US GDP grows 2.83% in Q3

US GDP grows 2.83% in Q3
The Financial Express, November 25, 2009, Page 20

Reuters, Washington

The US economy grew more slowly than initially thought in the third quarter, held back by strong imports and weak investment in nonresidential structures, hinting at a lackluster recovery. Corporate profits surged, however, as businesses managed to ramp up output even as they were still sharply cutting payrolls, a report from the commerce department showed on Tuesday.

In its second reading of third-quarter gross domestic product, the department said the economy grew at a 2.8% annual rate, rather than the 3.5% pace it estimated last month.

That was a touch below market expectations for a growth pace of 2.9%. It was still the fastest pace since the third quarter of 2007. GDP measures total goods and services output within US borders. “This demonstrates that the rebound was a little bit more subdued than the first print had suggested and highlights some of the headwinds to growth that could continue,” said Julia Coronado, senior US economist at BNP Paribas in New York.

US stock index futures pared gains following the report, while treasury debt prices rose slightly. The return to growth after four straight quarters of decline in output probably ended the most painful US recession in 70 years. The economy contracted at a 0.7% rate in the April-June period.

Surging imports, which outpaced growth in exports, restrained the economic growth rate in the third quarter. Imports jumped 20.8%, the biggest gain since the second quarter of 1985, instead of 16.4%.

Recovery not broad based: Gokarn

Recovery not broad based: Gokarn
Business Standard, November 25, 2009, Section II, Page 2

BS Reporter / Mumbai

New Dy governor of RBI says capital flows, inflation challenges

Subir Gokarn, who took over as the Reserve Bank of India (RBI) Deputy Governor today, said economic recovery, which was still in its early days, was sluggish and not broad based.

“It’s a recovery but hardly a boom. It is abnormally dependent on a few sectors. So, it could be premature to look for signs of normalcy. We have to see where funds are flowing, what they are flowing to, if they are flowing into activities which will eventually help sustain growth,” Gokarn told reporters shortly after taking charge as RBI’s fourth deputy governor.

The Indian economy, which returned to normalcy following the global economic meltdown, faced newer challenges like rising inflation and capital inflows, he added.

Large flow of foreign funds into domestic stock markets has led to a rise in the rupee in recent months and has drawn complaints from exporters. The government has, however, said that foreign inflows did not pose a threat at present.

Gokarn said though the country was on course to recovery, there might be some domestic and external threats. “So, we have to maintain a balance. We cannot ignore the external circumstances.”

“We are getting back to a more normal situation on the macro-economic front. That criticality has changed a bit now and we are dealing with a number of other pressures...inflation being one of them...capital flows and the possibility that these will expand and the implications it will bring for currency and reserve management or liquidity management,” Gokarn added.

In its second quarter review of the monetary policy in October, RBI had signaled an exit from its accommodative monetary stance. However, Gokarn said the exit policy was not to disrupt the growth process.

“Exit means we are shifting the responsibility of driving growth from a predominantly government-driven spending pattern to a private spending pattern. That is a transition that an exit strategy has to accomplish,” he said, adding that it would not be a good exit strategy if there was a significant slowdown in the economic growth rate.

“Exit is clearly going to have to be done very strategically. How we balance it, how we sequence it are the challenges that we face. Even as we do that, the risk of upsetting the apple-cart are high and we cannot underestimate them," he said.

The silver lining, Gokarn said, was the country’s economic outlook, which, as compared with year ago, was far more comfortable.

“And it gives policy makers a little bit of breathing space,” he said.

Economy in better shape, but recovery sluggish

Economy in better shape, but recovery sluggish
The Economic Times, November 25, 2009, Page 11

New RBI Deputy Governor Subir Gokarn Says It’s Too Early To Talk Of Exiting Easy Money Policy

Our Bureau MUMBAI

SUBIR Gokarn, the new deputy governor of the Reserve Bank of India (RBI), has indicated that the Indian economy is on a better footing compared to a year ago, but warned that recovery is still sluggish and not broad-based.

