projects, lowering their cash flows.
''We will try to cater to the whole demand that would arise after the government's decision. Our Uni Homes project will benefit from this project," said R Nagaraju, general manager, corporate planning, Unitech, the country's second largest developer.
Unitech has recently launched a new brand, Uni Homes, for low income projects in the Rs 10-30 lakh range and is planning to launch projects in seven cities, including Noida, Greater Noida, Chennai, Bangalore and Kolkota. The first such project would be announced next week.
Ravi Ramu, director of Bangalore-based Puravankara, which has set up Provident Housing to launch affordable housing projects, said the extra savings made by home loan borrowers (due to the Budget decision) is expected to drive sales of its housing projects. Provident is planning to launch a few thousand homes in the Rs 14.9-18.9 lakh category this week in Bangalore.
The company is planning to launch around 12 million sq ft of projects under this category this fiscal in many parts of the country, he said.
The Delhi-based Raheja Developers and Mumbai-based Sunil Mantri Realty say they’re planning to launch 20,000 homes and 10,000 homes, respectively, in the sub-Rs 20 lakh categry in the next one year.
The FM's announcement is expected to save Rs 60 for every Rs 1 lakh on a home loan borrowing per month.
"The announcement has come in at the right time, when sentiment in the realty market is turning positive and home buyers and investors are returning. With developers moving to affordable housing from premium housing and government announcing incentives, the momentum is building. I feel it is a good opportunity for developers to focus on this segment now,'' said Sanjay Dutt, chief executive, business, at property consultancy Jones Lang LaSalle Meghraj.
However, developers are not enthused by the FM's announcement to give tax holiday for developers under section 80 1B (10) of the IT Act on profits from projects approved between April 1, 2007, and March 31, 2008.
"Tax holiday for 2007-08 is historical. We cannot take the benefits from this announcement as we have sold our projects. Otherwise, we would have tailormade our projects and passed on the benefits to buyers,'' Ramu of Puravankara said.
More malls vacant in cities as retail pace slows
More malls vacant in cities as retail pace slows
The Hindu Business Line, July 29, 2009, Page 13
Where are the crowds?
Our Bureau, New Delhi
Even as demand seems to be returning slowly to the residential space, the retail real estate market continues to look disappointing.
The average vacancy across malls in major cities shot up to 19 per cent during the second quarter (April-June) of 2009 against 10 per cent in the last quarter. It is also expected that over 50 per cent of the estimated mall supply planned for 2009 will be delayed due to slowing construction and deferment of mall space, and also withdrawal of previously-announced retail projects.
According to global property consultant Cushman and Wakefield, the Delhi NCR (National Capital Region) is expected to see the maximum deferment of mall supply in this regard at 3.9 million sq ft, followed by Kolkata at 2.5 million sq ft.
According to the quarterly report by the consultant, this quarter too was marked by subdued retail activity, as retailers continued to remain cautious about expansion. “Mall supply was only marginally higher by 3 per cent from the previous quarter and was recorded at 1.14 million sq. ft. Expected mall supply by the end of 2009 is reduced to 8.55 million sq. ft — about 50 per cent lower than what was estimated at the beginning of the year,” it said.
Surge in supply
The vacancy rates rose on the back of a slowdown in uptake of mall space and churn among existing clients. This, in turn, prompted a further correction in the mall rentals. Surge in supply but a relatively slower absorption of malls space in the NCR led to vacancy of nearly 26 per cent in the second quarter of 2009. The vacancy level in Mumbai continued at nine per cent, while Chennai — in the absence of fresh mall supply and restrained churn — witnessed mall vacancy of only one per cent.
New malls
Hyderabad witnessed the largest infusion of mall supply of about 450,000 sq. ft., followed by Bangalore, which saw an addition of 300,000 sq. ft. in fresh mall supply. Kolkata (215,000 sq. ft.) and the NCR (175,000 sq. ft.) were the other markets that saw fresh additions to mall supply. “Many upcoming malls have been deferred or in certain cases withdrawn given the rather lukewarm response from retailers,” the report said.
The demand for mall space across most micro-markets remained slow due to conservative approaches from retailers and overall slowdown in consumer demand, it said. Slowing retail demand in many micro-markets led to rental values either remaining stable or correcting marginally, in the range of 5-10 per cent, over the previous quarter.
