Real Estate Intelligence Report, Friday, July 17, 2009

No stamp duty in SEZs

No stamp duty in SEZs
The Economic Times, July 17, 2009 Page 1

Relief On Land Buys Even For Non-Core Activities Within Notified Area

Deepshikha Sikarwar & Amiti Sen NEW DELHI

DEVELOPERS of special economic zones (SEZs) will get a blanket exemption from stamp duty on land purchases within the notified area for non-core activities such as building hotels, housing complexes, shopping malls and golf courses, according to a government official.

The exemption had become a contentious issue with states where these projects are located demanding that it be restricted to core manufacturing areas, which have to cover at least 50% of the total SEZ land.

The government has extended this to cover the whole area within the zone and has issued guidelines detailing the circumstances under which the sop can be availed, said the official asking not to be named.

For the developers of the 500-odd SEZs in the country, slated to bring in investments of over Rs 100,000 crore, this ends the uncertainty that had cropped up after some states had voiced their opposition.

Orissa had objected to the Centre giving such a tax sop without consulting states and had termed the move ultra vires. It had pointed out that while the Centre had powers to legislate on stamp duty, the power to fix the duty rates lay with the states.
This had forced the commerce department to seek the law ministry’s opinion on the provision in the SEZ Act.

The exemption, however, will be available only after formal approval of the zone. For land bought after in-principle approval, the state government may either give the exemption upfront or collect the duty and refund it after the zone has been set up. If under some circumstances, notification of a zone is cancelled, the state government will be entitled to withdraw the concession and recover the same from the developer.

Haryana plans 8,000 low-cost flats in NCR

Haryana plans 8,000 low-cost flats in NCR
Times of India, July 17, 2009, Page 1

Haryana has entered into a deal with real estate developers to provide affordable housing and is inviting expressions of interest for building 8,000 flats in NCR areas in the state

8,000 flats coming up in Gurgaon and Faridabad

8,000 flats coming up in Gurgaon and Faridabad
Times of India, July 17, 2009, Page 3

Manveer Saini TNN

Chandigarh: In a move expected to give a big push to the housing sector in Gurgaon and Faridabad, the Haryana Housing Board is in the process of inviting expressions of interest for building 8,000 flats in these cities and some other places in the national capital region areas. This is in addition to the 38,000 housing units, majority of them in NCR, planned in the next two years.

Under the latest project, the state will enter into an agreement with real estate developers to provide affordable housing to middle and lower middle class under the public private partnership mode.

‘‘Since we do not have land in Faridabad and Gurgaon, we will be joining hands with private colonizers whose projects have been stuck due to the (economic) slowdown. We’ll prefer those who have the licence, and then those who have enough land,’’ said S P Gupta, chief administrator of the housing board.

The announcement follows chief minister Bhupinder Singh Hooda’s assurance to developers that steps will be taken to counter the slump in the real estate market. It will also fulfil his commitment of providing cheap housing to locals, especially those in NCR cities of Gurgaon and Faridabad. Among the other areas selected for the project are Bawal (in Rewari district close to Gurgaon), Badhi (Sonepat) and Karnal. Officials claim that around 828 units would come up at Badhi, a township to the north of Delhi.

Govt front-loads borrowing, to raise Rs 2.99 lakh cr in H1

Govt front-loads borrowing, to raise Rs 2.99 lakh cr in H1
The Financial Express, July 17, 2009, Page 1

fe Bureau, New Delhi

The government will raise two-thirds of its planned annual borrowing of Rs 4.51 lakh crore in the first half of the current fiscal. At a meeting on Thursday, the finance ministry and RBI resolved to borrow Rs 2.99 lakh crore in the April-September period, higher by Rs 58,000 crore, or 24%, of the Rs 2.41 lakh crore indicated in March. These funds will be used to bridge the fiscal deficit, which is estimated to widen to 6.8% in 2009-10.

Since the government has already raised Rs 1.89 lakh crore (this includes Rs 12,000 crore in bond sales planned for Friday) from the market, it will borrow the remaining Rs 1.1 lakh crore in ten tranches beginning next week until the end of September, RBI deputy governor Shyamala Gopinath said.