Mr Gokarn, who took charge on Tuesday, will be in charge of monetary policy, economic analysis, statistics and information management, department of communication and Deposit Insurance & Credit Guarantee Corporation.

During a brief interaction with the media, he said, “The economic outlook is far more comfortable compared to a year ago. This gives policymakers a little bit of breathing space”.

When asked how fast the RBI will consider exiting the expansionary policy (which includes hiking interest rates), he said, “Recovery is still very sluggish, not broad-based, (and) abnormally dependent on some sectors, so it could be premature to look for signs of normalcy”.

With regard to capital flows into the country, he said, “We have to see where the funds are flowing and whether they are flowing into activities that will eventually help sustain growth”. He also said that the RBI is dealing with other pressures like inflation, capital flows and implications for reserve management and liquidity management.

He said India’s exit (from expansionary policy) will have to be scheduled earlier than the rest of world. But at the same time, he said, the RBI will bear in mind that the exit does not disrupt economic growth. “It would not be a good strategy if it would have to significantly slow the rate of growth, the objective of the exit is to keep recovery intact. The exit has to be strategic and how we sequence it is a challenge. There is no readymade road map on exit and every country will have to look at its domestic drivers and balance it,” said Mr Gokarn.

Economy recovering, but inflation a worry

Economy recovering, but inflation a worry
The Financial Express, November 25, 2009, Page 13

Agencies, fe Bureaus, Mumbai

Newly-appointed RBI deputy governor Subir Gokarn on Tuesday said though the economy has returned to normalcy, it faces newer challenges such as rising inflation and capital inflows.

“We are getting back to a normal situation on the macro economy. That criticality has changed a bit now and we are dealing with a number of other pressures...inflation and capital flows being the major ones. The possibility that these will expand and the implications they will bring for currency and reserve or liquidity management needs to be closely watched,” Gokarn said in his first interaction with the media here after taking charge on Tuesday.

Gokarn said it is necessary to be careful while dealing with these and must not underestimate the impact of fiscal measures taken over the past year while managing the global economic crisis.

“Exit (from a softer monetary policy of low interest rates) is clearly going to be done very strategically. How we balance it, how we sequence it are the challenges that we face. Even as we do that, the risk of upsetting the apple-cart is high and we cannot underestimate them,” Gokarn said.

The massive influx of foreign funds into the domestic stock markets has led to a phenomenal rise in the rupee in the recent past, making the country's exports uncompetitive in the global market and worrying policymakers.

In his new post, Gokarn will look after the monetary policy department, department of economic analysis and policy among others. His role will be important as the RBI currently faces the challenge of pushing economic growth while checking inflation.

“Gokarn will also represent the Reserve Bank at the G-20 deputies’ forum,” the RBI said. Gokarn has been appointed as the deputy governor of the RBI in place of Rakesh Mohan, who had resigned earlier this year.

“Gokarn has been appointed deputy governor for three years from the date of his taking over. He will be the fourth deputy governor, the other three being Shyamala Gopinath, Usha Thorat and KC Chakrabarty,” RBI said.

Prior to joining the RBI, Gokarn was the chief economist of rating agency Standard & Poor’s Asia-Pacific. He assumed the position in August 2007 after being the executive director & chief economist of Crisil, in which S&P’s acquired a majority stake in 2005.

Unitech targets $700m via FCCBs

Unitech targets $700m via FCCBs
The Economic Times, November 25, 2009, Page 1

Realtor Says Money For Township Project & Not To Retire Debts

Arun Kumar & Deepshikha Sikarwar NEW DELHI

UNITECH, India’s second-largest real estate company, has sought approvals from the government and central bank to raise $700 million (Rs 3,200 crore) through foreign currency convertible bonds (FCCBs), the first time a local realtor has sought to raise funds using this route in more than two years.

New Delhi-based Unitech, among those severely hit by the real estate downturn, has applied for approvals to the Department of Industrial Policy and Planning (DIPP) and the Reserve Bank of India (RBI), and has assured them that the funds will be used to develop an integrated township and not repay existing debt.