According to Mr Jaideep Wahi, Director, Agency, Retail Services, Cushman & Wakefield, there could be more corrections as a result of renegotiations. “Retailers are looking at changing their business understanding with upcoming malls into a revenue share or minimum guarantee model as an alternative to the fixed rental model previously employed,” Mr Wahi said.
India’s first housing price index
India’s first housing price index
The Economic Times, July 29, 2009, Page 12
The launch of NHB Residex in India is arguably the maiden attempt by a developing country to capture the price movements in the residential properties on such a comprehensive scale, says Raj Pal
MOVEMENTS in prices of real estate, particularly residential housing, is of vital importance to the macroeconomy as well as to individual households. For most Indians, a house is the single largest component of wealth and one that has been acquired with considerable efforts and possibly, some sacrifice. Besides the obvious wealth effect and implications for households, at the macro level, housing prices have emerged as a good indicator of output, inflation and financial health, which can be useful in developing appropriate monetary policy responses and establishing financial stability framework. It has acquired added importance in the light of increase in property prices in the resent past (till 2007). In the context of the perceived overheating of the housing market during the past few years as well as the recent slump in the housing market, a number of questions arise. What are the determinants of the housing prices? Can we assess a housing bubble? How do we measure the role of liquidity in housing price increases?
Most of the developed countries and some developing countries have housing price indices. These indices have multiple uses and are utilised by planners, real estate developers, building material industries, financial institutions as well as the individual home buyers. Measuring house prices accurately over time is not simple or straightforward. The complex nature of markets for real estate is one of the major challenges towards constructing a representative house price index. The housing market is generally illiquid, the resale transactions are generally negotiated and actual transaction price is often not reported. Houses are sold infrequently and the composition and quality of houses transacted in the market changes over time.
Being a heterogeneous good in terms of qualitative and quantitative attributes — like location, covered area, quality of construction, etc, — determination of housing prices is an outcome of complex interaction of various factors. Such characteristics pose a challenge in choice of appropriate methodology, selection of sample basket of houses and collection of data for construction of a house price index.
There are numerous methods for constructing house price indexes, each with their own advantages and disadvantages. Some of these methods are based on simple summary measures (averages), such as the median price of houses transacted in a particular period. The advantage of these methods lies in their relative simplicity, both in terms of computation and the interpretation of results. However, such simple measures are likely to suffer from compositional and quality problems. Recent advances in more sophisticated methods (such as hedonic regression and repeat sales methods) have enabled price statisticians to adequately account for compositional and quality changes. However, these methods are data intensive.
Keeping in view the prominence of housing and real estate as a major area for creation of both physical and financial assets and its contribution in overall national wealth, a need was felt for setting up of a mechanism, which could track the movement of housing prices in India. Accordingly, National Housing Bank (NHB), at the behest of the Union ministry of finance undertook a pilot study to examine the feasibility of preparing such an index at the national level.
THE pilot study covered five cities, viz., Bangalore, Bhopal, Delhi, Kolkata and Mumbai. Besides, a Technical Advisory Group (TAG), with adviser, ministry of finance, as its chairman and comprising expert members was constituted to deal with all the issues relating to methodology, collection of data and also to guide the process of construction of an appropriate index. NHB launched an index for tracking prices of residential properties in India, in July 2007, as the first official housing price index of India. The index has been named NHB RESIDEX. The launch of NHB Residex in India is arguably the maiden attempt by a developing country to capture the price movements in the residential properties on such a comprehensive scale.
NHB Residexis based on actual transactions prices. Initially, it covers residential properties. Year 2001 was taken as the base year for the study and year-to-year price movement during the period 2001-2005 were captured, and subsequently updated up to 2007. NHB Residex has been expanded to cover ten more cities, viz, Ahmedabad, Faridabad, Chennai, Kochi, Hyderabad, Jaipur, Patna, Lucknow, Pune and Surat. At the time of last updation and expansion of coverage of NHB Residex to 10 more cities, the base year has been shifted from 2001 to 2007 and has been updated up to December, 2008, with two half yearly updates (Jan-June and July-Dec) during 2008.
