In-Focus

Food inflation slides...falls below 10%

Jul 29, 2010 at 1150

India's food inflation declined in the week ended July 17, falling to single digit levels for the first time in many months while inflation in the fuel group remained elevated.

Inflation in the Primary Articles group also fell, the Government said on Thursday.

The stock market recovered some of the lost ground after the inflation announcement and the yield on the benchmark 10-year Government bond inched lower.

According to the data released today by the Commerce & Industry Ministry, inflation in the Food Articles group stood at 9.67% in the week ended July 17 versus 12.47% in the previous week.

Inflation in the Primary Articles group was at 14.5% as against 16.48% in the week ended July 10 while inflation in the Fuel & Power group rose to 14.29% from 14.27% in the preceding week.

RIL Q1 net profit up 32%

Jul 27, 2010 at 19:00

Reliance Industries Limited (RIL) has reported its financial performance for the quarter ended 30th June, 2010.

Highlights of Quarter’s Performance

Turnover increased by 88.1% to ` 610.07bn (US$ 13.1 bn)

Exports increased by 103.5% to ` 328.49bn (US$ 7.1 bn)

PBDIT increased by 41.9% and achieved a record level of ` 100.64bn (US$ 2.2 bn)

Profit Before Tax increased by 27.0% to 60.38bn (US$ 1.3 billion)

Cash Profit increased by 46.1% to 85.36bn (US$ 1.8 billion)

Net Profit increased by 32.3% to 48.51bn (US$ 1.0 billion)

Gross Refining Margin at US$ 7.3 / bbl for the quarter ended 30th June 2010

CORPORATE HIGHLIGHTS

The Supreme Court of India delivered its judgment in the RNRL - RIL legal dispute.The judgment recognized the dominant role of the provisions of the Production Sharing Contract and upheld the policies formulated by the Government under which it has the authority to regulate the production and distribution of natural gas.

The judgment defined the extent of marketing freedom that RIL enjoys in the area of sale of natural gas produced. In view of the findings of the judgment, RIL can sell gas only at the price approved by the Government and only to the entities that have been allocated gas under the Gas Utilization Policy. RIL has no ability to deviate from price, quantity and tenure as determined under Government’s policies, or to discriminate amongst various consumers.

RIL and Reliance ADA Group companies approved and signed an Agreement canceling allexisting non-compete arrangements entered into between the two groups in January 2006 pursuant to the scheme of reorganization of the Reliance Group and entered into a new simpler,

Non Compete Agreement with respect to only Gas Based Power Generation.

RIL and RNRL signed a Gas Supply Master Agreement in compliance with the Gas Utilization Policy and EGOM decisions.

RIL holds 95% of the equity in Infotel Broadband Services Private Limited, which has emerged as a successful bidder in all the 22 circles of the auction for Broadband Wireless Access (BWA) Spectrum conducted by the DoT.

RIL through its subsidiary, Reliance Marcellus LLC, has entered into a joint venture with United States based Atlas Energy, Inc., of Pittsburgh, Pennsylvania under which Reliance acquired 40% interest in Atlas's core Marcellus Shale acreage position.

RIL through its subsidiary, Reliance Eagleford Upstream Holding LP, has entered into a joint venture with United States based Pioneer Natural Resources Company, of Irving, Texas under which Reliance acquired 45% interest in Pioneer's core Eagle Ford Shale acreage position.

RIL and SIBUR, Russia’s leading petrochemical company, signed a Memorandum of Understanding (MoU) to set up a joint venture (JV) in India. This new joint venture will produce butyl rubber at Reliance’s integrated petrochemical site in Jamnagar, India.]

RIL has cash and cash equivalents of 264.07bn(US$ 5.7 bn). These are in fixed deposits,certificate of deposits with banks, mutual funds and Government securities / bonds. RIL’s net debt is equivalent to 1.2 times annualized PBDIT for the quarter ended 30th June 2010.

The net capital expenditure towards projects for the quarter ended 30th June 2010 was 36.28bn (US$ 781 mn).

RIL has domestic credit ratings of AAA from CRISIL and FITCH. RIL has investment grade ratings for its international debt from Moody’s and S&P as Baa2 and BBB respectively. Fitch has recently revised its RIL’s long-term Local Currency Issuer Default Rating (LC IDR) to 'BBB' from 'BBB-'.

DOMESTIC OPERATIONS

KG D6

Current production of about 60 MMSCMD is taken from 16 wells of D1/ D3 and 5 wells of D26 fields. During the quarter, D26 field was shut down for 2 days, in May’10, due to cyclone. The production of gas condensate from D26 fields commenced from 21st April 2010.During the quarter ended 30th June 2010, production from KG D6 was 304,349 tonnes of crude oil, and 5,376 MMSCM of natural gas, a growth of 207% and 210% respectively as the oil and gas production was under ramp up during the corresponding period of the previous year. During the quarter, production of gas condensate stood at 12,841 tonnes.

In line with the Government of India’s gas utilization policy, GSPAs have been executed, with 55 customers in the fertilizers, power, city gas distribution, steel, LPG, refinery and petrochemical sectors. During the quarter, GSPAs with two refineries and one power plant were signed.
Panna-Mukta and Tapti (PMT)

Production from Panna-Mukta was 502 MMSCM of natural gas, a growth of 7% and 403,394 tonnes of crude oil, reduction of 11% as compared to the corresponding period of the previous year. Decrease in oil production at Panna-Mukta was due to six days shutdown in Panna in April 2010 while increase in natural gas production was due to incremental production from infill and PK wells. Production from Tapti was 785 MMSCM of natural gas and 42,277 tonnes of condensate, a decrease of 6% and 18% respectively over the corresponding period of the previous year. The decrease in production was due to natural reserves decline.

INTERNATIONAL OPERATIONS

Conventional

The International business comprises of 14 blocks with acreage of over 102,385 square kilometers – 3 in Peru, 3 in Yemen (1 producing and 2 exploratory), 2 each in Oman, Northern part of Iraq i.e. Kurdistan Region and Colombia, 1 each in East Timor and Australia. Average production for the quarter ended 30th June 2010 at the Yemen Block 9 was about 4,600 barrels per day.Reliance had farmed-out 30% of its Participating Interest (PI) in Oman-Block 18 and 25% in Oman- Block 41 to Oman Oil Company Exploration and Production.

