Government To Announce Steps To Check Price Rise

Government on Wednesday decided on a slew of measures to check high inflation , particularly of food items following Prime Minister Manmohan Singh's consultations with his senior Cabinet colleagues yesterday.

The Prime Minister's meeting was followed by Finance Minister Pranab Mukherjee today holding discussions with Food and Agriculture Minister Sharad Pawar and Planning Commission Deputy Chairman Montek Singh Ahluwalia .

Talking to reporters after the meeting, Pawar said "Whatever decision has been taken at the meeting will be brought to the notice of Prime Minister and thereafter will be released to the media sometime today".

The government has been under attack for not being able to bring down prices, especially of food items. The food inflation, fuelled by rising prices of vegetables, fruits, meat and egg has crossed 18 per cent.

After the Prime Minister's consultations, the decision of the Agriculture Ministry to export five lakh tonnes of sugar was referred to the empowered Group of Ministers, headed by Mukherjee.

India can become world's fastest growing economy

The two hands to produce count for more than that one mouth to feed, after all. Driven by a sterling demographic dividend, continuing structural reform and globalisation, India is poised to accelerate its growth rate to 9-9.5% over 2013-15, even as China will cool down to a more sedate 9% by 2012 and to 8% by 2015. So finds a new report by Morgan Stanley.
India has one of the lowest median ages among the major economies. When an economy prospers, first its death rate and then, its birth rate falls. As this trend proceeds, there is a big bulge in the working age population while the non-working population (the young and the old) shrink as a share of the population. The lowering of the dependent (non-working) population to working age population ratio has twin effects.

Globalisation gives additional job opportunities, additional capital to augment rising domestic savings and additional know-how. With this happy combination, the report expects India to become the world’s fastest-growing economy. The government’s chief economic advisor Kaushik Basu has been forecasting such a development as well.“Real GDP growth in China has averaged 10% annually over the past 30 years, compared with 6.2% in India. During this period, China’s GDP grew 16 times to $5 trillion whereas India’s rose seven times to $1.2 trillion. China’s exports (including services) surged 65 times over this period to $1,330 billion while India’s exports increased 22 times to $250 billion” says the report.China has overtaken Japan to become the world’s second-largest economy. China’s demographic transition pushed up its savings rate above 30% in 1985, while India’s savings rate crossed that level only in 2005. India’s consumption level will now come down, even as China’s will rise.Underlying the Morgan Stanley forecast is the assumption that India will significantly jack up its expenditure on infrastructure and in plant and machinery. Infrastructure expenditure has gone up from 5.4% of GDP in 2005 to 7.5% in 2009 and is poised to go up to 8% of GDP in 2010. Over 2012-17, the forecast is that India’s infrastructure spend would be $1 trillion as compared with $530 million over the previous five-year period.Another assumption is on the quantity and quality of the young people coming into the workforce. While India will be the largest contributor to the world’s workforce — all of 136 million people — over the next 10 years (fully a quarter of the entire world’s additional workforce), China will add just 23 million.

Delhi No. 1 and chennai no 3 india's investment destination

In a survey of 27 cities, the competitiveness factors evaluated were: people, catalysts, infrastructure and financials.The 2010 ADB report says that location precedes supplier selection in globalisation initiatives: “Earlier, countries competed for location but now competition is often at a granular level between various cities. Lately, we are more likely to observe competition between Bangalore and Manila than between a generic India and the Philippines.”Against this backdrop, Delhi’s high quality of life, transportation infrastructure and cost-effective labour both skilled and unskilled — have “contributed in a big way to the city’s economic growth, pitchforking it to the top in overall rankings,” says the ADB report.he Commonwealth Games and the infrastructure development as a result of this such as the international airport and the Metro rail network are among the major factors contributing to Delhi’s rise to the No.1 position.“Furthermore, the city is extremely well-connected to suburban cities along its periphery such as Gurgaon, Faridabad and Noida, making it the largest economic agglomeration in India,” says ADB.