In the compilation of NHB Residex, the cities/towns have been divided into tax/administrative zones/municipal wards or any other criteria according to availability of the data for different cities/towns. The lowest level of the stratification has been the colonies/localities. In order to ensure true representative character of the index, the housing units are grouped into three categories based on built-up area — less than 500 sq ft, 500-1,000 sq ft and more than 1,000 sq ft. Data on housing prices is being collected from 20-30 colonies for each city/ town, which are fairly distributed across all the tax/administrative zones. The sample size of price observations consists of 500-600 observations for each city/town. The index has been constructed using the weighted average methodology with Price Relative Method (Modified Laspeyre’s approach). For the present NHB Residex is proposed to be updated on half-yearly basis.
At present, NHB Residexhas covered 15 cities, in the first phase is it proposed to cover 35 cities having million plus population. The proposal is to expand NHB Residex to 63 cities, which are covered under the Jawaharlal Nehru National Urban Renewal Mission, to make it a truly national index, in a phased manner. It is envisaged to develop a residential property price index for select cities/towns and subsequently an all-India composite index by suitably combining these city/town level indices to capture the relative temporal change in the prices of houses at different levels. Index methodology would be examined periodically for further improvement.
(The author is an IES officer presently on deputation as Principal Adviser to the NHB)
Govt to make short work of SEZ nods
Govt to make short work of SEZ nods
The Economic Times, July 29, 2009, Page 11
Zonal Authorities May Get More Activities To Okay
With more zonal sway, plight of SEZ developers who move the Board of Approval for every little permit may end
Amiti Sen NEW DELHI
SETTING up ancillary services such as effluent treatment plants and Wi-Max facilities inside a notified special economic zone (SEZ) may be shifted from under the purview of the central board to regional authorities concerned, according to a government move aimed at faster completion of such projects.
The proposal, mooted by the commerce department, is up for review by the SEZ Board of Approval (BoA), a panel comprising officials from various government ministries that gives permission to such tax-free industrial zones.
A department official pointed out that approaching BoA, which is bogged down with loads of such applications from across the country, is a time-consuming process that slows down the implementation of these projects.
“It increases the BoA’s work load too,” the official said asking not to be named.
Currently, activities inside the notified area for building roads, water supply lines and treatment plants, setting up electricity, gas and PNG distribution networks, boundary walls and telecom and other communication facilities don’t need BoA nod.
The latest proposal seeks to include rail-heads for steel and power, police posts, security offices, fire stations, fire protection systems, play zones, bus bays, effluent treatment plants and pipelines and Wi-Fi, Wi-Max services in that list, said the official.
“The reason it takes several months for SEZ projects to get implemented after being approved is because the developer has to approach the BoA for every step,” the official added.
To cut the work load, the government is also looking at setting up a sub-committee of the BoA to look at approval applications for authorised activities in zones. Both proposals will be taken up at the BoA meeting slated for August 11.
“If a sub-committee is formed to share the workload with the BoA, it will definitely help in expediting all clearances,” the official said.
The BoA includes senior officials from key ministries such as commerce, finance and home, its meetings are spaced out. The frequency of meetings is determined more by the number of new proposals that are to be cleared rather than the authorised activities to be given a go-ahead.
Of course, next month’s meeting will approve fresh SEZ proposals.
The last BOA held on 19 June had approved two fresh proposals, ratified extension of time to 23 developers, including Satyam Computer Services, for implementing tax-free enclaves.
Till date, 576 formal approvals have been granted for setting up of SEZs, of which 319 have been notified, as per commerce ministry records.
QUICK FIX
PRESENT APPROVAL PROCESS
First stage: Gives in-principal clearance to projects that do not possess land
Second stage: Gives formal approval to projects after land is acquired
Third stage: Notifies SEZs after the zones get all required clearances at the state level
Fourth stage: Approves authorised activities in the zones
THE PLAN
List of activities for which developers get approvals from zonal authorities may be expanded
These activities include setting up play zones, bus bays, effluent treatment plants and pipelines and wi-fi, wi-max services
Govt is also looking at setting up a BoA subcommittee to look at approval applications for authorised activities in zones
Tuesday, July 28, 2009
RBI pegs growth at 6.5%, projects 5.4% inflation
RBI pegs growth at 6.5%, projects 5.4% inflation
The Times of India, July 28, 2009, Page 21
Mumbai: Revising the growth projection to 6.5% from the earlier 5.7% for 2009-10, Reserve Bank on Monday said it expected inflation to go up to 5.4% by this fiscal end. In its macro economic review, RBI, however, said indications are that dampened growth impulses may continue due to significant delay in monsoon in certain parts of the country and persistence of global recession.