“There is ample liquidity in the system,” said Gopinath, assuring markets that the government’s borrowing programme would not be disruptive. Banks have parked an average of Rs 1.2 lakh crore in funds every day with RBI since April 1, against Rs 46,100 crore in the previous three months. RBI will also continue to support the market by buying bonds in the secondary market.

The bond market cooled off on Thursday as the government’s additional borrowings were below market expectations. Yields on the benchmark ten-year government bond closed at 6.79% on Thursday, from its previous close of 6.85%. However, traders said the initial optimism would not last and that yields would continue to remain under pressure.

According to the borrowing schedule, the government will raise the remaining one-third, or Rs 1.52 lakh crore, between October and March. “It would be quite challenging to manage second-half borrowings unless the government is able to raise resources from other avenues like disinvestment,” said DK Joshi, principal economist at ratings agency Crisil.

A substantial portion of the government’s debt is being raised in the first half of the fiscal to ensure that enough funds are available to the private sector in the remainder of the year, when the economy is expected to pick up steam. Once this takes place, credit growth is expected to rise significantly from 15.65% for the fortnight ended July 3.

“The recovery momentum is likely to be lower in the first half. So, in the second half, when we expect stronger recovery, the government’s borrowing will not interfere with private demand,” confirmed Bank of Baroda chief economist Rupa Rege Nitsure.

The Centre’s debt sale includes seven tranches of Rs 12,000 crore each between July 18 and September 4. Another Rs 11,000 crore, Rs 7,000 crore and Rs 8,000 crore will be carried out between September 4 and September 25, the finance ministry stated. The government paper will be of 5-20 years maturity. The government will also roll over treasury bills worth Rs 86,500 crore in 11 auctions between July 22 and September 30.

In a separate statement, RBI said it would continue its open market operations (OMOs) and conduct auctions every alternate week. Under these OMOs, the central bank buys government bonds in the secondary market to enhance liquidity and support the debt market. RBI had said in March it would buy bonds worth Rs 80,000 crore through OMOs in April-September. So far, the central bank has bought government paper worth Rs 29,850 crore through these auctions.

Centre to borrow more in first half

Centre to borrow more in first half
The Hindu Business Line, July 17, 2009, Page 1

Our Bureau, New Delhi

The Centre has stepped up its first half year borrowing programme by nearly 25 per cent to Rs 2.99 lakh crore.

This is being done to fund a higher-than-anticipated fiscal deficit, owing to higher social sector spending and lower revenue receipts.

The new borrowing level for April-September 2009, arrived at by the Finance Ministry and the Reserve Bank of India (RBI) following a meeting here on Thursday, is Rs 58,000 crore more than the March 2009 projection of Rs 2.41 lakh crore.

For the entire fiscal ending March 31,2009, the Centre’s gross market borrowings have been budgeted at Rs 4.51 lakh crore, about Rs 89,000 crore more than what was projected in the Interim Budget on February 16.

The new borrowing level of Rs 2.99 lakh crore would also mean that Government would in the first half complete about 66 per cent of its total borrowing target of Rs 4.51 lakh crore for the entire fiscal. “So far, the Government has borrowed Rs 1.89 lakh crore (in the first half). The balance Rs 1.10 lakh crore will be raised till September 30 in ten tranches”, Ms Shyamala Gopinath, RBI Deputy Governor, told reporters after meeting the Finance Secretary, Mr Ashok Chawla, and other senior Finance Ministry officials.

On open market operations, Ms Gopinath said that Rs 43,000 crore, out of Rs 80,000 crore announced in March 2009, had already been raised “This would continue through the first half….. We will manage the programme in non-disruptive manner”.

Calendar of borrowing

Later in the day, the Finance Ministry released an indicative calendar of Government borrowing for Rs 1.10 lakh crore through July 18 - September 30.

Although the market had been worried over the size as well as timing of the extra borrowing for the current fiscal, the announcement saw the easing of bond yields as the additional borrowing was below expectations.

Two-thirds of govt borrowing in H1

Two-thirds of govt borrowing in H1
Business Standard, July 17, 2009, Page 1

BS Reporters / New Delhi/ Mumbai

The government intends to borrow Rs 1,10,000 crore over the next 75 days, which will push up its first-half borrowings by Rs 58,000 crore from the earlier planned level.