“Though Greater Mumbai’s position remains unchallenged, its infrastructure lags far behind the pace of economic growth witnessed by the city. Several major infrastructure projects such as the Mumbai Urban Transport project and the Bandra Worli sealink are yet to show its effects on potential economic growth,” the report says.The ADB report says that quality of infrastructure such as water and power supply, roads, public transport, crime and safety, environmental pollution and recreation and leisure options also influence investment options.

Chennai’s No. 3 ranking as a potential hub for future investments couple traditional reasons such as it being a major seaport known for its manufacturing industry and recent developments such as an exceptionally high investment of Rs 34,000 crore for upgrading its urban infrastructure.According to the report, Bangalore is a major economic hub in the country with major IT, biotech and FMCG companies but its infrastructure has not been able to keep pace with its rapid economic growth.Hyderabad, meanwhile, is fast emerging as a top slot city in India. It is currently witnessing an unprecedented growth and is set to become the fourth largest urban agglomeration by 2011, overtaking Bangalore. The city also has the highest number of formally approved IT SEZs in the country.

Ras Al Khaimah wants investment from India

India may takeover the US in terms of households savings by 2020, touching the USD 5 trillion mark, as the growing economy would boost incomes of people, a study has said. "The household savings rate of 33.4 per cent would translate into incremental savings of USD 5 trillion over the next decade with growing incomes of Indian households," Assocham President Swati A Piramal said in a statement.

Currently, the size of Indian household savings is over USD 330 billion, according to a study jointly done by Assocham and PricehWaterhouse Coopers. Indian households have traditionally preferred safety of bank deposits and government saving schemes.

Less than 10 per cent of their investments are in other financial assets like shares, debenture and mutual funds, which is low as compared to some of the developed economies, Piramal said. "Given the quantum of savings, the need to mobilise savings into productive channels and the opportunity for financial intermediation, the next decade will be an opportunity of a lifetime for Indian capital markets," the study said.

It said, currently, Indian economy''s size is about USD 1 trillion with the savings rate of Indian households of 33.4 per cent, which is expected to grow further at an average rate of 8 per cent annually. Concerted efforts of the government and the regulators supported by a long-term vision and a clarity in action can significantly help in fostering a climate that is conducive to growth and investments, Piramal said.

Global economy faces higher capital costs

A new investment boom in emerging Economy as India and China coupled with a decline in saving rate in China is set to end the low interest rate environment in the coming years, McKinney Global Institute has cautioned. In its latest report — Farewell to cheap capital? The implications of long-term shifts in global investment and saving — the global consulting firm has said that nominal and real interest rates that are currently at 30-year lows are likely to rise in coming years.

“If real long-term interest rates were to return to their 40-year average, they would rise by about 150 basis points from the level seen in the fall of 2010. And they may start moving up within five years,” the report said.

The rise in interest rates, translating into higher cost of capital for businesses, investors and governments, would however be slower if the saving rate were to keep pace with the rise in demand for capital. That seems unlikely even though households in the US and UK have started saving a lot more in the aftermath of the financial crisis.

However, the increase in global saving rate is unlikely to match the rise in demand for capital when the Chinese government is encouraging its citizens to increase their consumption. The country needs to bring down its saving rate from 53% of GDP (in 2008) to sustain its high growth rate. If the Chinese government’s policies indeed succeed, global saving would decline by at least 1.8 percentage points of the global GDP by 2030. Increased saving by households in the US and UK, if it continues to persist, can at best offset this decline in global saving rate by just one percentage point in 2030. The global saving rate would also be depressed by the increased age-related spending in many countries. Spending for the retired could increase by 3-3.5% of the global GDP by 2030, according to some estimates.