It said that recovery in export growth could be weak in the near-term, coupled with lagged impact on manufacturing growth. The review, ahead of the quarterly review of RBI's annual monetary policy on Tuesday, quoted the central bank's Professional Forecasters Survey to indicate that the average inflation in the fourth quarter of 2009-10 will be around 5.4%.
On the inflation outlook, the review said, while certain indicators suggest possible firming up of inflation over time, other developments could also help in keeping the inflationary presures subdued. The indication of inflation firming up by this fiscal could be due to high base-effect, increase in commodity prices, especially oil and global recovery, RBI said.
Noting that the global econoic environment continues to be uncertain, RBI said the conduct of the monetary policy had to contend with the scale and pace of external shocks and their spillover effects through the real, financial and confidence channels.
“The thrust of the various policy initiatives has been on providing ample rupee liquidity, ensuring comfortable US dollar liquidity and maintaining a market environment conducive for continued flow of credit to the productive sectors,” RBI said. PTI
India’s external debt at $230 billion:
India's external debt went up by $5.3 billion or 2.4% to $229.9 billion as of March 2009, RBI said. The debt denominated in US dollar accounted for 57% of total external debt. PTI
Revenue deficit will be at its highest:
Revenue deficit would be at its highest-level ever while primary deficit would both be at its highest in India’s post-reform period, RBI said, adding the rise is due to higher growth in revenue expenditure. PTI
The Times of India, July 28, 2009, Page 21
Mumbai: Revising the growth projection to 6.5% from the earlier 5.7% for 2009-10, Reserve Bank on Monday said it expected inflation to go up to 5.4% by this fiscal end. In its macro economic review, RBI, however, said indications are that dampened growth impulses may continue due to significant delay in monsoon in certain parts of the country and persistence of global recession.
It said that recovery in export growth could be weak in the near-term, coupled with lagged impact on manufacturing growth. The review, ahead of the quarterly review of RBI's annual monetary policy on Tuesday, quoted the central bank's Professional Forecasters Survey to indicate that the average inflation in the fourth quarter of 2009-10 will be around 5.4%.
On the inflation outlook, the review said, while certain indicators suggest possible firming up of inflation over time, other developments could also help in keeping the inflationary presures subdued. The indication of inflation firming up by this fiscal could be due to high base-effect, increase in commodity prices, especially oil and global recovery, RBI said.
Noting that the global econoic environment continues to be uncertain, RBI said the conduct of the monetary policy had to contend with the scale and pace of external shocks and their spillover effects through the real, financial and confidence channels.
“The thrust of the various policy initiatives has been on providing ample rupee liquidity, ensuring comfortable US dollar liquidity and maintaining a market environment conducive for continued flow of credit to the productive sectors,” RBI said. PTI
India’s external debt at $230 billion:
India's external debt went up by $5.3 billion or 2.4% to $229.9 billion as of March 2009, RBI said. The debt denominated in US dollar accounted for 57% of total external debt. PTI
Revenue deficit will be at its highest:
Revenue deficit would be at its highest-level ever while primary deficit would both be at its highest in India’s post-reform period, RBI said, adding the rise is due to higher growth in revenue expenditure. PTI
Confidence, growth estimates better: RBI
Confidence, growth estimates better: RBI
The Financial Express, July 28, 2009, Page 1
fe Bureau, Mumbai
Two key pieces of data released by RBI on the eve of announcing its position on interest rates for the July-September quarter shows a higher growth estimate for the economy and a turnaround in business sentiment. The data is part of the Macroeconomic & Monetary Developments: First Quarter Review 2009-10.
The latest survey of professional forecasters conducted by RBI in June 2009 indicates most estimates converging on a 6.5% rate of GDP growth, higher than the 5.7% in the March survey. Average inflation in the fourth quarter is also expected to rise to 5.4% from the current negative 1.31%.
Similarly, the business expectation indices of private sector manufacturing companies has improved both for the April-June quarter and expectations for the July-September quarter. Company expectations are 20.3% and 14% more for better performance, compared with the previous quarters. The indices had dropped to their lowest level ever in the January-March quarter of 2009. RBI, however, cautioned that early indications suggest the revival impulses need to strengthen further to boost consumer and investor confidence.