A senior government official told ET that the DIPP has sent the proposal to the department of economic affairs in the finance ministry after clearing it for further approval.

New SEZ proposals to be taken up on December 15

New SEZ proposals to be taken up on December 15
The Financial Express, November 25, 2009, Page 11

Press Trust of India, New Delhi

While the revision of guidelines for setting up special economic zones is still pending, the government will continue to approve proposals for new SEZs, which would be developed in an environmentally-sustainable way and will consider fresh applications for SEZs on December 15.

“The Board of Approval of the SEZs, to consider proposals for setting up of the tax-free enclaves and other requests, will be held on December 15,” a government official said.

The 19-member, inter-ministerial BoA is chaired by commerce secretary Rahul Khullar.

The government is yet to give a final shape to the new SEZ norms for which it has invited public comments. The broad areas on which comments have been invited include site identification, land acquisition, development plans, role of state governments and physical infrastructure. “based on the experience gained so far, the formulation of certain broad guidelines to govern the development of SEZs has been considered appropriate to ensure an environmentally-sustainable, well planned development of the SEZs,” the official said.

The draft guideline says the cultivable land should be considered only if other adequate land is not available.

“The first preference should be for the acquisition of waste and barren land, followed by single crop land and double crop land, necessary to meet the contiguity requirements,” it said. The draft guidelines say that the site for an SEZ shall have the potential for development as a self-contained entity along with environmental sustainability.

Currently, the government has formally approved the setting up of 578 SEZs, out of which 340 have been notified. SEZs have provided employment to 4.18 lakh people and exports from the SEZs during the first two quarters of the current fiscal are estimated at about Rs 89,750 crore.

Office property market yet to beat slump

Office property market yet to beat slump
Business Standard, November 25, 2009, Page 2

Raghavendra Kamath / Mumbai

The office property market, which was hit hard in the aftermath of the global economic slowdown, will take at least a year to come out of the slump as demand for offices is still subdued, say fund managers, consultants and realty developers.

Due to oversupply and rising vacancy levels in cities such as Delhi, Mumbai, Bangalore, among others, rentals are expected to remain stagnant in the next six months or see a further fall of 10-15 per cent.

For instance, in the national capital region (NCR), the vacancy levels are expected to touch 46 per cent in the second quarter of 2010 from the current 41 per cent, as there is an absorption of 7.2 million sq ft till the fourth quarter of 2010 against the supply of 17 million sq ft, according to a report put out by property consultant DTZ.

Office rents have fallen up to 50 per cent in cities such as Mumbai, Bangalore and NCR from their peak in 2007-08, as companies and financial institutions deferred leasing or buying office space due to poor demand for goods and services.

Office rents have fallen to Rs 200-250 a sq ft in Mumbai’s main business hub of Nariman Point from their peak of Rs 500 a sq ft and to Rs 200-220 a sq ft in Bandra Kurla Complex, another business hub of Mumbai, from Rs 400-Rs 450, as leasing activity has slowed since the second quarter of FY09.

“Office market is still in shambles and it is primarily dependent on economic growth. Since companies in banking and financial services are not expanding into various geographies, there is no fresh demand. Existing tenants are renegotiating rents. I think there will be downward pressure on rents for some more time,’’ said Sunil Rohokale, executive director of ASK Investment Holdings, which is on the verge of closing a Rs 500-crore realty fund.

Adds Rajeev K Shete, vice-president, real estate, at Shapoorji Pallonji & Co Ltd: “Office market has not revived to the extent it was expected, as the infotech sector has not bounced back. It will take at least a year for the office market to pick up,’’ Shete says.

Infotech and ITES sectors consume over 50 per cent of office supply in the country, but since the global economic slowdown, IT/ITES companies have also scaled back their plans due to lower business from the US and European clients.