This has been approved by the Oman Government. Reliance had farmed-out 20% of its Participating Interest (PI) in Colombia Borjo North and Borjo South to Ecopetrol. The resolution has been passed by Association of National Hydrocarbon (ANH) to approve this farm out. However, the amendments to the contract are yet to be signed.

Commenting on the results, Mukesh D. Ambani, Chairman and Managing Director, Reliance Industries Limited said:“We had yet another record quarter due to high operating rates and improving margins across all our businesses. Reliance embarked on two major initiatives to create incremental value. We entered into joint ventures in shale gas to internationalize and diversify our upstream portfolio.

Reliance has also committed itself to participate in the high growth and exciting area of broadband wireless. Both these initiatives are in line with the strategy to identify and invest in new, value creating businesses.”

RBI hikes rates

Jul 27, 2010 at 11:35

The RBI today raised the reverse repurchase rate to 4.5% from 4% and the repurchase rate to 5.75 from 5.5%.

The move is aimed to moderate inflation by reining in demand pressures and reduce the volatility of short-term rates, RBI governor Subbarao was quoted in a statement.

The RBI plans to announce monetary policy statements every six weeks instead of once a quarter. The next announcement will be on Sept. 16 2010

South Korea's economy slows in Q2

Jul 26, 2010 at 10:45

South Korea's economy slowed in the second quarter of the year as compared to the previous three months, as the government started withdrawing some of the crisis-fighting stimulus measures.

Gross domestic product (GDP) grew by 1.5% during the April to June quarter from the previous three months, when the economy had expanded by 2.1% sequentially, the Bank of Korea said today.

The rise in real GDP was above a 1.1% growth estimate by economists.

From a year ago, the South Korean economy grew by 7.2% in the second quarter due largely to a lower comparative base in the year-earlier period, after rising 8.1% on year in the first quarter.

The second-quarter performance beat the median 6.6% year-on-year rise forecast by economists

The Bank of Korea said that the manufacturing sector grew by a 5.1% during the period compared to the first quarter, mainly due to the growth in machinery equipment, fabricated metal products and automobile manufacturing.

Services grew by 0.2% quarter-on-quarter, but construction contracted by 0.8% sequentially, which was attributable to the sluggishness in residential-building construction, the central bank said.

Exports jumped 7.1%, accelerating from 3.7% in the first quarter. Private spending, one of the main growth engines of the South Korean economy, gained 0.8%, compared with a 0.7% rise in the preceding quarter.

Facility investment climbed 8.1% after advancing 2.4%.

But government spending, which was a key driving factor behind strong growth early this year, rose a mere 0.1% in the second quarter from the first quarter, when such spending gained 5.8% on quarter.

The central bank said earlier this month that second-quarter GDP is likely to grow by 1.2% quarter on the quarter and 6.8% year on the year. For all of 2010, the export-dependent economy is expected to grow 5.9%, following a 0.2% rise in 2009.

Japan's exports up 27.7% yoy

Jul 26, 2010 at 10:10

Japan's exports were reportedly 27.7% higher in June than in the same month last year, while imports were up by 26.1%.

According to a financial daily, the trade surplus grew 41.1% to 687bn yen ($7.8 billion).

Seven banks fail Europe's test, need 3.5 billion euros

Jul 23, 2010 at 22:10

Seven European banks would not be strong enough to withstand another recession and would face a capital shortfall of 3.5 billion euros ($4.5 billion), tests run in an attempt to revive investor confidence showed on Friday.

Five of Spain's smaller regional lenders, known as cajas, failed the test and their recapitalisation is likely to speed a restructuring of the troubled sector.

Banks in Germany and Greece were also seen as weak spots and in need of restructuring, but state-owned Hypo Real Estate was the only German lender to flunk and state-controlled ATEbank was the only Greek bank to fail.

Analysts had expected five to 10 banks to fail the test. As expected, no big banks failed the health check. German government bond futures hit one-month lows and the euro briefly pared its losses against the dollar after the results were released.

Europe tested how 91 banks would cope with another recession and losses on government debt after the Greek crisis hit markets and raised fears the euro zone could unravel. It aimed to repeat a health check on US banks last year that helped restore investor confidence and underpinned a recovery by bank shares.

The Committee of European Bank Supervisors said its test was more severe than the US health check of its banks. The adverse scenario in Europe was a one in 20 years possibility, compared to a one in 7 years probability in the US test, it said. But markets have had their doubts.

"I see nothing stressful about this test. It's like sending the banks away for a weekend of R&R," said Stephen Pope, chief global equity strategist at Cantor. Under the most severe scenario banks were tested on how they would cope with a moderate recession this year and next, with additional losses on government bonds.

Any bank whose Tier 1 capital ratio falls below 6 per cent by the end of 2011 failed the test, and would be expected to raise funds to make up the capital shortfall. Of most concern to investors was that government bond losses were only applied to trading books, and not hold to maturity bonds, as the test did not consider there was a risk of any sovereign default.

Banks' holdings of government bonds were subjected to a 23.1 per cent loss on their Greek debt, a 12.3 per cent loss on Spanish bonds and a 4.7 per cent loss on German debt, all based on 5-year bonds and their value at the end of 2009.

Spain, Germany in spotlight

The hunt for weak spots in European banking has focused on Spain's regional savings banks, as well as regional German lenders, known as landesbanks. Spain and Germany have set up funds to help weak banks recapitalise and Spain wants more cajas to merge.

With the latest data showing signs of a strengthening recovery in Europe, banks could find themselves in a healthier position than expected.

A stress test on US banks early last year helped draw a line under worries about the sector there. European regulators were aiming to achieve the same. But there have been clear splits in the 27-nation EU about how to model the test and how much to divulge, stoking worries that it will be less credible.