Analysts, therefore, said it was difficult to take a call on possible repo and reverse repo rates the central bank would announce on Tuesday. These are the rates at which RBI respectively sells and buys surplus cash from banks, and provide a benchmark for interest rates at which banks provide credit.
Based on the RBI assessment, bond yields moved up in the debt market. The benchmark ten-year 6.90% maturing in 2019 ended at 6.95%, above Friday’s close of 6.92%, but volumes were moderate at Rs 7,640 crore after traders hedged their bets.
Yes Bank chief economist Shubhada Rao said RBI may revise its inflation forecast upwards on Tuesday, but would wait until early 2010--the fiscal fourth quarter--to drain liquidity by lifting cash reserve ratio requirements. “We believe RBI will provide comfort on the liquidity front. The fourth quarter is the one where we expect RBI to remove the ‘froth’ in liquidity,” she said.
RBI has cut repo six times since last October, lopping 425 basis points off to the present 4.75% as it tried to guard against economic deceleration in the middle of the global financial crisis. It also slashed reverse repo by 275 basis points since early December and brought down the cash reserve requirement by 400 basis points to 5% to keep credit flowing.
“The growth outlook for 2009-10 (therefore) needs to be assessed in the context of indications emerging from lead indicators so far… Indicators such as the higher growth in core infrastructure sector, positive growth in IIP, gradual revival in demand for non-food credit, improving performance of the corporate sector in terms of both sales and profitability, gradual return of risk appetite in the capital market, more optimistic business expectations and forecasts could be viewed as signs of recovery from the slowdown,” says the report.
Factors that could dampen the growth outlook, according to RBI, are the delayed progress of the monsoon, decline in exports due to the persistent global recession and the lagged impact of negative growth in manufacturing in the last quarter of 2008-09. But according to the central bank, chances of these happening are weaker.
The Financial Express, July 28, 2009, Page 1
fe Bureau, Mumbai
Two key pieces of data released by RBI on the eve of announcing its position on interest rates for the July-September quarter shows a higher growth estimate for the economy and a turnaround in business sentiment. The data is part of the Macroeconomic & Monetary Developments: First Quarter Review 2009-10.
The latest survey of professional forecasters conducted by RBI in June 2009 indicates most estimates converging on a 6.5% rate of GDP growth, higher than the 5.7% in the March survey. Average inflation in the fourth quarter is also expected to rise to 5.4% from the current negative 1.31%.
Similarly, the business expectation indices of private sector manufacturing companies has improved both for the April-June quarter and expectations for the July-September quarter. Company expectations are 20.3% and 14% more for better performance, compared with the previous quarters. The indices had dropped to their lowest level ever in the January-March quarter of 2009. RBI, however, cautioned that early indications suggest the revival impulses need to strengthen further to boost consumer and investor confidence.
Analysts, therefore, said it was difficult to take a call on possible repo and reverse repo rates the central bank would announce on Tuesday. These are the rates at which RBI respectively sells and buys surplus cash from banks, and provide a benchmark for interest rates at which banks provide credit.
Based on the RBI assessment, bond yields moved up in the debt market. The benchmark ten-year 6.90% maturing in 2019 ended at 6.95%, above Friday’s close of 6.92%, but volumes were moderate at Rs 7,640 crore after traders hedged their bets.
Yes Bank chief economist Shubhada Rao said RBI may revise its inflation forecast upwards on Tuesday, but would wait until early 2010--the fiscal fourth quarter--to drain liquidity by lifting cash reserve ratio requirements. “We believe RBI will provide comfort on the liquidity front. The fourth quarter is the one where we expect RBI to remove the ‘froth’ in liquidity,” she said.
RBI has cut repo six times since last October, lopping 425 basis points off to the present 4.75% as it tried to guard against economic deceleration in the middle of the global financial crisis. It also slashed reverse repo by 275 basis points since early December and brought down the cash reserve requirement by 400 basis points to 5% to keep credit flowing.