The McKinsey report noted that developing economies are embarking on one of the biggest building booms in history. “The world is now at the start of another potentially enormous wave of capital investment, this time driven primarily by emerging markets. By 2020, global investment demand could reach levels not seen since the postwar rebuilding of Europe and Japan and the era of high growth in mature economies,” it said.
The investment boom is already being experienced across Asia, Latin America and Africa, where the demand for new homes, transport systems, factories, offices, skyscrapers, hospitals and shopping centers has already caused a jump in investment. The global investment rate had increased from a low of 20.8% of the GDP in 2002 to 23.7% in 2008, and then dipped again during the global recession of 2009.
The authors of the report noted that given the emerging nations led by China and India have low levels of capital, high investment rates are likely to continue for decades, exceeding 25% of global GDP by 2030. If consensus forecasts of global growth are realised, global investment will amount to $24 trillion in 2030, compared with $11 trillion currently (in constant 2005 prices and exchange rates).

RBI ups growth projections, warns of uncertain global recovery

Upbeat over a normal monsoon and the robust industry and services sectors, the RBI today raised its projections for economic growth to 8.5 per cent this fiscal from the earlier estimate of 8 per cent, but warned that a global slowdown may cast a shadow on the economy.

"Taking into account the progress of monsoon so far... the baseline projection of real GDP growth for 2010-11 is revised to 8.5 per cent, up from 8.0 per cent. This upward revision is primarily based on better industrial production and its favourable impact on the services sector," the RBI said in its quarterly monetary review unveiled here.

The RBI's projection is in line with the government and the Prime Minister's economic growth think-tank PMEAC's forecast for the fiscal. However, it is less than the optimistic forecast of 9.5 per cent made by the IMF for this calendar year.

The central bank said the growth prospects of the Indian economy have improved since April, 2010.

"Although cumulative rainfall so far has been 14 per cent below the long period average (LPA), the monsoon has been better than last year. Should overall monsoon performance turn out to be as projected (102 per cent of LPA), there will be a pick-up in rural demand," it said.

Rising demand in the rural economy will further give momentum to the performance of the industrial sector, which has been growing firmly since October, 2009, the RBI said.

However, uncertainty about the global recovery may cast its shadow on India, the central bank warned.

"Prospects of a sustained global recovery appear to be increasingly uncertain, with possible adverse consequences for emerging market economies (EMEs), including India," it said.

The central bank said the main challenge to India's growth story comes from the global scenario, which recently witnessed a sovereign debt crisis in Greece, a slowdown in the eurozone and tight credit and high unemployment in the USA.

It said there is expectation of a slowdown of the global economy in the second half of 2010, which will affect India's manufacturing and services sectors, besides significantly reducing the flow of foreign capital into the country.

"The main risk emanates from the global scenario and has two key dimensions... A widespread slowdown in global trade will have an impact on important manufacturing and services sectors...," the RBI said, adding that a bigger risk could be a slowdown in capital inflows.

Such a situation could also constrain domestic investment, the RBI said.

Market ends choppy trading session lower

The key benchmark indices slipped into the red in late trade as most Asian stocks fell. The BSE 30-share Sensex was provisionally down 26.36 points or 0.15%, up close to 75 points from the day's low and off about equal points from the day's high. The Sensex fell below the psychological 18,000 mark after crossing that mark in mid-morning trade. Realty, FMCG, healthcare and consumer durables stocks fell. But, capital goods stocks rose. Index heavyweight Reliance Industries (RIL) edged lower. Private sector banking major HDFC Bank rose after reporting strong Q1 result.

The market moved between positive and negative zone throughout the day.The market recovered from an early slide as Chinese stocks and US index futures rose. The intraday recovery gathered strength in morning trade - the market moved into positive zone. The market slipped into the red again in early afternoon trade. Weakness continued in afternoon trade after European stocks opened lower. The market moved in a range in mid-afternoon trade.

India's June exports rose an annual 30% to $17.75 billion, Trade Secretary Rahul Khullar said on Monday. Imports for the month rose 23% to $28.3 billion, he said.