UK economy grows more than forecast

Jul 23, 2010 : 14:25

The UK economy expanded by a much stronger-than-expected 1.1% in the second quarter as compared to the previous three months, government data showed on Friday.

Economists had forecast a quarterly increase of 0.6%.

Compared to the second quarter (April to June) of 2009, the British GDP grew by 1.6%.

Economists had forecast a 1.1% annual rise.

Moody's says it may downgrade Hungary's rating

Jul 23, 2010 at 13:25

Moody’s Investors Service said on Friday that it has placed Hungary’s credit rating on review for a possible downgrade after the government was unable to reach agreement with the IMF and EU on fiscal targets.

Moody’s placed Hungary’s Baa1 local and foreign currency government bond ratings on review for possible downgrade.

“Moody’s decision to initiate this review was prompted by the increased uncertainty regarding Hungary’s fiscal outlook and economic prospects,” the credit rating agency said. “This uncertainty is the result of the recent breakdown of Hungary’s talks with the IMF and EU.”

It may be recalled that Hungary's bailout-loan talks with the IMF and the European Union broke down over the last weekend

Hungary's prime minister Viktor Orbán on Thursday defied foreign critics of his fiscal policies, saying that Budapest no longer needs help from the IMF and won't seek to extend an emergency financing agreement it signed in 2008.

The IMF and the EU walked out of negotiations with Hungary saying that Budapest was not doing enough to achieve lasting cuts in spending and shore up its finances.

The failure of the talks means that Hungary can't draw on the remaining funds in the €20 billion (US$25.54bn) rescue package it received from the IMF, the EU and World Bank at the start of the global financial crisis.

Orbán said yesterday that Hungary doesn't intend to continue talks with the IMF on the current standby loan. He said Hungary will repay the loan by the end of 2012. In the future, the government will negotiate only with the EU, he said.

US existing home sales fall 5.1%

Jul 23, 2010 at 11:05

In Thursday's economic reports, sales of existing US home sales fell 5.1% in June from May levels, according to a report from the National Association of Realtors. But the drop was smaller than expected. Sales rose nearly 10% from a year earlier.

Separately, the House voted to extend jobless claims benefits until November, ending a seven-week old debate between lawmakers that saw federal benefits for the long-term unemployed run out. President Obama is expected to sign the extension shortly.

Earlier, the Department of Labor reported that the number of Americans filing new claims for unemployment rose to 464,000 last week from a two-year low of 427,000 in the prior week. Economists thought claims would rise to 445,000.

Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to 4,487,000 from 4,710,000 in the previous week. Economists expected 4,600,000.

The index of leading economic indicators fell 0.2% in June, the Conference Board reported, after rising 0.5% in May. Economists expected the index to have fallen 0.4%.

Food inflation lower, non-food inflation spikes

Jul 22, 2010 at 12.05

India's food inflation eased a bit in the week ended July 10 while fuel inflation was unchanged but inflation in the Primary Articles group inched higher, data released by the Government showed on Thursday.

Annual, point-to-point inflation in the Food Articles group declined to 12.47% from 12.81% in the week ended July 3, the Commerce & Industry Ministry said today.

Inflation in the Primary Articles group stood at 16.48% in the week ended July 10 as against 16.25% in the previous week, while inflation in the Non-Food Articles group climbed to 20.75% from 18.85%.

Inflation in the Fuel & Power group and the Minerals group was static at 14.27% and 53.47%, respectively.

GST...Centre agrees to dual rate structure for goods

Jul 21, 2010 at 18:00

The full potential of GST could be realized only if India adopts a single rate structure with unification of the rate for goods and services, Finance Minister Pranab Mukherjee said on Tuesday.

However, the Government recognizes this may not be feasible on the date of introduction of GST and requires a phased approach so that the transition is smooth and painless both for the taxpayer and the administration, he told the Empowered Committee of State Finance Ministers.

As such, the Centre is agreeable to the adoption of a dual rate structure for goods at the inception of GST, Mukherjee said. In the year of introduction i.e. April 1, 2011, the Central Government proposes to keep CGST lower rate for goods at 6% and standard rate at 10%. The services will be charged at 8%.

"Our request to the States will be to consider keeping the same rates i.e. the lower rate for SGST at 6%, standard rate at 10% and services at 8%," the Finance Minister said.

This mutually supportive approach will ensure that India has a single rate for CGST and SGST in the range of 12% to 20% in the first year of GST introduction, he said.

The peak effective rate will be about 15% which will be quite acceptable to the trade and industry, Mukherjee said. Eventually, it will settle down to a level of 16% to 18% for both CGST and SGST which will mean an effective rate of 12%, he added.

In the second year of implementation of GST, depending upon the revenue receipt by the Centre and the States and payment of compensation, the standard rate for SGST and CGST may be reduced to 9% retaining the lower rate at 6%, he said.

During the third year of implementation, based on experience and depending upon the buoyancy of revenue receipt and payment of compensation, the standard rate may be reduced to 8% and lower rate increased to 8% while the rate for services will be retained at 8% both for CGST and SGST.

"Thus, in a phased manner, we will be able to achieve a single CGST and SGST rate for both goods and services," the Finance Minister said today.

The Thirteenth Finance Commission has made certain recommendations about compensating the States for their loss of revenue owing to the adoption of GST.

"The Centre stands by this recommendation and would not hesitate to step up the amount of compensation recommended by the TFC should the need arise based on a mutually agreed formula," Mukherjee said.

The Government also assures the States that the compensation for subsuming Purchase Tax on foodgrains will be provided along with VAT compensation for the next four years, he said.

A reference will be made to the Fourteenth Finance Commission to suitably address this issue for the period beyond 2013.

Govt non-committal on decontrol of diesel prices

Jul 21, 2010 at 10:15

Almost a month has passed since the Government announced partial decontrol of petrol prices and promised freeing diesel prices, but there is still no official word or action on when the latter will be done.

Diesel prices are unlikely to be fully freed in the foreseeable future, and along with kerosene and cooking gas, will be priced through administrative orders, Cabinet Secretary K.M. Chandrasekhar said.

