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.