Tuesday, April 21, 2009
RBI indicates status quo on rates
RBI indicates status quo on rates
The Financial Express, April 21, 2009, Page 1
Economy Bureau, Mumbai
The Reserve Bank of India on Monday indicated that although growth prospects remained grim, it might prefer not to cut policy rates further at this time. It said earlier rate cuts and higher government spending since October had already made a positive impact on economic growth.
“The fiscal stimulus packages of the government and monetary easing by RBI will arrest the moderation in growth and revive consumption and investment demand,” the central bank stated in its Macroeconomic & Monetary Developments 2008-09 review, which was released on the eve of its annual credit and monetary policy announcement.
Looking back over the last fiscal, the economy probably expanded 6.6%, less than the 6.8% forecast last December, according to the median compiled by the RBI from the forecasts of 14 agencies, including the World Bank and Citigroup Inc. The seventh round of the professional forecasters survey was conducted last month.
RBI said it still had the option to reduce rates to support growth as it expects inflation to “remain at a low level through the greater part of 2009-10” because of higher farm output and low international commodity prices. It also said commercial banks had sufficient room to lower borrowing costs further.
RBI pointed out that major drivers of growth in India are moderating and various surveys of economic activity point towards less-than-optimistic sentiment for the economy in coming months.
According to its outlook of manufacturing companies in the private sector, business expectations indices based on the assessment for January-March 2009 and expectations for April-June 2009 declined sharply by 20.7% and 13.9%, respectively, over the previous quarters. A similar trend was observed in these indices when compared with the corresponding quarters of the previous year.
RBI said consumer price inflation remained high, with recent evidence of only very modest moderation, adding that the transmission process of lower inflation at the wholesale level to inflation at the retail level had emerged an important issue in the conduct of monetary policy.
“Various measures of consumer price inflation, though starting to decline, still remained high in the range of 9.6-10.8% during January-February 2009, compared with 5.2-6.4% in February 2008,” it said.
The central bank said weather forecasts indicated that prospects for the farm sector remained bright, and this would continue to support rural demand. Satisfactory agricultural output, along with low international commodity prices, would help keep inflationary pressures low for most of 2009-10, it said.
The Financial Express, April 21, 2009, Page 1
Economy Bureau, Mumbai
The Reserve Bank of India on Monday indicated that although growth prospects remained grim, it might prefer not to cut policy rates further at this time. It said earlier rate cuts and higher government spending since October had already made a positive impact on economic growth.
“The fiscal stimulus packages of the government and monetary easing by RBI will arrest the moderation in growth and revive consumption and investment demand,” the central bank stated in its Macroeconomic & Monetary Developments 2008-09 review, which was released on the eve of its annual credit and monetary policy announcement.
Looking back over the last fiscal, the economy probably expanded 6.6%, less than the 6.8% forecast last December, according to the median compiled by the RBI from the forecasts of 14 agencies, including the World Bank and Citigroup Inc. The seventh round of the professional forecasters survey was conducted last month.
RBI said it still had the option to reduce rates to support growth as it expects inflation to “remain at a low level through the greater part of 2009-10” because of higher farm output and low international commodity prices. It also said commercial banks had sufficient room to lower borrowing costs further.
RBI pointed out that major drivers of growth in India are moderating and various surveys of economic activity point towards less-than-optimistic sentiment for the economy in coming months.
According to its outlook of manufacturing companies in the private sector, business expectations indices based on the assessment for January-March 2009 and expectations for April-June 2009 declined sharply by 20.7% and 13.9%, respectively, over the previous quarters. A similar trend was observed in these indices when compared with the corresponding quarters of the previous year.
RBI said consumer price inflation remained high, with recent evidence of only very modest moderation, adding that the transmission process of lower inflation at the wholesale level to inflation at the retail level had emerged an important issue in the conduct of monetary policy.
“Various measures of consumer price inflation, though starting to decline, still remained high in the range of 9.6-10.8% during January-February 2009, compared with 5.2-6.4% in February 2008,” it said.
The central bank said weather forecasts indicated that prospects for the farm sector remained bright, and this would continue to support rural demand. Satisfactory agricultural output, along with low international commodity prices, would help keep inflationary pressures low for most of 2009-10, it said.