"We have not thought about decontrolling LPG, kerosene or diesel right now. We have to look at a lot of things, like its effect on consumer, before we do that,” Chandrasekhar told reporters after a CII event.

On June 25, the Government announced that petrol prices would be market determined, and added that diesel prices would be market determined in due course.

But, the lack of clarity over the proposed decontrol of diesel prices has raised concerns about the Centre's plan on this front as it weighs the political pressure owing to double-digit inflation.

"You cannot say at this point of time we have any specific road map of these issues," Chandrasekhar said.

The Kirit Parikh committee has recommended that diesel prices should be linked to market rates at the retail level. The panel's report said that keeping retail prices of diesel below cost was a major factor behind the high level of subsidy on fossil fuels.

Meanwhile, Chandrasekhar said that the Government would take another look at subsidies to make sure they were properly targeted. The Cabinet Secretary reiterated the Government’s resolve to cut fiscal deficit by reviewing subsidies.

“We are looking at subsidies, how the subsidy system can be rejigged to ensure it reaches the poorest of the poor on one hand, and at the same time it incentivises production,” he said.

The Centre spent Rs 1,31,025 crore on food, fuel and fertiliser subsidies in FY10 and expects to bring down such payments to Rs 1,16,224 crore in FY11 to cut fiscal deficit to 5.5% of GDP.

Exports grow 30.4% in June: Commerce Secretary

Jul 20, 2010 at 14:20

India’s exports registered a growth of 30.4% in June, at US$17.75 billion as compared to US$13.5 billion during June 2009, Commerce Secretary Rahul Khullar said at a press interaction in New Delhi last evening.

India’s imports in June were US$28.3 billion, up 23% while oil imports recorded a 25% growth in the month, Khullar said.

First quarter (April-June 2010-11) exports reached US$50.8 billion, registering a growth of 32.2% while imports were at US$83 billion, reflecting a growth of 34%, the Commerce Minister said.

The trade deficit for the first three months of FY11 stood at US$32.2 billion, he added.

The sectors which registered healthy growth in June include engineering (90%), petroleum & oil products (66%), gems & jewellery (24%) and chemicals (41%), Khullar said.

India's June exports up 30% yoy

Jul 19, 2010 at 18:00

India's merchandise exports were up 30% at US$17.75bn in June while imports grew by 23% to US$28.3bn, translating into a trade gap of US$10.55bn, Trade Secretary Rahul Khullar said on Monday.

Trade deficit during April-June 2010-11 stood at US$32.2bn, with exports during the period rising 32% to US$50.8bn.

The Government is targeting close to 15% export growth in the current fiscal year, following a drop of 4.7% in FY10.

Moody's downgrades Ireland ratings

Jul 19, 2010 at 12:05

Moody's Investor Service said today that it has downgraded Ireland to "Aa2" from "Aa1". But, ratings outlook for Ireland is now stable, the credit rating agency said.

The EURO-USD slipped below US$1.2900 after the Moody's announcement. The shared currency of the debt-strapped euro-zone was last trading at US$1.2885.

Moody's cited Ireland's banking liabilities, weak growth prospects and a substantial increase in the debt to GDP ratio as reasons for the downgrade.

The general government debt-to-GDP ratio was at 64% at the end of last year, up from 25% before the financial crisis took hold, and is continuing to rise.

“Today’s downgrade is primarily driven by the Irish government’s gradual but significant loss of financial strength, as reflected by its deteriorating debt affordability,” said Moody's lead analyst for Ireland, Dietmar Hornung.

Moody's last downgraded Ireland's ratings on July 2, 2009. The agency had given the bonds a "Aa1" rating, with a "negative" outlook.

But now, Moody's sees the upside and downside risks as evenly balanced at the current rating level.

"If the GDP growth trend were to exceed Moody’s expectations - with a quick resumption of domestic credit flow and a supportive global economic environment — then the government’s debt metrics could stabilise earlier than is currently being assumed,” said Hornung.

SEBI revamps takeover code; hikes open offer limit

Jul 19, 2010 at 10:45

Capital market regulator SEBI has decided to re-write the entire take over code. SEBI has recommended increasing the open offer trigger limit from the current 15% to 25%.

SEBI had set up a Takeover Regulatory Advisory Committee, with former Securities Appellate Tribunal (SAT) officer C Achuthan as chairman.

The committee has recommended increasing the statutory open offer size from the present 20% to as high as 100%.

Voluntary open offer size should be minimum 10% and maximum 75%, Achuthan said during a news conference in Mumbai today.

Railway's commodity-wise freight revenue up 8% yoy

Jul 16, 2010 at 12.40

The Railways have generated Rs. 14915.16 crore of revenue earnings from commodity-wise freight traffic during April-June 2010 as compared to Rs. 13768.56 crore during the corresponding period last year, registering an increase of 8.33 per cent. Railways carried 218.35 million tonnes of commodity-wise freight traffic during April-June 2010 as compared to 213.24 million tonnes carried during the corresponding period last year, registering an increase of 2.40%. The Net Tonne Kilo Metres (NTKM) went up from 138779 million during April-June 2009 to 145342 million during April-June 2010, showing an increase of 4.73%.

Out of the total earnings of Rs. 4870.62 crore from commodity-wise freight traffic during the month of June 2010, Rs. 1925.61 crore came from transportation of 32.94 million tonnes of coal, followed by Rs. 707.67 crore from 9.45 million tonnes of iron ore for exports, steel plants and for other domestic user, Rs. 476.25 crore from 8.06 million tonnes of cement, Rs. 241.70 crore from 2.48 million tonnes of foodgrains, Rs. 303.02 crore from 3.49 million tonnes of petroleum oil and lubricant (POL), Rs. 265.81 crore from 2.41 million tonnes of Pig iron and finished steel from steel plants and other points, Rs. 286.57 crore from 3.84 million tonnes of fertilizers, Rs. 75.52 crore from 0.87 million tonnes of raw material for steel plants except iron ore, Rs. 225.54 crore from 2.61 million tonnes by container service and Rs. 362.93 crore from 5.79 million tonnes of other goods.