This means that the government will now borrow Rs 2,99,000 crore by the end of September through bond issues, which would account for around two-thirds of the Rs 4,51,000 crore the Centre proposes to borrow during the current financial year.

The revised borrowing calender finalised by the Reserve Bank of India (RBI) and the finance ministry today has generally met with market approval. “Given the fact that the bond supply is large over a short duration, it is a positive sign,” said Sandeep Bagla, senior vice-president at ICICI Securities.

The government had earlier indicated it would frontload its borrowings to ensure that there was enough space for private sector fund raising in the second half. So far, during the financial year, the government has raised market loans worth Rs 1,89,000 crore.

According to the revised borrowing calendar finalised today, the Centre will maintain its weekly borrowings at Rs 12,000 crore from July 17 to early September before tapering it to 8,000 crore in the last week of September.

Though Finance Secretary Ashok Chawla had earlier indicated that half the borrowings would be supported by the Reserve Bank of India’s (RBI’s) open market operations (OMO), in a statement, the central bank said that for the moment, the OMO estimate of Rs 80,000 crore for the first half of the year was being retained.

Stating that the endeavour was to maintain adequate liquidity in the system, the central bank said: “It is reiterated that the Reserve Bank will have the flexibility to make changes in the amount of OMO and alter frequency and day of auction as may be necessary.”

So far in 2009-10, RBI has bought securities worth Rs 29,850 crore through OMO, which involves buying government bonds in the secondary market, against the notified amount of Rs 43,500 crore.

As for the third element of the fund raising exercise — the unwinding of market stabilisation scheme bonds — RBI has transferred Rs 28,000 crore through desequestering, while bonds of Rs 37,500 crore have been redeemed. Over the next 10 weeks, MSS redemptions of Rs 4,500 crore are due.

Under MSS operations, RBI had issued securities on behalf of the government and sucked out the excess liquidity. The government bears the interest costs on these bonds.

When these bonds are unwound, the bonds are liquidated and the money is transferred to the Centre’s account. The funds which are released would meet a part of the government’s borrowing requirements and do away with the need to tap the markets to raise funds.

“The government and the RBI are trying to front-load the borrowing programme to avoid crowding out private investments. This borrowing will be done in a non-disruptive manner.

There is ample liquidity in the system,” RBI Deputy Governor Shyamala Gopinath said earlier in the day.

Following her comments, the yield on the most-traded 6.90 per cent paper due in July 2019 dropped six basis points to 6.79 per cent (yield has an inverse relation to price). The borrowing calendar, released in the evening, provided further comfort to the bond dealers and bankers.

“The bond yields are not likely to move up further and remain range-bound,” added IDBI Gilts Managing Director G A Todas.

Though the government has proposed to increase its borrowings by 72 per cent during the current financial year, lenders such as Corporation Bank Chairman and Managing Director J M Garg said interest rates were unlikely to move up soon since there was ample liquidity in the system and credit demand was low.

Today banks parked Rs 1,28,000 crore with RBI through the reverse repo window, which is used to absorb surplus liquidity from the system. The flow of bank credit has dropped to 16.34 per cent during the year up to July 3, as against RBI’s projection of 18 per cent for the current financial year.

CENTRE TO BORROW 24% MORE IN H1

CENTRE TO BORROW 24% MORE IN H1
The Economic Times, July 17, 2009 Page 1

THE GOVERNMENT WILL

borrow Rs 2.99 lakh crore, 24% more than its earlier estimate for H1 of FY10. “We have already done Rs 1,89,000 crore. The balance is Rs 1,10,000 crore, which we will do up to September 30 in 10 tranches,” RBI deputy governor Shyamala Gopinath told reporters.

Bonds cool to govt’s stiffer borrowing

Bonds cool to govt’s stiffer borrowing
The Economic Times, July 17, 2009 Page 9

Centre To Borrow Rs 2.99 Lakh Crore In First Half, 24% Higher Than Earlier Estimate

Our Bureaus NEW DELHI MUMBAI

THE government bond market shrugged off the Centre’s revised borrowing schedule to raise Rs 1.1 lakh crore in the next 10 weeks through long-dated bonds, as the amount was in line with expectations. The Centre will borrow Rs 2.99 lakh crore from markets, 24% higher than its earlier estimate, for the first half of this fiscal.