Economy to grow at 5.7% in FY 10, say RBI survey
Economy to grow at 5.7% in FY 10, say RBI survey
Business Standard, April 21, 2009, Money & Markets, Section II, Page 1
Manufacturing sector to be hit by slowdown for some more time, it says.
A survey conducted by the Reserve Bank of India (RBI) has estimated that the Indian economy would grow at less than 6 per cent during the current financial year, the slowest expansion since 2002-03.
The median forecast of professional forecasters' survey estimated that the economy would grow by 5.7 per cent during the current financial year and also revised the growth projections for 2008-09.
According to the Central Statistical Organisation's advance estimates, GDP is projected to grow by 7.1 per cent in 2008-09. This would be the slowest growth since 2002-03, when the economy grew by 4 per cent. For three successive years up to 2007-08, GDP rose at a rate of over 9 per cent.
Agriculture, which is projected to grow at 3 per cent during the current financial year, provides a silver lining of sorts with services and industrial growth expected to moderate.
During the current financial year, imports and exports are projected to contract by 4 per cent and 8.4 per cent respectively. This indicates that the manufacturing sector would continue to feel the impact of the global slowdown for some more time.
The only good news is that there are signs of the economy bottoming out. During April-June, the GDP is expected to rise by 5.3 per cent, before improving to 5.6 per cent in the second quarter. The Indian economy is expected to grow at 6.2 per cent in the third and 6.5 per cent in the fourth quarters. During the third quarter of 2008-09, the Indian economy grew by 5.3 per cent as against 7.7 per cent in the first half.
While RBI expects inflationary pressure to remain low during the current financial year due to low commodity prices globally, it also points out that high food prices have kept consumer price inflation at elevated levels. During January-February, inflation based on consumer price indices has hovered around 9.6-10.8 per cent as against 7.3-8.8 per cent in June 2008.
Pointing to more pain for companies, the forecasters' survey estimated the growth in corporate profit to fall to single-digit rates.
Data, barring savings and capital formation, pertains to growth rateEarlier estimates based on survey conducted for quarter-ended Dec 2008Latest estimates based on survey for quarter-ended March 2009
In addition, the quarter-ahead expectations survey on industrial performance conducted by RBI projected all-round deterioration during April-June 2009. Only 11.2 per cent of the respondents said that the overall business situation would be better and 8.4 per cent said the financial situation would be better.
"In sum, the Indian economy has experienced some loss of growth momentum with major drivers of growth witnessing moderation," RBI said in its pre-monetary policy assessment today.
While savings and investment rates are expected to decline during 2008-09, RBI said the fiscal stimulus packages announced by it and the government would help arrest the moderation and revive consumption and investment with some lag. Besides, it said that the balance of payment position remained sustainable in the context of the present level of foreign exchange reserves and external debt.
Among the positives, the central bank, which is due to announce the annual policy statement for 2009-10 tomorrow, said that foreign exchange reserves continued to remain at comfortable levels, and would ensure stability, despite falling by $59 billion over the last 12 months.
Business Standard, April 21, 2009, Money & Markets, Section II, Page 1
Manufacturing sector to be hit by slowdown for some more time, it says.
A survey conducted by the Reserve Bank of India (RBI) has estimated that the Indian economy would grow at less than 6 per cent during the current financial year, the slowest expansion since 2002-03.
The median forecast of professional forecasters' survey estimated that the economy would grow by 5.7 per cent during the current financial year and also revised the growth projections for 2008-09.
According to the Central Statistical Organisation's advance estimates, GDP is projected to grow by 7.1 per cent in 2008-09. This would be the slowest growth since 2002-03, when the economy grew by 4 per cent. For three successive years up to 2007-08, GDP rose at a rate of over 9 per cent.
Agriculture, which is projected to grow at 3 per cent during the current financial year, provides a silver lining of sorts with services and industrial growth expected to moderate.
During the current financial year, imports and exports are projected to contract by 4 per cent and 8.4 per cent respectively. This indicates that the manufacturing sector would continue to feel the impact of the global slowdown for some more time.
The only good news is that there are signs of the economy bottoming out. During April-June, the GDP is expected to rise by 5.3 per cent, before improving to 5.6 per cent in the second quarter. The Indian economy is expected to grow at 6.2 per cent in the third and 6.5 per cent in the fourth quarters. During the third quarter of 2008-09, the Indian economy grew by 5.3 per cent as against 7.7 per cent in the first half.