Meanwhile, a committee set up by the Indian stock market regulator Securities & Exchange Board of India (Sebi) has recommended major changes in the existing law governing substantial acquisition of shares and takeovers. The committee headed by C. Achuthan has recommended an increase in the acquisition threshold for the initial trigger of an open offer from the current level of 15% to 25% of the voting capital of a listed company. While no change has been recommended in the annual creeping acquisition limit of 5%, the committee has recommended that creeping acquisition be permitted only to acquirers who already hold more than 25% of the voting capital, subject to the aggregate post-acquisition shareholding not exceeding the maximum permissible non-public shareholding.

The committee has recommended that an open offer should be made for all the shares of the target company to ensure equality of opportunity and fair treatment of all shareholders, big and small. The exception to this rule is the size of an open offer where the same is voluntary in nature. The current regulations mandate a minimum offer size of only 20%.

European shares turned positive on Monday as energy shares cut early losses and miners advanced, tracking stronger metals prices. The key benchmark indices in France, UK and Germany were up by 0.21% to 0.38%.

Negotiators for the International Monetary Fund and European Union walked away from talks with Hungary over the weekend over differences on government budget cuts.

Moody's Investors Service on Monday cut Ireland's sovereign debt rating by one notch to Aa2 from Aa1, citing the government's "gradual but significant loss of financial strength." However, the agency also lifted the outlook on Irish government debt to stable from negative, saying the risks are now evenly balanced

Asian stock markets fell on Monday after US consumer confidence weakened and corporate results fell short of expectations. The key benchmark indices in Hong Kong, Taiwan, Indonesia and South Korea were down by 0.19% to 0.79%. But, China's Shanghai Composite rose 2.11%, as banking, property and consumer stocks rose on hopes that Beijing may not introduce more restrictive policies after several indicators showed last week the economy was cooling. Japanese markets were shut for Marine Day.

Trading in US index futures indicated that the Dow could gain 28 points at the opening bell on Monday, 19 July 2010.

Dismal economic data and lower than expected revenues from GE and two big banks slammed US stocks on Friday, 16 July 2010, driving down major indexes more than 2%. General Electric Co, Bank of America Corp and Citigroup Inc joined the list of major companies that beat Wall Street's expectations, but investors unloaded some shares of all three after the companies reported a drop in quarterly revenues. The Dow Jones Industrial Average dropped 261.41 points, or 2.52% to 10,097.90. The Standard & Poor's 500 Index slid 31.60 points, or 2.88% to 1,064.88. The Nasdaq Composite Index lost 70.03 points, or 3.11% to 2,179.05.

The Thomson Reuters/University of Michigan survey of consumers showed US consumer sentiment fell far more than expected to 66.5 in a preliminary July reading, down sharply from 76, June's final number. Earlier, the US Labor Department reported the US Consumer Price Index dipped 0.1% in June, which was weaker than the forecast for no change.

With the market anxious to know whether the world's biggest economy is stalling, semiannual testimony by U.S. central bank chief Ben Bernanke on Wednesday will be closely watched by investors.

Back home, a sharp cut in corporate tax rate proposed in the direct taxes code is reportedly likely to be done in stages to ensure that tax collections do no plummet, derailing the government's attempts to bring the fiscal situation under control. The direct taxes code, or DTC, has proposed a cut in corporate tax rate to 25% from the current 30%, but will withdraw most tax exemptions available to companies. The government is likely to lower the tax rate to 27.5%, or a reduction of 2.5 percentage points, when the code comes into effect, likely from April 2011, reports suggest.

The stock market regulator Securities & Exchange Board of India (Sebi) on Thursday, 15 July 2010, allowed physical settlement of both stock options and stock futures. At present only cash settlement of derivatives is allowed. Sebi said stock exchanges will also have flexibility to offer a combination of cash settlement for stock options and physical settlement for stock or physical settlement for stock options and cash settlement for stock futures.

A stock exchange may introduce physical settlement in a phased manner, it said in a circular. On introduction, however, physical settlement for all stock options and/or all stock futures, as the case may be, must be completed within six months, Sebi said. The settlement mechanism shall be decided by the stock exchanges in consultation with the depositories,the Indian stock market regulator said.