The revised schedule would raise the total target for the first half of this fiscal to Rs 3 lakh crore against Rs 2.4 lakh crore as per the original schedule, and is eventually expected to push up yields. After market hours, the central bank announced that of the next 10 auctions (after Friday), seven will raise Rs 12,000 crore for the government while there will be three auctions of Rs 11,000 crore, Rs 8,000 crore and Rs 7,000 crore each. A Rs 12,000-crore bond auction is scheduled on Friday.

“We have already done and announced Rs 1,89,000 crore...So, the balance is Rs 1,10,000 crore, which we are going to be doing up to September 30 in 10 tranches,” RBI deputy governor Shyamala Gopinath told reporters after meeting finance secretary Ashok Chawla.

After her statement, benchmark 10-year bond yields declined to end at 6.79%, down 7 basis points. When yields fall, prices rise. “It’s unlikely that the market will get spooked by the new borrowing schedule, as it was more or less expected,” said Sandeep Bagla, senior vice-president at ICICI Securities Primary Dealership. “Excess supply will remain an issue, but global factors like US treasury yields and crude prices will also hold the key,” he added.

Ms Gopinath also sought to assuage market fears over the excess supply of government paper. “There is ample liquidity in the system. We will manage the borrowing programme in a nondisruptive manner.”

The government has raised Rs 1.77-lakh crore from 13 bond auctions up to July 10 and borrowed more than originally planned in the last seven sales.

The central bank also reiterated its commitment to open market operations wherein it buys bonds directly from traders. The rupee gave up some of its early gains to end at 48.74 against the dollar, weaker than Wednesday’s close of 49.64 with stocks hit by profit booking.

Domestic job market rises 8.1% in June, highest in a year

Domestic job market rises 8.1% in June, highest in a year
The Financial Express, July 17, 2009, Page 2

fe Bureaus, New Delhi

There is some positive news with hiring activity in the country rising 8.1% in June, 2009, compared with May, 2009. According to the JobSpeak survey conducted by online jobs portal Naukri.com, the growth in recruitment in June over May is “the highest upward movement since July 2008, indicating a strong hiring sentiment coming back to the market”.

Out of the key sectors surveyed in the report, all sectors except for FMCG, food & beverage and consumer durables showed an increase in hiring. While banking& financial services (BFSI) saw an increase of 22% in June, hiring for IT professionals was back in action and saw an increase of 12%. However, hiring in BPO and ITeS sectors was up by 3% as against May, with recruitment of software professionals going up 10%.

Other sectors, which saw an uptake include real estate and retail, where hiring was up by almost 25%. “Telecom saw a comeback with hiring activity picking up by 17%,” noted the report. However, hiring in FMCG and consumer durables saw a 8% and 14% drop, respectively.

Another sector which saw a huge upsurge in hiring was teaching and education, partly due to the beginning of the new academic year, as recruitment of professionals in these sectors saw a jump in demand by 22%. In BFSI, banking & insurance professionals saw a jump in demand by 12%, while demand for accounting & finance professionals inched up by 5%.

In terms of city-wise hiring, out of the top 13 cities, 12 recorded an increase in hiring activity. While hiring activity in Mumbai picked up by 13% after falling for several months in succession, Bangalore, Chennai and Pune saw a pick up in hiring activity by 10%,19% and 15%, respectively.

Inflation up at minus 1.21%

Inflation up at minus 1.21%
The Financial Express, July 17, 2009, Page 2

Press Trust of India, New Delhi

Driven by higher prices of fuel items like petrol and diesel, inflation rose marginally to (-)1.21% for the week ended July 4 against (-)1.55 %in the previous week.

At the same time, prices of food articles like cereals, pulses, spices, and fruit and vegetables also remained firm. The wholesale price index during the corresponding week a year ago was as high as 12.19 %.

Following the government's decision to raise fuel prices effective July 1, prices of naphtha rose 15%, furnace oil 11%, petrol 10%, high-speed diesel 7% and light diesel oil by 4 %.

Fuel items turned expensive as the government increased prices of petrol and diesel by Rs 4 and Rs 2 per litre, respectively. As a result, the Fuel, Power, Light and Lubricants index increased by 3.1% during the week.