While RBI expects inflationary pressure to remain low during the current financial year due to low commodity prices globally, it also points out that high food prices have kept consumer price inflation at elevated levels. During January-February, inflation based on consumer price indices has hovered around 9.6-10.8 per cent as against 7.3-8.8 per cent in June 2008.
Pointing to more pain for companies, the forecasters' survey estimated the growth in corporate profit to fall to single-digit rates.
Data, barring savings and capital formation, pertains to growth rateEarlier estimates based on survey conducted for quarter-ended Dec 2008Latest estimates based on survey for quarter-ended March 2009
In addition, the quarter-ahead expectations survey on industrial performance conducted by RBI projected all-round deterioration during April-June 2009. Only 11.2 per cent of the respondents said that the overall business situation would be better and 8.4 per cent said the financial situation would be better.
"In sum, the Indian economy has experienced some loss of growth momentum with major drivers of growth witnessing moderation," RBI said in its pre-monetary policy assessment today.
While savings and investment rates are expected to decline during 2008-09, RBI said the fiscal stimulus packages announced by it and the government would help arrest the moderation and revive consumption and investment with some lag. Besides, it said that the balance of payment position remained sustainable in the context of the present level of foreign exchange reserves and external debt.
Among the positives, the central bank, which is due to announce the annual policy statement for 2009-10 tomorrow, said that foreign exchange reserves continued to remain at comfortable levels, and would ensure stability, despite falling by $59 billion over the last 12 months.
RBI survey lowers GDP growth forecast to 5.7%
RBI survey lowers GDP growth forecast to 5.7%
The Hindu Business Line, April 21, 2009, Page 6
Overall sentiment for all industries, except textiles, positive.
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Personal loans grew at just 8.5 per cent in the last one year compared with 13 per cent growth registered in the previous year.
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Our Bureau, Mumbai
The median forecast of real GDP growth, according to the Reserve Bank of India’s latest professional forecasters’ survey, for 2009-2010 has been revised downwards to 5.7 per cent from 6 per cent.
The central bank, in its report on the Macroeconomic and Monetary Developments in 2008-2009, said that the various surveys of economic activity point towards prevalence of less-than-optimistic sentiment for the outlook of the economy in the coming months.
Between the sixth round survey conducted in December 2008 and seventh round survey in March 2009, median forecast of real GDP growth for 2008-09 was revised downwards to 6.6 per cent from 6.8 per cent.
According to the report, for the April-June 2009 quarter, the overall net sentiment for all industries, except textiles, is positive. Moderate growth is expected across the various companies in the first quarter. However, the expectations are less optimistic for smaller companies compared with their bigger counterparts.
Inflation
On the inflation front, the report underscored the fact that unlike the wholesale price index based inflation, consumer price index based inflation in India remains high, with recent evidence of very slight moderation. “The transmission process of lower inflation at the wholesale level to inflation at the retail level has emerged as an important issue in the conduct of RBI’s monetary policy,” the report said.
The WPI-based inflation eased to 0.18 per cent for the week ended April 4 from 0.26 per cent for the previous week. Various measures of consumer price inflation, though started declining, still remained high in the range of 9.6-10.8 per cent during January/ February 2009.
The higher level of consumer price inflation (CPI) as compared with WPI inflation , in recent months, could be attributed to higher prices of food articles, which have higher weight in CPI.
Scheduled commercial banks (SCBs’) investment in statutory liquidity ratio (SLR) securities as a per cent of their net demand and time liabilities (NDTL) increased at end-March 2009 to 28.1 per cent, from 27.8 per cent a year ago.
However, adjusted for Liquidity Adjustment Facility collateral securities on an outstanding basis, SCBs holding of SLR securities amounted to Rs 11,10,156 crore or 26.7 per cent of NDTL at end-March 2009 – implying an excess of Rs 1,13,817 crore or 2.7 per cent of NDTL over the prescribed SLR of 24 per cent of NDTL.
The lower expansion in credit relative to the expansion in deposits resulted in a decline in the incremental credit-deposit ratio (y-o-y) of SCBs to 64.4 per cent at March-end 2009 from 73.6 per cent a year ago.