Food inflation inches up; fuel inflation eases

Jul 15, 2010 at 11:50

Primary Articles inflation stood at 16.25% in the week ended July 3 versus 16.08% in the previous week, the Government said today.

Food Articles inflation stood at 12.81% versus 12.63% in the week ended June 26.

Fuel group inflation stood at 14.27% versus 18.02% in the preceding week.

China's GDP growth drops; inflation softens

Jul 15, 2010 at 09:15

China's latest GDP data as well as a number of other key economic indicators for June indicate that the nation's rapid economic expansion is beginning to moderate as it withdraws some of the crisis-fighting stimulus measures.

China’s economic growth eased to 10.3% in the second quarter, slower than the 11.9% growth recorded in the first quarter. The first-half GDP growth came in at 11.1%.

In the second quarter, growth was less than the median estimate of 10.5% expansion.

China's June consumer prices rose 2.9% year on year while June producer prices were up 6.4% year on year and June Industrial output rose 13.7% year on year. Retail sales rose 18.3% in June from a year earlier, the bureau said.

Economists had forecast June CPI of 3.3% and industrial production growth of 15.1%. PPI was expected to come in at 6.8%.

In May, consumer prices rose 3.1%, the fastest pace in 19 months. In May, China's producer prices rose 7.1% while its retail sales and industrial production had expanded 18.7% and 16.5%, respectively.

June's industrial output growth was the weakest since September excluding January and February numbers distorted by a Lunar New Year holiday.

A leading economic index for China rose 0.8% to 145.8 in May, The Conference Board said today. The indicator signals solid but less robust growth in the second half, said Bill Adams, a Beijing-based economist for the research organization.

Urban fixed-asset investment gained 25.5% in the first six months of 2010 from a year earlier, the statistics bureau said in today’s statement. The pace compares with a 33.6% increase in the first half of 2009.

China’s economy will overtake Japan’s as the world’s second biggest this year and the Organization for Economic Cooperation and Development (OECD) said in March that it may account for a third of global growth.

Euro-zone industrial output up 0.9%; inflation flat

Jul 14, 2010 at 15:50

Industrial output in the debt-plagued euro-zone grew at a slower than anticipated pace in May and consumer inflation slowed in June, data released by the European Union (EU) statistics agency Eurostat showed on Wednesday.

Industrial production across the 16-nation eurozone rose by 0.9% in May and was 9.4% higher than in the same month last year, Eurostat reported.

Economists had forecast a 1.3% monthly rise and an 11.3% annual increase.

Eurostat also said that consumer inflation in the euro zone was flat in June but rose by 1.4% on an annual basis. That was down from an annual pace of 1.6% in May and matched a preliminary estimate by Eurostat.

Core inflation, which excludes volatile costs such as energy, accelerated to 0.9% in June from 0.8% in the previous month.

The ECB last month forecast euro-region inflation to average about 1.5% this year and around 1.6% in 2011. The Frankfurt-based central bank aims to keep annual gains in consumer prices just below 2%.

UK jobless claims fall for 5th month...unemployment drops

Jul 14, 2010 at 15:45

The number of British workers claiming jobless benefits declined for the fifth consecutive month in June, official data showed on Wednesday, though economists said that the longer-term outlook for the UK labour market remains murky owing to the impending public sector job cuts.

The Office for National Statistics (ONS) said today that unemployment claims fell by 20,800 to 1.46 million, the lowest level in 15 months. The figure was largely in line with economists' expectations for a 21,000 decline.

The ONS said that 4.5% of the workforce was claiming benefits, down from 4.6% in May.

The broader unemployment rate, measured according to International Labor Organization (LBO) standards, fell to 7.8% in the three months ended in May from 7.9% in the previous three-month period. The number of unemployed declined over the quarter by 34,000, to 2.47 million, declining for the first time since January.

The UK's unemployment rate compares with 10% in the euro region, 9.5% in the US and 5.2% in Japan, the report showed.

The proportion of the working population in part-time employment rose to 27% in the quarter through May, the highest since records began in 1992, the ONS said.

UK consumer confidence falls further in June

Jul 14, 2010 at 15:25

Consumer confidence in the UK declined for a second straight month in June to touch the lowest level in a year amid concerns that deep budget cuts by the new government will hurt the nation's economic growth.

After dropping 10 points in May, the index fell another 3 points to 63, the worst reading in a year, according to a poll by lender Nationwide Building Society.

A gauge measuring expectations for the British economy in the next six months fell 6 points to 88, the lowest since May 2009.

Nationwide said that political uncertainty after the election in May may also have contributed to the recent slide in household sentiment.

"With the emergency budget taking place late in the month, this lack of optimism may have been a product of consumers hypothesizing over the government’s plans," Nationwide chief economist Martin Gahbauer said. "With greater clarity about future fiscal plans, it may be that we begin to see confidence stabilize somewhat in the coming months."

The index measuring people’s current perception of the economy rose 1 point to 24 in June, the report showed. The gauge of whether now is a good time to spend dropped to 95 from 100.

Gahbauer said that the government’s decision to delay a planned increase in the sales-tax rate until January may lift spending in the second half of 2010. Nevertheless, willingness to spend remains part of a fine balancing act with the employment situation and levels of disposable income, he added.

Consumers also grew more concerned about the outlook for the job market, Nationwide said. The share of respondents who expect some or many jobs available in six months time fell to 23% from 29%. Those expecting few jobs to be available jumped to 53% from 46%.

"These concerns are perhaps unsurprising with unemployment figures remaining close to record highs and fears over public sector jobs continuing to grow," Gahbauer said.

Separately, the number of British workers claiming jobless benefits declined for the fifth consecutive month in June, official data showed on Wednesday, though economists said that the longer-term outlook for the UK labour market remains murky owing to the impending public sector job cuts.

The ONS said that 4.5% of the workforce was claiming benefits, down from 4.6% in May.

