Friday, February 20, 2009
Another stimulus possible: Pranab
Another stimulus possible: Pranab
Business Standard, February 20, 2009, Page 1
Tells Parliament he will hold talks with RBI and finance ministry officials
BS REPORTER New Delhi
Two days after announcing an Interim Budget that disappointed industry for lacking stimulus measures, Finance Minister Pranab Mukherjee today announced that he would discuss the possibility of another set of fiscal and monetary measures to counter the economic slowdown with officials and the Reserve Bank of India.
Replying to a question in the Rajya Sabha, Mukherjee said, “I have just discussed with my officers, my colleagues and with some experts, and Iam also going to have another round of discussion, because I do believe that fiscal corrections and monetary policy changes go side by side, so that the impact is felt.” Although Mukherjee categorically stated that he could not give any commitment on possible measures, he told the House, “The Reserve Bank enjoys a certain autonomy. Iwill have consultations with the Governor of the Reserve Bank, and after doing that, Ido hope that while replying to the debate on the Budget, Imay be in a position — I am not making any assurance or commitment — to indicate some more detailed information.” Mukherjee also admitted that to overcome the problem of slowdown, the government has to “ensure that more jobs are generated, and more investments in the employmentoriented sectors have to be done.” While pointing out that the full impact of the slowdown was yet to be felt, the finance minister expressed confidence that in the course of time, it would be possible to put the economy in the right track.
He also told the Rajya Sabha that even as many Indian workers were returning home and exports were affected, there was no concern about the availability of foreign exchange reserves. “We need not press the panic button,” he told the House.
Replying to another question from Rahul Bajaj, Mukherjee said, “All measures necessary to boost the economy will be taken. The support that the Indian economy requires will be given. That is why I am laying emphasis on both the fiscal corrections and the monetary corrections. Unless these two are moved together and they move in harmony, it would be difficult to tackle the problem.”
Business Standard, February 20, 2009, Page 1
Tells Parliament he will hold talks with RBI and finance ministry officials
BS REPORTER New Delhi
Two days after announcing an Interim Budget that disappointed industry for lacking stimulus measures, Finance Minister Pranab Mukherjee today announced that he would discuss the possibility of another set of fiscal and monetary measures to counter the economic slowdown with officials and the Reserve Bank of India.
Replying to a question in the Rajya Sabha, Mukherjee said, “I have just discussed with my officers, my colleagues and with some experts, and Iam also going to have another round of discussion, because I do believe that fiscal corrections and monetary policy changes go side by side, so that the impact is felt.” Although Mukherjee categorically stated that he could not give any commitment on possible measures, he told the House, “The Reserve Bank enjoys a certain autonomy. Iwill have consultations with the Governor of the Reserve Bank, and after doing that, Ido hope that while replying to the debate on the Budget, Imay be in a position — I am not making any assurance or commitment — to indicate some more detailed information.” Mukherjee also admitted that to overcome the problem of slowdown, the government has to “ensure that more jobs are generated, and more investments in the employmentoriented sectors have to be done.” While pointing out that the full impact of the slowdown was yet to be felt, the finance minister expressed confidence that in the course of time, it would be possible to put the economy in the right track.
He also told the Rajya Sabha that even as many Indian workers were returning home and exports were affected, there was no concern about the availability of foreign exchange reserves. “We need not press the panic button,” he told the House.
Replying to another question from Rahul Bajaj, Mukherjee said, “All measures necessary to boost the economy will be taken. The support that the Indian economy requires will be given. That is why I am laying emphasis on both the fiscal corrections and the monetary corrections. Unless these two are moved together and they move in harmony, it would be difficult to tackle the problem.”
Inflation below 4%, but Pranab warns of tougher times
Inflation below 4%, but Pranab warns of tougher times
The Financial Express, February 20, 2009, Page 1
Economy Bureau
Finance minister Pranab Mukherjee warned on Thursday that the full impact of the global slowdown is “yet to be felt”, though the UPA government had refrained from doing “too many radical things” in the interim Budget due to constitutional constraints. But he stressed that the government is willing to take more steps to spur the economy, broadly hinting at monetary measures like rate cuts.