Meanwhile, the lower exposure margin requirement for stock derivatives has become effective from late last week.

On the macro front, the latest data showed that the fuel price index rose 14.27% in the year to 3 July 2010 and the food price index climbed 12.81%. Fuel price inflation eased from the previous week's annual rise of 18.02% while the pace of food price inflation edged up marginally from last week's 12.63%. Food inflation edged up because of higher rice and wheat prices. The primary articles index was up 16.25% compared with the previous week's reading of 16.08%.

The headline inflation rose lower-than-expected 10.55% in June 2010. The rate of increase was higher than May's rise of 10.16%. Inflation for April 2010 was revised upwards to 11.23% from 9.59%.

Weak monsoon rains in the past week will not significantly hurt crop output in the country and the weather outlook is encouraging, Farm Minister Sharad Pawar said on Friday, 16 July 2010. Monsoon rains were 24% below normal in the week ended 14 July 2010. Out of 36 meteorological sub-divisions, rainfall was excess in 8, normal in 4, deficient in 19 and scanty in 5 sub-divisions during the week. Bihar, east Madhya Pradesh, Chhattisgarh, Vidarbha, Andhra Pradesh, Tamil Nadu and Sub- Himalayan West Bengal & Sikkim received good rainfall during the week.

The India Meteorological Department (IMD) said the cumulative seasonal rainfall for the country as a whole during this year's monsoon upto 15 July has so far been 14% below the long period average (LPA). Out of 36 meteorological subdivisions, the rainfall has been excess over 6, normal over 16 and deficient in 14 sub-divisions.

The southwest monsoon was vigorous over Sub-Himalayan West Bengal & Sikkim and active over Saurashtra & Kutch and Arunachal Prades during past 24 hours, the IMD said in its daily update on Sunday, 18 July 2010. The IMD expects widespread rainfall over Uttar Pradesh, Uttrakhand, Bihar, Sub-Himalayan West Bengal & Sikkim, Konkan & Goa, Coastal Karnataka, Kerala, Lakshadweep and northeastern States, in the near term. It said fairly widespread rainfall would occur over Himachal Pradesh, Punjab, Haryana, Chandigarh & Delhi, East Rajasthan, Gangetic West Bengal, Vidarbha, Madhya Pradesh, Chhattisgarh, Jharkhand and Andaman & Nicobar Islands.

The IMD expects scattered rainfall over Madhya Maharashtra, Marathwada, Interior Karnataka, north Andhra Pradesh and Orissa during next 48 hours and increase thereafter. It expects isolated to scattered rainfall over rest of the country in the near term. For the current week, the IMD expects widespread rainfall over west coast, along foothills of Himalaya and northeastern states. It also expects fairly widespread rainfall over central and east India this week.

The south west monsoon is important for India as about 60% of the country's farmlands are rain-fed and more than half of the workforce is employed in the agriculture sector. The weather office expects this year's monsoon rains to be at 102% of the long-period average. Good monsoon rains would help raise farm output, boost rural incomes and lower food inflation.

As per provisional figures, the BSE 30-share Sensex was down 26.36 points or 0.15% to 17929.46. The Sensex rose 49.25 points at the day's high of 18,005.07 in mid-morning trade. The index lost 99.42 points at the day's low 17,856.40 in early trade.

The S&P CNX Nifty was down 7.55 points or 0.14% to 5386.35 as per provisional figures.

The BSE Mid-Cap index rose 0.16%. The BSE Small-Cap index rose 0.14%. Both these indices outperformed the Sensex.

The market breadth, indicating the strength of the broader market, was positive. On BSE, 1,504 shares advance while 1,401 shares declined. A total of 116 shares remained unchanged. The breadth was much stronger earlier in the day.

From the 30 share Sensex pack, 19 stocks fell and the rest rose.