India's infaltion rises to 10.55% in June

Jul 14, 2010 at 11:40

The annual rate of inflation, based on monthly wholesale price index (WPI), rose at a less than anticipated pace in June, data released by the Government showed on Wednesday. Inflation stood at 10.55% in June 2010 as compared to 10.16% in the previous month, the Government said today.

Inflation for June had been expected to come in at around 10.7-10.8%.

Meanwhile, April's inflation figure was revised to 11.23% compared to the preliminary estimate of 9.59%. It may be recalled that last month, the Government had revised upwards March inflation rate to 11.04% from a provisional reading of 9.90%.

Some experts suggest that the fuel price hike announced by the Government may not fully reflect in the June inflation data as it was announced late in the month (June 25). So, the full impact of the fuel price increase will be seen in the July numbers. Also, inflation may remain in the low double digits for the foreseeable future owing to the second round impact from the fuel price hike.

The Reserve Bank of India (RBI), which early in July raised policy rates by 25 basis points in a surprise move, is expected to continue with its 'calibrated' monetary tightening. Markets expect the central bank to announce another quarter point hike in key short-term rates at the scheduled review on July 27.

That will take the total increase in benchmark rates to 1% since mid-March

Moody's downgrades Portugal's bond ratings to A1

Jul 13, 2010 at 13.00

Moody's Investor Service today downgraded Portugal's bond ratings to A1.

Moody's said that Portugal's financial strength will weaken more and its growth prospects will remain weak.

Euro dropped after Moody's announcement while Portugal's PSI-20 index fell 0.4%

S&P affirms Britain's AAA sovereign rating

Jul 13, 2010 at 09:55

Standard & Poor's affirmed Great Britain's AAA sovereign rating but warning the possibility of a downgrade, if the new U.K. government doesn't deliver on making cuts to the budget deficit.

According to reports, the agency left Britain's rating under a negative outlook, which means a downgrade is possible but not inevitable. S&P said the negative outlook reflects the potential for a downgrade if the government doesn't stick to the scale of its ambitious plan to bring about fiscal consolidation, adds report.

Infosys Q1 net profit down 7.5% QoQ

Jul 13, 2010 at 08:50

Infosys Q1 net profit is Rs14.88bn versus Rs16bn in the previous quarter, showing a sequential drop of ~7.5%. The year-on-year fall in the net profit works out to 2.4%.

Revenues for the April to June quarter came in at Rs61.98bn versus Rs59.44bn in the January to March quarter, reflecting a QoQ growth of ~4.2%. The year-on-year decline in topline works out to 13.3%.

EPS for the reporting quarter is Rs26.06 from Rs28.02 in the preceding quarter. QoQ decline was 7.0%; YoY decline was 2.6%.

Excluding the income from investment in OnMobile Systems, Inc. of Rs480mn in Q4 FY10, the QoQ decline was 4.1% in net profit and EPS, Infosys said in a statement.

Meanwhile, Infosys managed to beat its own guidance for Q1 FY11 revenue and EPS.

Infosys and its subsidiaries added 38 new clients during the quarter. Infosys and its subsidiaries saw gross addition of 8,859 employees (net addition of 1,026) for the quarter while the total headcount stood at 1,14,822 employees as on June 30, 2010.

"While the global economic environment remains uncertain, we continue to see greater demand for services from our clients," said S. Gopalakrishnan, CEO and Managing Director. "The challenge for the industry is to enhance the investment to grow the business, given the uncertainty in the environment."

UK economic growth left unrevised at 0.3%

Jul 12, 2010 at 15:05

The UK economy grew at the same pace in the first quarter as had been anticipated previously, matching forecast by economists but the Office for National Statistics said that the recession that preceded it was worse than initially expected.

British first-quarter gross domestic product (GDP) expanded by 0.3% compared to the final three months of 2009, the ONS said today.

Compared to the first quarter of last year, GDP shrank by 0.2%, also unchanged from the prior measurement.

Both estimates were unchanged from the agency's previous estimates.

The data had been scheduled for release on June 30, but was postponed after the ONS said that quality-assurance tests had revealed potential errors in some of the detailed figures in the National Accounts data set.

First-quarter industrial production growth was revised down to 1% from a prior estimate of 1.2%. Services growth was revised up by 0.1% to 0.3%, while the drop in construction was 1.6% instead of 0.5%, the statistics office said.

Consumer spending was revised down in the quarter, showing a 0.1% drop instead of no change, the ONS said. That was offset upward revisions to government spending and fixed investment.

The ONS confirmed that Britain exited recession in the fourth quarter of 2010, with the economy expanding at a quarterly rate of 0.4%, as earlier estimated.

On an annual basis, the UK economy contracted by 6.4% between the second quarter of 2008 and the third quarter of 2009, more than the 6.2% previously thought.

Separate data showed that services output fell by 0.3% in April, in line with private sector surveys.

The ONS also released first-quarter current account data, which showed that Britain's deficit with the rest of the world widened to 9.628 billion pounds in the last three months of 2009, more than twice as much as expected and compared with a surplus of 521 million pounds in Q4 2009.

This was the widest level of current account deficit since the third quarter of 2007

India's industrial output drops to 11.5% in May

Jul 12, 2010 at 11:15

India's industrial output surprisingly declined in May when compared to growth in April, as the mining and manufacturing sub-segments saw a sharp deceleration in their respective output even as the electricity sub-segment registered a marginal increase month-on-month.

The industrial output, as measured by the index of industrial production (IIP), stood at a surprisingly low 11.5% in May, the Government said today. Also, the Central Statistical Organisation (CSO) revised down April's stellar IIP growth reading from 17.6% to 16.5%.

Most economists had been forecasting a growth of 15-16% in the IIP for May.

Stocks gave up some of their early gains after the release of the IIP numbers.

Manufacturing output declined to 12.3% in May from 19.4% in April, the data released by the CSO showed today. Mining sector output too fell to 8.7% versus 11.4% in the preceding month.