“I am laying emphasis on both fiscal corrections and monetary corrections. Unless these two are moved together and they move in harmony, it would be difficult to tackle the problem,” he said, adding that “simply pressing the panic button” won’t achieve anything.
“If the economy demands certain things and if these could be done within (the constitutional constraints of an outgoing government), surely we would like to do them,” he said. Markets already anticipate a cut in policy rates by RBI with inflation touching a 14-month low of 3.92% for the first week of February.
“I will have consultations with the governor of the Reserve Bank. After that, I hope that while replying to the debate on the Budget (next week), I may be in a position—I am not making any assurance or commitment—to give more detailed information,” Mukherjee said.
The minister’s comments came a day after RBI governor D Subbarao said in Tokyo there is more room to reduce key rates. “The question is whether we should cut rates, when we should cut rates and by how much we should cut rates,” the governor said.
Warning of a sharper impact of the global slowdown on India than expected, he said the challenge for the government and RBI would be to “minimise the pain”. However, Subbarao dismissed suggestions to slow external liberalisation to protect Indian industry: “We should not give a wrong signal right now. The support—I would not use the word ‘protection’—that the Indian economy requires will be given.”
The government has already announced two stimulus packages to spur economic growth, which is expected to moderate from 9% to 7.1% in 2008-09.
The Financial Express, February 20, 2009, Page 1
Economy Bureau
Finance minister Pranab Mukherjee warned on Thursday that the full impact of the global slowdown is “yet to be felt”, though the UPA government had refrained from doing “too many radical things” in the interim Budget due to constitutional constraints. But he stressed that the government is willing to take more steps to spur the economy, broadly hinting at monetary measures like rate cuts.
“I am laying emphasis on both fiscal corrections and monetary corrections. Unless these two are moved together and they move in harmony, it would be difficult to tackle the problem,” he said, adding that “simply pressing the panic button” won’t achieve anything.
“If the economy demands certain things and if these could be done within (the constitutional constraints of an outgoing government), surely we would like to do them,” he said. Markets already anticipate a cut in policy rates by RBI with inflation touching a 14-month low of 3.92% for the first week of February.
“I will have consultations with the governor of the Reserve Bank. After that, I hope that while replying to the debate on the Budget (next week), I may be in a position—I am not making any assurance or commitment—to give more detailed information,” Mukherjee said.
The minister’s comments came a day after RBI governor D Subbarao said in Tokyo there is more room to reduce key rates. “The question is whether we should cut rates, when we should cut rates and by how much we should cut rates,” the governor said.
Warning of a sharper impact of the global slowdown on India than expected, he said the challenge for the government and RBI would be to “minimise the pain”. However, Subbarao dismissed suggestions to slow external liberalisation to protect Indian industry: “We should not give a wrong signal right now. The support—I would not use the word ‘protection’—that the Indian economy requires will be given.”
The government has already announced two stimulus packages to spur economic growth, which is expected to moderate from 9% to 7.1% in 2008-09.
Economic growth to recover next fiscal, assures Montek
Economic growth to recover next fiscal, assures Montek
The Economic Times, February 20, 2009, Page 10
Piyush Babele NEW DELHI
PLANNING Commission deputy chairman Montek Singh Ahluwalia has said the next financial year will be the year of economic recovery and the Indian economy is expected to grow between 6.5% and 7% in 2009-10. “The growth next year is expected to be more than the growth witnessed in the second half of current financial year. This would mean that the economy is on the path of recovery,” he told ET Hindi on its first anniversary.
For India, this is the first year of economic slowdown, mainly for the services sector and the manufacturing sector. The slowdown is due to external forces and not due to country’s economic policies, Mr Ahluwalia said. But India has left no stone unturned to avert the economic downturn, he added.