“Whatever demand is coming in is because there has been no activity since the slowdown. I believe rents will continue to remain low for the next six to eight months and will be flat for another year,’’ says Anshul Jain, chief executive of DTZ, an international property consultant.

Jain says markets such as Mumbai, NCR and Bangalore will revive faster than markets like Kolkata and Chennai, as the former have seen higher correction in prices.

FICCI signs 3 pacts with US educational institutions

FICCI signs 3 pacts with US educational institutions
The Hindu Business Line, November 25, 2009, Page 15

Our Bureau , New Delhi

The Federation of Indian Chambers of Commerce and Industry announced on Monday that it has signed 3 MoUs in Washington with educational institutions in the US.

The MoUs were signed with the Polytechnic Institute of New York University (NYU-Poly), the IC2 Institute of the University of Texas and the Institute of International Education.

The MoU with NYU-Poly aims at the development of programmes and events to facilitate government, industry and higher education partnerships in research and business.

NYU-Poly will also design and host activities to promote an understanding of how partnerships between government, industry and educational institutions can spur advances in research and bolster economic activity in India.

The two organisations have agreed to bring their respective strengths to meet India’s growing demand for world-class research and development facilities that attract global talent.

Real Estate Intelligence Service, Tuesday, November 24, 2009

Govt may do away with lock-in period for FDI in real estate

Govt may do away with lock-in period for FDI in real estate
The Hindu Business Line, November 24, 2009, Page 1

Dept of Industrial Policy and Promotion framing new rules.

Moumita Bakshi Chatterjee, New Delhi

Setting the stage for easier FDI norms in the real estate sector, the Government is considering a proposal to do away with the three-year lock-in stipulation for repatriation of foreign investments in SPV projects.

Industry observers say the move will draw foreign investors — which had avoided project-level or Special Purpose Vehicle funding because of the lock-in condition — into the sector. This will benefit both unlisted as well as listed builders, including such players as DLF, Unitech, Parsvnath Developers, and Ansal API.

At present, portfolio investments do not come with a lock-in clause. The condition is only stipulated for Foreign Direct Investments. Sources said that the condition of a three-year period (from completion of minimum capitalisation) had initially been imposed as a deterrent against speculative investments when the sector was opened up for foreign investment.

In the current context, however, it was felt that there is no similar clause in other sectors, with the exception of Defence. Hence, the Government is considering scrapping the lock-in condition. Other conditions pertaining to minimum area for development of serviced housing plots or construction development, as well as minimum capitalisation norms (Press Note 2 of 2005) are likely to continue.

Sources said the Department of Industrial Policy and Promotion (DIPP) — the nodal Department for framing FDI rules — is also seeking the view of the Urban Development, Housing and Finance Ministries on the issue.

When contacted, a senior official of a large real-estate company told Business Line that dispensing with the lock-in condition would help infuse more capital into projects. “The restriction with regard to repatriation was a deterrent for some foreign investors. If the condition is removed, it will be easier for developers to get more capital for their projects,” the official said, on condition of anonymity.

On the flip side, an analyst pointed out that the move could worry some realtors as their current FDI partners may now find it easier to repatriate investments in projects even before the three-year period is up. “It should not be an easy-come, easy-go policy,” he cautioned.

The Parsvnath Developers Chairman, Mr Pradeep Jain, felt that, depending on the execution, if the project generated internal accruals, the investor would now be free to repatriate his original investment. “I think, it will be good for the sector as a whole…The cost to the project will come down,” he said.

At present, under Press Note 2 (2005), up to 100 per cent FDI is permitted on automatic route in case of integrated township development, housing and construction development activities. This is subject to certain conditions: Minimum area to be developed under each project in case of serviced plots is 10 hectares; minimum area to be developed in the case of construction development project is stipulated at 50,000 square metres (built-up space).

Besides this, there is a minimum capitalisation requirement of $10 million for a wholly-owned subsidiary and $5 million for joint ventures. Although there is a blanket lock-in period stipulated for repatriation, investors are allowed to exit in specific cases, with prior permission of the FIPB.