“The growth outlook for 2009-10 (therefore) needs to be assessed in the context of indications emerging from lead indicators so far… Indicators such as the higher growth in core infrastructure sector, positive growth in IIP, gradual revival in demand for non-food credit, improving performance of the corporate sector in terms of both sales and profitability, gradual return of risk appetite in the capital market, more optimistic business expectations and forecasts could be viewed as signs of recovery from the slowdown,” says the report.
Factors that could dampen the growth outlook, according to RBI, are the delayed progress of the monsoon, decline in exports due to the persistent global recession and the lagged impact of negative growth in manufacturing in the last quarter of 2008-09. But according to the central bank, chances of these happening are weaker.
FM LETS GOOD TIMES ROLL
FM LETS GOOD TIMES ROLL
The Economic Times, July 28, 2009, Page 1
India Inc tax sops to propel growth
With an eye on 8% growth amid difficult times, FM continues to pull out more goodies for India Inc and the aam aadmi. While industry got a slew of tax breaks, housing dreams of millions of Indians came closer to reality
Our Bureau NEW DELHI
THE government has lowered the interest rates on loans for affordable housing, extended a tax holiday given to industrial parks, and lifted the tax burden off road repair costs, adding to the four existing stimulus packages in its effort to propel GDP growth to 8-9% by the end of 2010.
Finance minister Pranab Mukherjee on Monday told Lok Sabha that home loans up to Rs 10 lakh for properties with a market value not exceeding double that amount will now come with a 1% subsidy on the interest charged by commercial banks.
The minister has earmarked Rs 1,000 crore for this, a step expected to give a leg up to lower and middle income families looking to buy a house.
Mr Mukherjee proposed an amendment to the Income-Tax Act so that profits from housing projects approved by a local authority between April 1, 2007, and March 31, 2008, will be tax-free if they are completed before March 31, 2012. He urged builders to pass on the benefit to consumers.
Renu Sud Karnad, joint managing director of HDFC, said the interest subsidy on home loans will result in increased activity in the affordable housing segment and creation of employment. “With the real estate segment directly and indirectly supporting 269 big and small industries, it will have a positive impact on the economy. Also, with the fear of below-normal rainfall looming, a step like this is a well-timed, well-thought one,” she said.
Companies working out of industrial parks can now plan long term, with tax breaks being extended by two years to March 31, 2011. Accordingly, profits from development, operation and maintenance of industrial parks will continue to be tax-free.
Industry body Ficci welcomed the measures saying these, along with the fiscal steps introduced in the Budget for 2009-10 and the stimulus packages rolled out earlier, will give a new momentum to the economic recovery currently underway.
STIMULUS UNLIMITED
FOR INDIVIDUALS
1% interest subsidy for loans up to Rs 10 lakh for a year, provided purchase price is up to Rs 20 lakh
Tax deduction on interest paid on education loans for legal guardians
I-T deductions for assessees with severe disability raised from Rs 75,000 to Rs 1 lakh
FOR INDUSTRY
Extended tax holiday for special investment zones
Tax break for realtors extended by three years
Food processing tax incentives to cover milk & meat industry
Coal bed methane gas to get tax holiday
Service tax waiver for road repair & maintenance services
Tax on new services from September 1
As part of its continuing efforts to generate activity in the infrastructure sector, the government exempted repair and maintenance of roads from service tax, a la construction of new roads. The tax break will be available immediately.
“We can push domestic demand with stimulus measures. But it is very essential that exports, which are now in the negative territory, should turn positive for faster economic growth,” said DK Joshi, director and principal economist, Crisil.
In a step that will help higher education, Mr Mukherjee said taxpayers can now deduct the interest paid on education loans availed for those under their legal guardianship. Earlier the benefit was available only on loans taken for the benefit of the taxpayer, spouse and children.
Also, the minister said the eligible deductions for assessees with severe disability will be raised from Rs 75,000 to Rs 1 lakh for purposes of income tax. Firms engaged in processing, preservation and packaging of meat, poultry, marine and dairy products have also been given exemption from tax on their profits.
The new services brought under service tax in Finance Bill 2009—those in relation to transport of goods by rail and inland water, coastal goods, legal consultancy, cosmetic and plastic surgery—will come into force only from September 1, 2009. The government also extended the tax holiday earlier proposed for natural gas production from blocks licensed under the eighth round of the national exploration licensing policy (Nelp-VIII) to natural gas production from blocks licensed under the fourth round of bidding for exploration of coal bed methane as well.
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