He said the impact of the global slowdown on the Indian economy was negligible in the first half of the current financial year, but the growth dipped in the second half. “The government has taken several steps that would improve the condition of the economy in the next financial year,” Mr Ahluwalia said.
“When we talk about the current economic situation, we should not forget that despite slowdown India is still the second-fastest growing economy of the world. We must also see the economic growth from another perspective. Even if we combine this year’s growth rate with the previous year; the figure will be higher than the 6-6.5% growth rate achieved during the NDA government,” he said.
Mr Ahluwalia expressed satisfaction the slowdown had not hit the farm sector and was limited to modern forms of the economy. “In this background, the government will invest in the infrastructure sector and NREGA. These schemes will strengthen the economy,” he said.
The Economic Times, February 20, 2009, Page 10
Piyush Babele NEW DELHI
PLANNING Commission deputy chairman Montek Singh Ahluwalia has said the next financial year will be the year of economic recovery and the Indian economy is expected to grow between 6.5% and 7% in 2009-10. “The growth next year is expected to be more than the growth witnessed in the second half of current financial year. This would mean that the economy is on the path of recovery,” he told ET Hindi on its first anniversary.
For India, this is the first year of economic slowdown, mainly for the services sector and the manufacturing sector. The slowdown is due to external forces and not due to country’s economic policies, Mr Ahluwalia said. But India has left no stone unturned to avert the economic downturn, he added.
He said the impact of the global slowdown on the Indian economy was negligible in the first half of the current financial year, but the growth dipped in the second half. “The government has taken several steps that would improve the condition of the economy in the next financial year,” Mr Ahluwalia said.
“When we talk about the current economic situation, we should not forget that despite slowdown India is still the second-fastest growing economy of the world. We must also see the economic growth from another perspective. Even if we combine this year’s growth rate with the previous year; the figure will be higher than the 6-6.5% growth rate achieved during the NDA government,” he said.
Mr Ahluwalia expressed satisfaction the slowdown had not hit the farm sector and was limited to modern forms of the economy. “In this background, the government will invest in the infrastructure sector and NREGA. These schemes will strengthen the economy,” he said.
Obama unveils $275b housing rescue plan
Obama unveils $275b housing rescue plan
The Economic Times, February 20, 2009, Page 19
$75B Lifeline For Homeowners, $200B To Freddie Mac & Fannie Mae
AFP PHOENIX, ARIZONA
US PRESIDENT Barack Obama on Wednesday targeted the housing crisis at the root of the US economic meltdown, with a program which could cost $275 billion and reach nine million homeowners.
The strategy includes $75 billion designed as an incentive for lenders to reduce interest rates to prevent at-risk mortgage debtors joining the millions who have already fallen victim to foreclosures.
The government will also put up an additional $200 billion dollars to bolster confidence in efforts by federal lenders Freddie Mac and Fannie Mae to offer affordable mortgages and bring stability to the housing market.
Obama opened the new front in the broad battle against the economic crisis a day after signing a huge, $787-billion stimulus plan into law, and as he simultaneously attempts to restructure the debilitated US auto industry.
"All of us are paying a price for this home mortgage crisis and all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama said as he unveiled the plan in Arizona, one of the states worst hit by the crisis.
"When the housing market collapsed, so did the availability of credit on which our economy depends. "We will help between seven and nine million families restructure or refinance their mortgages so they can avoid foreclosure," Obama said.
Treasury officials said the plan could reach or make affordable one-and-a-half trillion dollars in mortgage debt and deal with a large proportion of the six million foreclosures expected over the next four years.
The plan includes incentives for lenders to help debtors who cannot make monthly payments but also cannot sell their homes due to negative equity, to lower mortgage payments to no more than 31% of their income.
The plan will see the treasury department double its financial support to troubled mortgage finance giants Fannie Mae and Freddie Mac, to $200 billion each, in an effort to stabilise the real estate sector.
A $75-billion initiative will target those who cannot afford to pay their mortgages and have seen the price of their properties plunge so cannot sell them and move into cheaper accommodation.