This is the fifth week in a row when inflation remained in negative territory. However, according to analysts, the RBI may not cut benchmark policy rates or reduce the ratios when the central bank reviews the credit policy on July 28.

The RBI should not cut the repo rate and the cash reserve ratio in July monetary policy, said former RBI deputy governor S S Tarapore. The challenge before the monetary authorities at present is to deal with the fiscal deficit, he said.

During the week, food items like coffee turned expensive 15%, arhar 3% , maize 2%, and condiments and spices by 1%.

The problem with deficit? Tight money

The problem with deficit? Tight money
The Financial Express, July 17, 2009, Page 6

Jayanth R Varma

The movement of equity and bond markets after the announcement of the budget is threatening to look like a re-run of early 2008 when falling stock markets and rising interest rates delivered a double whammy to the economy. Monetary policy needs to respond to this threat and avoid a similar double whammy now.

To recall what happened in early 2008, the stock market dropped by nearly 40% from mid-January to mid-July, while the 10-year government bond yield rose by over 180 basis points. The corporate sector found that both equity and debt were either unavailable or too expensive. With a lag, this funding squeeze had a highly negative impact on investment and on the broader economy.

The rise in interest rates at that time was due to the tight money policy followed by the RBI in response to double digit inflation caused by rising prices of food and oil. What nobody knew then, but is evident now is that the inflation of early 2008 was a transient phenomenon that was being killed by the global economic downturn. In retrospect, the tightening of interest rates was unnecessary.

The situation now has some similarities. The failure of the monsoon so far is causing fears of food price inflation. These fears would weigh on RBI and could induce it to keep monetary policy too tight. At the same time, the spending and borrowing programmes announced in the budget has caused long-term interest rates to rise. Interest rates would rise even further if RBI does not accommodate the borrowing through monetary easing.

Loose fiscal policy combined with a monetary policy fixated on inflation can cause interest rates to explode. In the US, in the early 1980s this was what happened when President Reagan embarked on a spending spree while the Federal Reserve under Paul Volcker declared war on inflation. The yield on long term US government bonds crossed 15% and shorter maturity yields rose even higher. This combined with the rising dollar (itself a result of the high interest rates) brought about a nasty recession in the US.

A recession induced by high interest rates is the last thing that India needs today when the economy is being kept afloat by a large fiscal stimulus. If we take away the support provided to the core sectors from government spending on infrastructure and the support provided to consumer durables by the sixth pay commission, the economy is in pretty bad shape. In this context, the fiscal stimulus is unavoidable and the only question is whether the central bank will accommodate the fiscal deficit through its monetary policy.

A lot of the discussion on the fiscal deficit in recent days has focused on the ‘crowding out’ of private borrowing by government borrowing. In today’s environment I worry more about private borrowing being crowded out by high interest rates, and fortunately monetary policy is a tool that can prevent this.

Many countries are running large deficits. The fiscal deficits of the US and the UK are much higher than ours as a percentage of GDP. The big difference is that in those countries, extremely loose monetary policy has worked in tandem with the fiscal policy. At extremely low interest rates, higher levels of government debt are sustainable simply because the cost of servicing the debt is low.

In India on the other hand, we have turned to fiscal policy long before exhausting the limits of monetary policy. This means that the government is undertaking huge borrowing at relatively high interest rates. The resulting high interest bill will only make the fiscal position worse in coming years.

In the event of a failed monsoon, tight monetary policy can control food price inflation by ensuring people run out of money before they run out of food. It is, however, much less painful for the broader economy to take advantage of our comfortable foreign exchange reserves and tackle food price inflation through aggressive imports.

Turning to the stock market, a modest decline in stock prices is not worrying. There is little point in propping up asset price bubbles when the economic fundamentals are as weak as they are today. What I find more worrying is the possible closing of the primary equity market that had begun to open up for Indian companies in May and June in the form of private placements.

There are signs that this window is closing again due to rising global risk aversion as well as changing risk perceptions about India. If this were to happen, then the corporate sector would be starved of risk capital as it tries to restructure and deleverage while grappling with the challenging economic environment. It is important to keep the primary market open for sound companies that are willing to raise equity at realistic valuations.