Personal loans
Our Chennai Bureau reports: The latest confirmation of a slowdown in the personal loans segment comes from the Statement on Macroeconomic and Monetary Developments put out by the Reserve Bank of India. Personal loans (inclusive of housing, credit cards, educational loans, consumer durable loans etc.) at Rs 5,55,392 crore account for about 22 per cent of the total loans outstanding as of end February 2009. Personal loans grew at just 8.5 per cent in the last one year compared with 13 per cent growth registered in the previous year.
Loans for housing, which constitute about half the personal loan segment, were at Rs 272,376 crore. They grew at just 7.5 per cent last year compared with 13 per cent in the previous year (2007-08) and 26 per cent in the year 2006-07. Credit card outstandings also grew at a mere 8 per cent compared to about 51 per cent in 2007-08 and 46 per cent in 2006-07.
Despite oft-repeated complaints that the real estate sector was credit starved, statistics provided by the RBI show that real-estate loans grew 61.4 per cent last year to Rs 9,0765 crore compared with a 27 per cent growth in 2007-08.
Similarly, loans to NBFCs also grew by 42 per cent during the last year to Rs 90,521 crore.
Negative inflation may pose dilemma for RBI on key policy rates
Negative inflation may pose dilemma for RBI on key policy rates
The Hindu Business Line, April 21, 2009, Page 1
Our Bureau, New Delhi
With inflation likely to turn negative before the month-end, the question, say some economists, is no longer one of whether to reduce the reverse repo rate, but by how much. This crucial policy rate – which is what banks earn from parking their funds with the Reserve Bank of India – is currently 3.5 per cent.
That the country, for the first time since 1975-76, is going to witness negative inflation based on the wholesale price index (WPI) could impinge on the options before the RBI Governor, Dr D. Subbarao, when he unveils his annual credit and monetary policy on Tuesday.
The Centre would like to see a cut of 100 basis points in both the reverse repo and the repo rates (the latter is the rate at which RBI lends to banks). The Prime Minister, Dr Manmohan Singh, recently told top Indian businessmen, “With ample liquidity and low inflation, there is scope perhaps for a further moderation in interest rates”.
This has been interpreted as a virtual directive to the RBI.
According to the Chairman of the Prime Minister’s Economic Advisory Council, Dr Suresh Tendulkar, “If banks want to stay in business they should start lending. The credit-deposit ratio has been steadily coming down.” Some economists feel that a cut in the reverse repo rate is required if banks were to be prodded to lend more rather than park their surplus cash in the RBI’s reverse repo window.
However, Mr Devendra K. Pant, Director, Fitch Ratings India Pvt Ltd, felt that it would be difficult to bring down the reverse repo rate as it is tied to the savings bank deposit rate (which is also 3.5 per cent). “There will be some tinkering in certain policy rates, but no big ticket changes,” he noted.
Crisil’s Principal Economist, Mr D.K. Joshi, expected the RBI to go in for 25-50 basis point cut in repo rate, while retaining the reverse repo rate at 3.5 per cent.
The RBI may come up with other measures to discourage banks from using the reverse repo window.
These could take the form of quantitative limits, such as ceilings on the amount that a bank can park under the reverse repo window. The option of closing the reverse repo window for a few months could also be considered.
The RBI’s real dilemma arises from the likelihood of negative inflation and the real (inflation-adjusted) interest rate, which is already over 12 per cent.
Starting from this week the official wholesale inflation could enter negative territory and remain there for several months because of the base effect.
Rentals in metros fall further in Jan-Mar: Richard Ellis
Rentals in metros fall further in Jan-Mar: Richard Ellis
The Financial Express, April 21, 2009, Corporates & Markets, P VIII
fe Bureau, New Delhi
Rentals and capital value of office space witnessed a further drop during the January-March quarter in cities like Delhi NCR, Mumbai, Bangalore, Chennai, Hyderabad, Pune and Kolkata, according to the latest C B Richard Ellis report.
The financial and IT sectors, which have been hit hard by the slump, are postponing their capital expenses and giving up on excess space.