BSE clocked turnover of Rs 3705 crore, lower than Rs 4307.85 crore on Friday, 16 July 2010.

India's largest thermal power producer by sales NTPC rose 2.4% and was the top gainer from the Sensex pack. NTPC said during the weekend that it will start commercial operations of its second coal-based 490 MW power plant at Dadri in Uttar Pradesh to provide electricity for the Commonwealth Games. The new plant, along with another unit of similar capacity which came on stream early this year, will provide 90% of its power output for the Games in October this year, the company said in a statement. The remaining 10% will be given to Uttar Pradesh.

Index heavyweight Reliance Industries (RIL) was down 0.68% at Rs 1055.70. The stock hit a low of Rs 1054 and a high of Rs 1065.75. RIL may reportedly be able to establish more commercially-viable oil and gas finds in the country's largest gas field KG-D6 with the Cabinet allowing the company extra time for drilling wells.

The extension will help RIL complete evaluation works in at least three wells in the KG-D6 block where drilling was not authorised by the concerned regulator Directorate General of Hydrocarbon (DGH) after the company missed the deadline, reports suggest.

RIL and Reliance Natural Resources (RNRL) on 25 June 2010, entered into a new gas supply agreement, as directed by the Supreme Court. The Supreme Court had ordered the two companies to renegotiate the Gas Supply Master Agreement, which was signed between the Ambani brothers as part of the business demerger in 2005. RIL also recently announced its seventh oil discovery in Cambay basin in Gujarat.

Private sector banking major HDFC Bank rose 1.07% after the bank announced during market hours today that its net profit rose 33.92% to Rs 811.72 crore in Q1 June 2010 over Q1 June 2009.

FMCG stocks fell on profit taking. ITC, Dabur India, Nestle India and Hindustan Unilever fell by between 0.96% to 2.33%.

Sun Pharmaceutical Industries fell 0.9%. The company has announced that the US District Court for the District of New Jersey denied its motion for judgment as a matter of law, seeking to reverse the earlier jury verdict in the patent litigation over generic Protonix.

The detailed opinion of the Court supporting this order has not yet been issued. Sun Pharma continues to believe that the patent is invalid and unenforceable and will pursue all available legal remedies including appeals. Other claims of Sun Pharma, including patent misuse and unclean hands, that also concern the validity and enforceability of the patents remain pending, the company said.

Among other healthcare stocks, Cipla, Lupin, Pfizer and Dr Reddy's Laboratories fell by between 0.17% to 0.83%.

Some consumer durables stocks fell on profit taking. Gitanjali Gems, Blue Star, Rajesh Exports and Titan Industries fell by between 0.88% to 4.73%.

Interest rate sensitive realty stocks fell on rate hike worries. Omaxe, DLF, Phoenix Mills, Unitech, Indiabulls Real Estate, HDIL, Ansal Properties, Sobha Developers fell by between 0.16% to 1.45%.

India's largest engineering and construction firm by sales Larsen & Toubro rose 1.45% after company said during market hours today L&T General Insurance Company, the general insurance arm of the firm would commence its operations soon. The company has received the necessary license from the regulatory authority for commencing the business operations.

Among other capital goods stocks, Siemens, SKF India, Praj Industries and BEML rose by between 0.05% to 1.38%.

But, India's largest power equipment maker by sales Bharat Heavy Electricals fell 1.14%. The company has got an order worth Rs 2665 crore from Dainik Bhaskar Power for setting up a 1,200 megawatts thermal power plant in Chhattisgarh. The company will announce its Q1 result on Friday, 23 July 2010.

ABB fell 2.13% after its Swiss parent said it will not raise a Rs 900 a share offer for increasing stake in the company.

Reliance Communications (RCom) rose 2% on reports Emirates Telecommunications is close to buying a 26% stake in the firm. It was the top gainer form the Sensex pack. The deal is estimated to be worth $3 billion, and the two groups are considering merging RCom with Swan Telecom, the Indian company in which Etisalat holds a 45%, reports suggest.