CMIE lowers growth rate to 5.8% on poor monsoon

CMIE lowers growth rate to 5.8% on poor monsoon
The Financial Express, July 17, 2009, Page 10

Press Trust of India, Mumbai

Economic think-tank, Centre for Monitoring Indian Economy (CMIE), has lowered India’s real GDP growth figure to 5.8%from the earlier expectation of 6.6%due to failure of the monsoon in June.

“India’s real GDP is expected to grow by 5.8%in FY 10,” CMIE said in its monthly review here. The GDP rate of 5.8%is much lower than its earlier expectation of a 6.6% increase in growth. The revision is entirely because of the failure of the monsoon in June, CMIE said.

While the Union Budget for 2009-10 was expansionary and conducive to growth, the delayed monsoon and the consequent 4.7%decline in agriculture is expected to shave off 0.8 percentage points from the GDP growth rate.

At 5.8%, India is still among the very few countries in the world with a respectable growth rate, it said.

This growth rate remains respectable in spite of two consecutive external shocks within less than ten months of the global liquidity crisis in September and the failure of the monsoon in June.

The growth rate is a reflection of the resilience of the Indian economy and its strong fundamentals before the crisis struck in late 2008, CMIE said.

GDP growth to be lower at 5.8%: CMIE

GDP growth to be lower at 5.8%: CMIE
The Economic Times, July 17, 2009 Page 8

PTI MUMBAI

ECONOMIC think tank, Centre for Monitoring Indian Economy (CMIE), has lowered India’s real GDP growth figure to 5.8% from the earlier expectation of 6.6% as monsoon played truant in June.

“India’s real GDP is expected to grow by 5.8% in FY10,” CMIE said in its monthly review here. The revision is entirely because of the failure of the monsoon in June, CMIE said.

While the Union Budget for 2009-10 was expansionary and conducive to growth, the delayed monsoon and the consequent 4.7% decline in agriculture is expected to shave off 0.8% from the GDP growth rate. At 5.8%, India is still among the very few countries in the world with a respectable growth rate, it said. This growth rate remains respectable in spite of two consecutive external shocks within less than ten months of the global liquidity crisis in September and the failure of the monsoon in June. The growth rate is a reflection of the resilience of the Indian economy and its strong fundamentals before the crisis struck in late 2008, CMIE said.

Indian economy grew at a slow pace of 6.7% in 2008-09 against a rate of 9% in the preceding four years. CMIE said the ongoing industrial recovery will also be impacted and projected the industrial production growth at 4.8% in the current fiscal against 5.1% projected earlier. “Nevertheless, this growth rate is significantly higher than the 2.4% growth registered in 2008-09,” it said.

Crop prospects hazy as rainfall is much below normal still

Crop prospects hazy as rainfall is much below normal still
The Hindu Business Line, July 17, 2009, Page 1

Water storage at most reservoirs at less than half the capacity.

M.R. Subramani, Chennai

Monsoon continues to be in the deficit, but the shortfall has been trimmed to 27 per cent for the week-ended July 15 against 36 per cent for the period ending July 8.

A six-per cent excess rainfall during July 9-15 had helped. But rainfall in Punjab, Haryana, Uttarakhand, Uttar Pradesh, Himachal Pradesh, Jharkhand and West Bengal continues to be deficient.

For the entire period starting June 1, rainfall has been deficient in key farming areas such as Gujarat, Marathwada, Vidharbha, Madhya Pradesh, Uttar Pradesh, Haryana, Punjab, Uttarkhand and Bihar.

This could affect the prospects of crops such as rice, soyabean, groundnut, maize and pulses.

Already, the prices of pulses are soaring on reports of deficient monsoon and the season for sowing the crop passing by.

That the monsoon’s spread has been uneven can be gauged from the fact that only 10 of the 37 meteorological sub-divisions received excess rainfall during July 9-16. Normal rainfall was experienced in eight sub-divisions. The monsoon was deficient in 11 and scanty in seven sub-divisions, according to the India Meteorological Department data. From June 1, the monsoon has been deficient in 20 sub-divisions.

As the monsoon turned vigorous last week, the reservoirs have begun to fill up. The storage position on Thursday was 20.731 billion cubic metres (BCM) or 14 per cent of the full reservoir level of 151.768 BCM. During the same period last year, it was 28 per cent.