The adverse supply-demand crunch, high interest rates and low mismatch and non-availability of confidence in the economic outlook financing options, has impacted the realty sector hard in the form of substantial slowdown in construction in the last few months of 2008. Most new projects remain on paper. While not ruling out the scope of further correction in the coming quarters, the report said that the prospects of any sharp decline is unlikely. Transactions are expected to pick up in the major cities in the medium to long-term period.
In the Delhi NCR region, the effect is no different from the rest of India. The central business district (CBD) of Connaught Place in Delhi has witnessed enhanced levels of second hand space as a result of tenants relocating to more cost-effective destinations. The civic centre, an office complex of approximately 0.6 million sq ft, which was expected to be completed in this quarter, has been delayed. With vacancy levels ranging between 8%-9%, rentals are at more realistic levels as compared to the high of early 2008.
The secondary business district (SBD) of Nehru Place lacked any major activity in this quarter as well. The supply (approximately 20,000 – 40,000 sq ft) in the three projects which include International Trade Tower, Eros Corporate Tower and IFCI is increasing with existing tenants downsizing their operations or relocating.
With the IT sector facing a slump, the peripheral market of Gurgaon continues to be slow. This quarter witnessed an increase in the supply (around 0.25 million sq ft) of furnished space and availability of sub-lease options In Noida the current vacancy rate is around 25% to 30%.
Mumbai has also seen a southward trend in rentals across all micro markets. The CBD of Nariman Point has witnessed a significant correction in rentals over the last 6–9 months with additional secondary stock added to the micro market, taking the vacancy rate to around 15%.
Despite the general lack of demand, extended business district - Lower Parel and Worli has witnessed a revival of construction activity in many of the projects that were earlier stalled.
In central business district of MG Road, Richmond Road and Residency Road of Bangalore, most of the transactions took place in the small and medium segment. Whilst there was no addition of fresh grade A stock, available sub-lease and second generation space has been estimated at approximately 0.36 million sqft, with absorption level at approximately 0.10 million sq ft.
Unitech: Not yet out of the woods
Unitech: Not yet out of the woods
Business Standard, April 21, 2009, Money & Markets, Section II, Page 1
Shobhana Subramanian / Mumbai
With the Rs 1,600 crore that Unitech has managed to raise through a placement to qualified institutions, the risk on its balance sheet will be reduced. The money will help it pay back some of its dues to mutual funds and in the process, the firm’s net debt-equity ratio, analysts estimate, will come down to 1.2 times in 2009-10 from 1.9 times at the end of March 2009. But that doesn’t mean the company is out of the woods.
For sure, it can pay off some of the interest on loans and will have some money left to fund some projects. But, the debt on its books —estimated at close to Rs 8,500 crore at the end of March — is not small given that cash flows will continue to be weak until the real estate market revives. There are few signs of that just yet and it’s possible that things could get
So another round of restructuring — about Rs 2,300 crore has already been rescheduled — is on the cards. Unitech’s ‘affordable housing’ strategy isn’t working too well outside of the NCR, says an IIFL report, which points out that not a single project has been delivered yet in Kolkata, even though it has been present in the city for so many years.
However, the company apparently wants to launch 30 million sq ft of space in 2009-10. But, as IIFL points out, that’s more than the area it has sold in the last three years. Unitech cannot afford to fritter away scarce resources; it needs to rethink its strategy.
Few takers for realty projects on the block
Few takers for realty projects on the block
The Economic Times, April 21, 2009, page 6
Neha Dewan & Raja Awasthi, ET Bureau, NEW DELHI
The cash strapped real estate sector is desperately seeking funds to script a revival. And what could be a better way out for the companies than to put their assets on the block. Buyers, however, are still not coming forward. SundayET’s findings reveal that an estimated Rs 4,500 cr to Rs 5,000 cr worth upcoming projects by leading developers around the country are on the block - but takers are very few. Industry sources say that while top names in the business have been able to sell off some assets, a lot more of those still need to be offloaded.
People close to deals say that while there were a large number of developers entering the special economic zones (SEZ) segment during the boom time, now there is almost a reverse wave to get out. Says Rajeev Talwar executive director, DLF Group, “The market over the last six to eight months have witnessed a major slowdown as far as the cash flow is concerned. This has resulted in many developers trying to raise cash by putting few of the assets on the block. What will sell in these conditions are projects which are priced attractively as there is some room for the buyer.” DLF, India’s largest real estate developer, has requested the ministry of commerce & industry for de-notification of four of its nine SEZs for IT and IT-enabled service projects.