However, growth in electricity generation increased to 6.4% from 6% in April.
Monsoon revives...covers entire country ahead of schedule

Jul 09, 2010 at 19:50

The monsoon entered into a revival phase with formation of two low pressure areas over the Bay of Bengal during the week and their northwestward movement

The long hiatus in the monsoon advance was broken and it rapidly advanced and covered the entire country on 6 July, 2010, which is 9 days ahead of the normal date (15 July, 2010).

The rainfall activity over most parts of the country, except northeast India was above normal during the period between July 1 and July 7. Monsoon was vigorous particularly over northwest India with very heavy falls at some places. It led to significant improvement in rainfall over northwest India compared to last week.

Country as a whole received actual rainfall of 64.5mm, which is 2% above the Long Period Average (LPA). In the week between June 23 and June 30, the actual rainfall for the entire nation was 25% below the LPA.

Out of 36 meteorological sub-divisions, rainfall was excess in 16, normal in 09,deficient in 10 and scanty in 01 sub-division during the week.

The cumulative seasonal rainfall for the country as a whole during this year’s monsoon has up to 08 July been 10% below the LPA. Actual cumulative rainfall between June 1 and July 1 was 16% below the LPA.

From June 1 till today, the rainfall has been excess over 11 sub-divisions, normal over 15 sub-divisions, deficient in 9 sub-divisions and scanty in 1 sub-division, out of 36 meteorological sub-divisions.

As compared to last week, there has been significant improvement in the overall rainfall condition, except over northeast India, where slight deterioration was observed.

Weak monsoon conditions could prevail over central India during next week, however monsoon would be active along foothills of Himalayas and northeastern states.

With the dipping of monsoon trough in the Bay of Bengal, increase in rainfall activity is likely over east & central India and west coast.

Sharad Pawar: right time to decontrol sugar

Jul 09, 2010 at 19:40

This is the right time to decontrol India's sugar sector as production in India is all set to rebound, Agriculture Minister Sharad Pawar said on Friday. Pawar, who has recently taken over as the chief of the International Cricket Council (ICC), also said that the Government is actively considering imposing tax on sugar imports.

The Government may end stock limits for bulk consumers of sugar, he said in New Delhi today.

"Sugar sector is heavily regulated. This is the time the millers and the Government should sit together to decide on easing restrictions on sugar sector," he told an industry conference in the capital.

The Government sets the benchmark price for sugarcane and the monthly sales quota for mills, who are required to sell 20% of their production at below-market prices to the Centre for resale to the poor through fair price shops. Pawar did not provide a timeframe as to when the Government would end the controls.

Pawar also said that he expects a strong rebound in India's agriculture output, which will reduce food price inflation. Last year, India had suffered the country's worst drought in 37 years, hitting farm output.

The flood situation in Punjab and Haryana, the main grain producing states is not serious, the Agriculture Minister said.

Bank of Korea surprises...hikes key rate by 25 bps

Jul 09, 2010 at 09:10

The Bank of Korea on Friday unexpectedly hiked its key policy rate by a quarter percentage point, catching markets and economists by surprise. This is the first rate increase by the South Korean central bank since the global financial crisis, sending its currency won higher. Stocks too reacted positively, with the benchmark Kospi index rising above 1700.

Governor Kim Choong Soo boosted the seven-day repurchase rate to 2.25 percent from a record low 2 percent, the bank said in a statement in Seoul today.

The Bank of Korea had cut by a total of 325 basis points from October 2008 to February 2009 to a record low of 2%.

"Consumer price inflation has so far remained in a range of somewhat above 2% but a little below 3%. But in the future, upward pressures are expected to build continuously, owing to the increase in demand-pull pressures associated with the continued upturn in economic activity," the Bank of Korea said in a statement.

"In the real-estate market, housing sales prices have declined in Seoul and its surrounding areas, while those in other areas have sustained a highly upward trend," it said.

The won rose 1.1% to 1,196.25 per dollar as of 11:29 a.m. in Seoul, nearly a two-week high as South Korea joined India, Malaysia and Taiwan in lifting rates in recent weeks, judging that economic growth in Asia will remain largely insulated from the sovereign debt problems in Europe.

The Kospi stock index climbed 0.4% to 1705.

The Finance Ministry on June 24 boosted this year’s growth forecast to 5.8% from a December projection of 5%, and said that the nation needs to normalize fiscal and monetary policies.

Consumer prices rose 2.6% in June from a year earlier, after climbing 2.7% in May. The central bank is targeting inflation of between 2% and 4% on average through 2012.

Strengthening growth prompted Malaysia’s central bank to raise rates yesterday for the third time this year, Taiwan to boost borrowing costs last month and the Reserve Bank of India to increase its benchmark three times since mid-March.

Earlier this week, the central banks in Australia, the UK and EU left key rates unchanged while Malaysia’s central bank raised interest rates, marking a third increase this year.

Governor Kim Choong-soo told reporters after the decision that policy will remain accommodative and that it was not time for the central bank to adopt a tightening stance. He was quoted as saying that inflationary pressures will likely continue growing in the coming months, perhaps topping 3% in the second half of the year, which is the midpoint of the central bank's target range.

Kim also said that the country's economy will expand by more than 1% during the second quarter compared with the first quarter, or about 7% from the year-ago quarter.

India's June car sales up 31% yoy

Jul 08, 2010 at 18:00

Domestic sales of passenger cars in India grew by 30.8% in June, as consumers made a beeline for a spate of new models amid loose monetary policy and buoyant growth prospects, the Society of Indian Automobile Manufacturers (SIAM) said on Thursday.

Car makers in India sold a total of 141,184 vehicles in the month under review compared with 107,948 cars sold in the same month a year ago, data from the industry body showed.

Sales of trucks and buses rose by 44% to 52,211 units in June, SIAM said.

India's car sales are likely to rise 12-13% in 2010-11 to 1.7 million units, SIAM president Pawan Goenka told reporters in New Delhi today.

About 1.71 million units are likely to be sold this fiscal year, compared with 1.53 million a year earlier, the SIAM said today.

ECB too holds rates steady

Jul 08, 2010 at 17:55

The European Central Bank (ECB) on Thursday held interest rates unchanged at record low 1%, as the central bank continues to be wary of the regional sovereign debt problems hurting economic growth.