The storage level in key reservoirs such as Bakra Nangal is at a low 19 per cent against 60 per cent during the same period a year ago. The level in almost all the major reservoirs is less than half the capacity, barring Gerusoppa and Kabini, which benefitted from the heavy rains a fortnight ago in Karnataka.

An area of concern is the poor level in the Godavari, Narmada, Kutch and Ganga basins.

Divestment road map likely by Aug 7; PSUs being shortlisted

Divestment road map likely by Aug 7; PSUs being shortlisted
The Financial Express, July 17, 2009, Page 12

Praveen Kumar Singh, New Delhi

The Centre is likely to finalise the blueprint for disinvestment by August 7, the minister of state for heavy industries and public enterprises, Arun Yadav, has said, adding that his ministry is in close talks with the finance ministry to select the best out of “many companies” that have the potential for disinvestment.

“There are many companies in which the government can sell equity. The process of selling the stake in NHPC Ltd and Oil India Ltd is on and the initial public offers of the two will be floated in the next two months. The government will finalise the names of the other companies and the right time for disinvestment in the next 2-3 weeks,” Yadav told FE.

When asked about the companies that may be under consideration, Yadav said, “It is too early to talk about that. The picture will be clear soon”. The decision naming the companies is to be taken up by the department of disinvestment, under the finance ministry, he said. However, the ministry of heavy industries and public enterprises is discussing the issue with the finance ministry “on daily basis”, Yadav added.

The statement comes two days after finance minister Pranab Mukherjee told the Lok Sabha that the process of preparing a road map on disinvestment has been initiated. “My ministry has initiated discussions with other ministries and departments for identifying public sector undertakings (PSUs) where a portion of government shareholding can be sold and for the issue of fresh equity by the public sector undertakings to meet their fund requirements. The details are being worked out and would be announced in due course,” he had said on July 14.

Different ministries have already said that disinvestment is important for their PSUs. Coal minister Sriprakash Jaiswal had declared last month that he is pitching for divesting up to 10% in companies like like Coal India Limited and Neyveli Lignite, which are under his administrative control. Heavy industries minister Vilasrao Deshmukh had also said in June that the government is mulling to sell stake in the already-listed Bharat Heavy Electricals Limited (Bhel). Bhel is the only navratna company under his ministry.

Outlining his ministry’s priority, Yadav said, “The ministry is serious about the revival of sick PSUs and increasing the efficiency of profit-making ones”. He announced that 17 out of 35 PSUs under the department of heavy industry are profitable. Another 15 undertakings, including Tyre Corporation of India and NEPA Limited, are either sick or on the verge of being declared sick.

China picks up pace with 7.9% growth

China picks up pace with 7.9% growth
The Hindu Business Line, July 17, 2009, Page 17

China’s economy grew 7.9% in the second quarter of 2009, the government said on Thursday, in a stunning turnaround for the Asian powerhouse that offered some hope for the rest of the world. With help from $580 billion in government pump priming, the world's third-biggest economy picked up pace again after the global economic crisis dragged growth down to 6.1% in the first quarter. China's gross domestic product grew by 7.1% in the first half of 2009 compared with the same period a year earlier, according to the bureau. This put China back on track to achieve its goal of 8.0% growth for the year, despite the financial crisis hitting its crucial export sector particularly hard.

China grows 7.9% on stimulus boom

China grows 7.9% on stimulus boom
The Economic Times, July 17, 2009 Page 13

AP BEIJING

CHINA’S second-quarter growth accelerated on a stimulus-fed investment boom, the government reported Thursday, sparking a rise in Asian stocks on hopes the world’s third-largest economy could help to lead a global recovery.

The economy grew by 7.9% from a year earlier, up from the first quarter’s 6.1% growth rate, the National Bureau of Statistics said. Analysts said full-year growth should easily reach the government’s 8% target.

“This should give people confidence that China’s economy is on strong footing and that there are a lot better days ahead,” said Alan Landau, Hong Kong-based president of Marco Polo Pure Asset Management.

The pickup in growth reflected the impact of Beijing’s 4 trillion yuan ($586 billion) stimulus, an effort to offset a collapse in exports by pumping money into the economy through spending on public works construction.