A look at the projects on the block says it all. Real estate major Unitech, for instance, has put its Marriott Service Apartments in Gurgaon up for sale. The developer is in talks with some companies for the project, which stands at an estimated cost of Rs 250 cr. Ditto is the case with DLF which is looking at selling 8 of its hotel plots over the next three months at an estimated cost of Rs 900 crore. The group is also considering pulling out of the Rs 1,000 crore infopark project which was being developed over 54 acres., The case with Parsvnath is no different. The developer is in talks with companies to sell off its four hotel projects in Hyderabad, Goa, Ahmedabad and Lucknow. And Omaxe too is looking for a buyer for its Omaxe Citadel project in Jasola which is worth roughly around Rs 90 to Rs 100 cr.
However, many of these projects are not attracting buyers. So is it a case of high valuation that is acting as a dampener? Sanjay Dutt, CEO, business, Jones Lang LaSalle Meghraj, says that there was fundamentally a valuation problem in the first leg of resale during Q4 in 2008. But that has changed in the first quarter of 2009. “Markets fell considerably in Q1 ‘09. That sent shock waves globally which, in turn, impacted valuations and brought them down. But that still hasn’t happened across the board. Hence, valuations in some cases are still high,” he says. Dutt says that more transactions are expected over the next few months. “Those developers who have aligned to market rates are seeing sales. Those who were adamant about high valuations will be forced to sell on revised value transactions. The next 3-6 months are expected to see more transactions taking place.”
The Economic Times, April 21, 2009, page 6
Neha Dewan & Raja Awasthi, ET Bureau, NEW DELHI
The cash strapped real estate sector is desperately seeking funds to script a revival. And what could be a better way out for the companies than to put their assets on the block. Buyers, however, are still not coming forward. SundayET’s findings reveal that an estimated Rs 4,500 cr to Rs 5,000 cr worth upcoming projects by leading developers around the country are on the block - but takers are very few. Industry sources say that while top names in the business have been able to sell off some assets, a lot more of those still need to be offloaded.
People close to deals say that while there were a large number of developers entering the special economic zones (SEZ) segment during the boom time, now there is almost a reverse wave to get out. Says Rajeev Talwar executive director, DLF Group, “The market over the last six to eight months have witnessed a major slowdown as far as the cash flow is concerned. This has resulted in many developers trying to raise cash by putting few of the assets on the block. What will sell in these conditions are projects which are priced attractively as there is some room for the buyer.” DLF, India’s largest real estate developer, has requested the ministry of commerce & industry for de-notification of four of its nine SEZs for IT and IT-enabled service projects.
A look at the projects on the block says it all. Real estate major Unitech, for instance, has put its Marriott Service Apartments in Gurgaon up for sale. The developer is in talks with some companies for the project, which stands at an estimated cost of Rs 250 cr. Ditto is the case with DLF which is looking at selling 8 of its hotel plots over the next three months at an estimated cost of Rs 900 crore. The group is also considering pulling out of the Rs 1,000 crore infopark project which was being developed over 54 acres., The case with Parsvnath is no different. The developer is in talks with companies to sell off its four hotel projects in Hyderabad, Goa, Ahmedabad and Lucknow. And Omaxe too is looking for a buyer for its Omaxe Citadel project in Jasola which is worth roughly around Rs 90 to Rs 100 cr.
However, many of these projects are not attracting buyers. So is it a case of high valuation that is acting as a dampener? Sanjay Dutt, CEO, business, Jones Lang LaSalle Meghraj, says that there was fundamentally a valuation problem in the first leg of resale during Q4 in 2008. But that has changed in the first quarter of 2009. “Markets fell considerably in Q1 ‘09. That sent shock waves globally which, in turn, impacted valuations and brought them down. But that still hasn’t happened across the board. Hence, valuations in some cases are still high,” he says. Dutt says that more transactions are expected over the next few months. “Those developers who have aligned to market rates are seeing sales. Those who were adamant about high valuations will be forced to sell on revised value transactions. The next 3-6 months are expected to see more transactions taking place.”
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