The initiative also aims to help families who put money down on homes and met their regular payments, yet cannot take advantage of refinancing made attractive by low mortgage rates because the value of their homes have sharply dropped.
Fed sees unusually prolonged recovery
THE United States' economy would face an "unusually gradual and prolonged" period of recovery as it struggles to climb out of a deep global downturn, the US central bank has warned. Releasing its economic outlook for 2009 on Wednesday the Federal Reserve or Fed said it expected that the economy would contract by 0.5% to 1.3% this year, unemployment would rise to 8.5% to 8.8% and inflation would remain under greater pressure. Bleak economic data reflecting a sharpening slide in housing, trade, industrial production, spending and employment rates "more than offset" any potential impact from an economic stimulus plan, the Fed said, forcing it to cut its economic outlook. — IANS/Washington.
The Economic Times, February 20, 2009, Page 19
$75B Lifeline For Homeowners, $200B To Freddie Mac & Fannie Mae
AFP PHOENIX, ARIZONA
US PRESIDENT Barack Obama on Wednesday targeted the housing crisis at the root of the US economic meltdown, with a program which could cost $275 billion and reach nine million homeowners.
The strategy includes $75 billion designed as an incentive for lenders to reduce interest rates to prevent at-risk mortgage debtors joining the millions who have already fallen victim to foreclosures.
The government will also put up an additional $200 billion dollars to bolster confidence in efforts by federal lenders Freddie Mac and Fannie Mae to offer affordable mortgages and bring stability to the housing market.
Obama opened the new front in the broad battle against the economic crisis a day after signing a huge, $787-billion stimulus plan into law, and as he simultaneously attempts to restructure the debilitated US auto industry.
"All of us are paying a price for this home mortgage crisis and all of us will pay an even steeper price if we allow this crisis to continue to deepen," Obama said as he unveiled the plan in Arizona, one of the states worst hit by the crisis.
"When the housing market collapsed, so did the availability of credit on which our economy depends. "We will help between seven and nine million families restructure or refinance their mortgages so they can avoid foreclosure," Obama said.
Treasury officials said the plan could reach or make affordable one-and-a-half trillion dollars in mortgage debt and deal with a large proportion of the six million foreclosures expected over the next four years.
The plan includes incentives for lenders to help debtors who cannot make monthly payments but also cannot sell their homes due to negative equity, to lower mortgage payments to no more than 31% of their income.
The plan will see the treasury department double its financial support to troubled mortgage finance giants Fannie Mae and Freddie Mac, to $200 billion each, in an effort to stabilise the real estate sector.
A $75-billion initiative will target those who cannot afford to pay their mortgages and have seen the price of their properties plunge so cannot sell them and move into cheaper accommodation.
The initiative also aims to help families who put money down on homes and met their regular payments, yet cannot take advantage of refinancing made attractive by low mortgage rates because the value of their homes have sharply dropped.
Fed sees unusually prolonged recovery
THE United States' economy would face an "unusually gradual and prolonged" period of recovery as it struggles to climb out of a deep global downturn, the US central bank has warned. Releasing its economic outlook for 2009 on Wednesday the Federal Reserve or Fed said it expected that the economy would contract by 0.5% to 1.3% this year, unemployment would rise to 8.5% to 8.8% and inflation would remain under greater pressure. Bleak economic data reflecting a sharpening slide in housing, trade, industrial production, spending and employment rates "more than offset" any potential impact from an economic stimulus plan, the Fed said, forcing it to cut its economic outlook. — IANS/Washington.
Lok Housing to restate accounts
Lok Housing to restate accounts
Business Standard, February 20, 2009, Page 4
BS Reporter / Mumbai
In a first of its kind development, Mumbai-based Lok Housing and Construction is planning to restate its accounts for the past three financial years as the revenue it booked hasn’t materialised after investors and buyers backed out of its projects.
The plight of the Bombay Stock Exchange-listed company may befall on other real estate players, with analysts claiming that many more companies could follow suit by restating accounts.