“We are in a blood transfusion-led economic recovery,” said Rock Jin, chief economist for Sinolink Securities Co. in Beijing. Many analysts expect China to be the first major country to emerge from the worst global slump since the 1930s. That could help propel global growth as China imports more raw materials, industrial components and consumer goods. In the United States, a Chinese recovery could help to boost exports of factory and construction equipment and farm goods such as soybeans. But the bulk of China’s imports are raw materials such as Australian iron ore and components from other Asian countries, so the direct impact on the United States and Europe might be limited. China’s strong quarterly results, coupled with higher US corporate profits, spurred a rally in Asian stocks. Markets in Tokyo, Hong Kong, South Korea and Singapore all rose. In mainland China, markets fell as investors took profits after a rally, but the benchmark index is still up 75% this year on enthusiasm about the stimulus.

The International Monetary Fund raised its forecast of China’s 2009 growth this month by one percentage point to 7.5%. The World Bank boosted its forecast last month from 6.5% to 7.2%, citing unexpectedly strong stimulus results. Still, the Chinese government warned that despite the latest improvement, a full-fledged recovery is not firmly established.

“The difficulties and challenges in the current economic development are still numerous,” said a statistics bureau spokesman, Li Xiaochao. “The basis of the rebound of the people’s economy is not stable.”

Goldman Sachs said compared with the previous quarter—the way other major countries measure economic expansion—growth accelerated to a near-record 16.5% on an annualised basis. JP Morgan said it calculated that sequential expansion at 14.9%. China’s growth sank last year as global demand for exports collapsed, wiping out up to 30 million factory jobs. But the economy was regarded as poised for a quick a recovery, with strong banks unhampered by the mortgage crisis that battered Western lenders.

Clinton to talk CSR with India Inc

Clinton to talk CSR with India Inc
The Financial Express, July 17, 2009, Page 1

Sanjay Jog, Mumbai

India Inc’s initiatives in corporate social responsibility (CSR) will dominate the discussions between visiting US secretary of state Hillary Clinton and a 10-member team led by Tata Group chairman Ratan Tata on July 18.

Clinton has shown a desire to understand India Inc’s ongoing and intended CSR projects. She would later spell out the US schemes in this respect. The 10-member team comprises RIL chairman & managing director Mukesh Ambani, Piramal Healthcare director Swati Piramal, Godrej & Boyce CMD Jamshyd Godrej and National Dairy Development Board chairman Amrita Patel. Names of the rest are being finalised.

Sources told FE that “The US consulate called upon Ratan Tata to organise a group of leading industrialists not exceeding 10 for the meeting. Clinton is keen to hold deliberation exclusively on CSR, and not on other issues.”

Curiously, more pressing issues like sale of nuclear reactors, US move to curb H1 B visas, climate change and trade expansion will not be on the agenda.

After her interaction with industry representatives, Clinton will spend about an hour with volunteers and artisans of Self Employed Women’s Association (Sewa), a non-government organisation founded by Ela Bhatt.

Clinton’s meeting comes in the backdrop of greater acceptance of CSR by Indian companies in recent years. Corporate India has spread its CSR activities across 20 states and Union territories, with Maharashtra gaining the most from them. About 36% of the CSR activities are concentrated in the state, followed by about 12% in Gujarat, 10% in Delhi and 9% in Tamil Nadu.

Assocham’s ‘Eco Pulse Study’ on CSR for 2009-10, released in June, says some 300 corporate houses, on an aggregate, have identified 26 different themes for their CSR initiatives. Of these 26 schemes, community welfare tops the list, followed by education, the environment, health as well as rural development.

Of the 300 corporate houses, 74 are from the chemical sector, contributing 12% to the overall CSR initiatives. Among these 74 companies, 28% CSR themes focuses on environment, followed by 18% on education, 6% on community welfare and 12% on healthcare.

As many as 62 companies in the FMCG and consumer durable sector are placed at second position with a CSR initiative contribution of 10.15%. Their focus is mainly on community welfare (29%), environment (21) and education (15.)

Clinton will be on a five-day visit to India, beginning Friday to start a strategic dialogue with New Delhi, which will include issues like climate change and clean energy.