The developer will write off Rs 225.01 crore worth of profit and Rs 282.14 crore of sales it recognised in its books in the previous financial years, according to the notes on the accounts. The profit to be written off will be marginally lower than that declared by the company.
"Due to the financial meltdown and severe economic recession, some of the parties with whom the company had entered into agreement to sell have failed to meet their commitments and considering the overall interest of the company, the agreement for sale entered into in the past financial years and in respect of which revenues already recognised have been mutually terminated/ cancelled," the company said in a statement to the exchanges recently.
Lok Housing had reported a profit of Rs 112.85 crore in FY08, Rs 91.67 crore in FY07 and Rs 21.86 crore in FY06. The company reported losses prior to these periods. The company would seek shareholder’s approval in May for the restatement of accounts, a company official said. It has already got the court's approval for the same.
As a common practice among developers, Lok Housing recognised sales and profit thereon at the time of entering into such agreements. Lok Housing Chairman and Managing Director Lalit C Gandhi refused to comment on the matter, saying it is sub judice. A source said both the end-users and investors failed to pay money for some of their projects. The company is expected to write off the amounts in one or two quarters.
"Considering the overall interest of the company, the agreement for sale entered into in the past financial years and in respect of which revenues already recognised have been mutually terminated/ cancelled," the company release added.
Analysts said other developers could also come out with such disclosures, given the slowdown and credit crunch faced by home buyers.
Business Standard, February 20, 2009, Page 4
BS Reporter / Mumbai
In a first of its kind development, Mumbai-based Lok Housing and Construction is planning to restate its accounts for the past three financial years as the revenue it booked hasn’t materialised after investors and buyers backed out of its projects.
The plight of the Bombay Stock Exchange-listed company may befall on other real estate players, with analysts claiming that many more companies could follow suit by restating accounts.
The developer will write off Rs 225.01 crore worth of profit and Rs 282.14 crore of sales it recognised in its books in the previous financial years, according to the notes on the accounts. The profit to be written off will be marginally lower than that declared by the company.
"Due to the financial meltdown and severe economic recession, some of the parties with whom the company had entered into agreement to sell have failed to meet their commitments and considering the overall interest of the company, the agreement for sale entered into in the past financial years and in respect of which revenues already recognised have been mutually terminated/ cancelled," the company said in a statement to the exchanges recently.
Lok Housing had reported a profit of Rs 112.85 crore in FY08, Rs 91.67 crore in FY07 and Rs 21.86 crore in FY06. The company reported losses prior to these periods. The company would seek shareholder’s approval in May for the restatement of accounts, a company official said. It has already got the court's approval for the same.
As a common practice among developers, Lok Housing recognised sales and profit thereon at the time of entering into such agreements. Lok Housing Chairman and Managing Director Lalit C Gandhi refused to comment on the matter, saying it is sub judice. A source said both the end-users and investors failed to pay money for some of their projects. The company is expected to write off the amounts in one or two quarters.
"Considering the overall interest of the company, the agreement for sale entered into in the past financial years and in respect of which revenues already recognised have been mutually terminated/ cancelled," the company release added.
Analysts said other developers could also come out with such disclosures, given the slowdown and credit crunch faced by home buyers.
Realtors may divert surplus FDI via makeshift window
Realtors may divert surplus FDI via makeshift window
The Economic Times, February 19, 2009, Page 7
PROPOSED NORM IGNORES END-USE RESTRICTIONS, NULLIFIES FDI CONDITIONS
Rajat Guha NEW DELHI
IN A move to help the cash-strapped real estate sector, the commerce and industry ministry is likely to waive enduse restrictions and allow realty developers to divert surplus foreign direct investment to real estate projects where it was not allowed so far. According to the norms, FDI is allowed only in projects with a minimum investment of $10 million (in wholly-owned subsidiaries) or $5 million in joint ventures, and which has a minimum area of 10 hectares.
As per the proposal, which will require a Cabinet approval before being implemented, a real estate company which has brought in FDI in a project meeting the mandated conditions can now use the surplus funds in another project which may not meet the prescribed conditions. For example, a realty company that has raised FDI for a township in Faridabad which meets the minimum capitalisation and minimum area norms may now use a part of the surplus funds for a project in Gurgaon which may not have got a clearance from Foreign Investment Promotion Board (FIPB). Put simply, while the new norm does away with the end-use restrictions, it also nullifies the mandatory meeting of conditions for using FDI.
In the last FIPB meeting, the board deliberated that in view of the difficulties being faced by the real estate sector, some leeway is required, even if for a temporary period.
“We will soon issue the guidelines to be followed in case of requests for receiving FDI by realty companies engaged in various projects, not all of which are FDI-compliant as per Press Note 2 of 2005,” a senior official directly dealing with the new policy told ET. He asked not to be identified. The official added that the relief would be extended to the realty sector for a temporary period with an in-built sunset clause.
Interestingly, this comes even as the government had recently stepped up vigilance against companies channelling FDI money to projects that had not received FIPB clearance. While examining real estate company Keystone’s proposal in a meeting held in January, the board had asked the department of industrial policy and promotion (Dipp) to set up a monitoring cell to track FDI inflows into non-FDI compliant projects under the veil of FDI. The board was apprehensive that in such cases, there could be a possibility of funds getting diverted to projects that had not been cleared by FIPB.
In fact, Dipp has prepared a draft Press Note on guidelines on induction of FDI into Indian real estate companies with both FDI-compliant and non-FDI-compliant projects, where FDI is required to flow into FDI compliant projects only. Officials say this would be the fourth PN to be issued by the present government before the polls.
The Economic Times, February 19, 2009, Page 7
PROPOSED NORM IGNORES END-USE RESTRICTIONS, NULLIFIES FDI CONDITIONS
Rajat Guha NEW DELHI
IN A move to help the cash-strapped real estate sector, the commerce and industry ministry is likely to waive enduse restrictions and allow realty developers to divert surplus foreign direct investment to real estate projects where it was not allowed so far. According to the norms, FDI is allowed only in projects with a minimum investment of $10 million (in wholly-owned subsidiaries) or $5 million in joint ventures, and which has a minimum area of 10 hectares.
As per the proposal, which will require a Cabinet approval before being implemented, a real estate company which has brought in FDI in a project meeting the mandated conditions can now use the surplus funds in another project which may not meet the prescribed conditions. For example, a realty company that has raised FDI for a township in Faridabad which meets the minimum capitalisation and minimum area norms may now use a part of the surplus funds for a project in Gurgaon which may not have got a clearance from Foreign Investment Promotion Board (FIPB). Put simply, while the new norm does away with the end-use restrictions, it also nullifies the mandatory meeting of conditions for using FDI.
In the last FIPB meeting, the board deliberated that in view of the difficulties being faced by the real estate sector, some leeway is required, even if for a temporary period.
“We will soon issue the guidelines to be followed in case of requests for receiving FDI by realty companies engaged in various projects, not all of which are FDI-compliant as per Press Note 2 of 2005,” a senior official directly dealing with the new policy told ET. He asked not to be identified. The official added that the relief would be extended to the realty sector for a temporary period with an in-built sunset clause.
Interestingly, this comes even as the government had recently stepped up vigilance against companies channelling FDI money to projects that had not received FIPB clearance. While examining real estate company Keystone’s proposal in a meeting held in January, the board had asked the department of industrial policy and promotion (Dipp) to set up a monitoring cell to track FDI inflows into non-FDI compliant projects under the veil of FDI. The board was apprehensive that in such cases, there could be a possibility of funds getting diverted to projects that had not been cleared by FIPB.
In fact, Dipp has prepared a draft Press Note on guidelines on induction of FDI into Indian real estate companies with both FDI-compliant and non-FDI-compliant projects, where FDI is required to flow into FDI compliant projects only. Officials say this would be the fourth PN to be issued by the present government before the polls.
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