Policy makers meeting in Frankfurt today kept the benchmark rate at 1%, as predicted by most economists.

Jean-Claude Trichet, the ECB president, will hold a press conference later today. He is expected to focus on the criteria used in European bank stress tests and liquidity concerns.

Separately, the Bank of England (BOE) left its key rate steady at 0.5% besides maintaining status quo on its bond purchase program.

The euro was little changed following the announcements, and was last quoted at US$1.2666, up 0.26% on the day.

April-June Passenger Vehicles sales up 32% yoy

Jul 08, 2010 at 17:00

Sales of India's Passenger Vehicles in April-June 2010 grew by 32.70% over the same period last year, according to the Society of Indian Automobile Manufacturers (SIAM).

Passenger Car sales grew by 33.43%, Utility Vehicles grew by 25.36% and Multi Purpose Vehicles grew by 39.19% in April-June 2010 over the same period last year.

The overall domestic sales of Commercial Vehicles segment registered a growth of 54.72% in April-June 2010 as compared to the same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) registered a growth rate of 83.12% and Light Commercial Vehicles grew by 35.68%.

During April-June 2010, Three Wheelers sales recorded a growth rate of 15.17% while Passenger Carriers sales grew by 16.53% and Goods Carriers sales grew at 9.98% in the same period.

Two Wheelers registered a growth rate of 27.60% in April-June 2010. Scooters, Mopeds and Motorcycles grew by 48.18%, 24.39% and 24.13% respectively.

In April-June 2010, overall automobile exports registered a growth rate of 59.30%. Passenger Vehicles, Two Wheelers, Commercial Vehicles and Three Wheelers segments grew by 11.20%, 67.50%, 103.37% and 150.33 respectively.

The overall automobile production data for April-June 2010 shows production growth of 33.27% over the same period last year with industry producing 4,091,485 vehicles.

BOE leaves key rate unchanged at 0.5%

Jul 08, 2010 at 16:40

As was widely expected, the Bank of England (BOE) today left its key rate unchanged at 0.5%, and maintained assets purchase program at 200 billion pounds.

The Monetary Policy Committee, led by Governor Mervyn King, is caught between rising inflation on the one hand and the danger of spending cuts hurting economic growth on the other.

The European Central Bank (ECB) will also probably leave its main interest rate unchanged at 1%, according to a survey of economists. The ECB is due to announce its decision at 1:45 pm Frankfurt time.

The US Federal Reserve is also likely to keep its benchmark rate near zero through this year, as the euro-zone debt crisis and a slowdown in China threaten to stall the global recovery.

The Chancellor of the Exchequer George Osborne announced an emergency budget on June 22 to tackle the record budget deficit. The spending-cut program will slice 85 billion pounds from expenditure, equivalent to 5.7% of GDP, according to the Institute for Fiscal Studies estimates.

The new IMF forecasts see the UK economy expanding 1.2% this year and 2.1% in 2011. That compares with an April projection for growth of 1.3% and 2.5%.

Food inflation dips, but fuel inflation jumps

Jul 08, 2010 at 12:55

Food inflation in India dropped further in the penultimate week of last month owing largely to high base effect but fuel prices surged after the Government decided to decontrol petrol prices and hiked prices of other petroleum products. Mineral prices also jumped in the week ended June 26, government data showed today.

India’s food inflation declined to 12.63% in the week ended June 26 from 12.92% in the preceding week. Inflation in the Food Articles group stood at 12.21% in the corresponding period last year. The index for 'Food Articles' group declined by 0.1% to 296.0.

However, inflation in the Fuel & Power group shot up to 18.02% in the week ended June 26 from 12.90% in the week ended June 19. Inflation in this group stood at (-) 12.42% during the corresponding week of the previous year. The index for this major group rose by a whopping 4.5% to 387.0 from 370.2.

Inflation in the Primary Articles group also climbed in the week under review to 16.08% from 14.75% in the previous week. The annual rate of inflation, calculated on point to point basis, for this group stood at 6.85% during the week ended June 27, 2009. The index for this major group rose by 1.4% to 306.0 from 301.8 in the previous week.

Inflation in the Non-Food Articles group inched lower to 18.60% in the week ended June 26 from 18.80% in the week before. Inflation in this group was at -1.79% in the week ended June 27, 2009. The index for this group rose by 0.2% to 287.0.

Inflation in the Minerals group shot up to 53.47% in the week ended June 26 from 20.15% in the previous week. Inflation for this group stood at (-) 12.73% in the corresponding week of last year. The index for Minerals group rose by 28.3% to 866.2 from 674.9 in the previous week.

India's GDP to grow at 9.4% in 2010: IMF

Jul 08, 2010 at 09:30

The International Monetary Fund (IMF) has raised its forecast for GDP growth in India to 9.4% and expects growth to decline slightly to 8.4% next year, even as it increased the growth forecast for the overall emerging markets to 6.8%, from 6.3% in April.

China's economy will grow the fastest at 10.5%, while that of Brazil will expand by 7.1%, the fund said.

Brazil’s forecast had the biggest revision higher in today’s report, from a 5.5% prediction in April, the IMF report showed.

Mexico’s economy will grow by 4.5% this year, more than the 4.2% expansion seen in April, the IMF said.

Inflation in the emerging economies is expected to accelerate to 6.25% this year before slowing to 5% in 2011, the IMF said.

Raising rates in countries with excessive external surpluses should be accompanied by a stronger exchange rate, the fund said. Countries should also be ready to a swift policy reversal if risks materialize, it said.

Euro-zone Q1 GDP growth confirmed at 0.2%

Jul 07, 2010 at 16:00

Year-on-year, the seasonally adjusted first quarter GDP grew by 0.6%, the first annual gain since the third quarter of 2008.

The economy of the debt-stricken euro-zone rose by 0.2% in the first quarter of 2010 compared with the previous quarter, a second estimate from Eurostat said on Wednesday.

The revised reading matched with a June 4 estimate. In the fourth quarter of 2009, euro-zone growth was 0.1%. Year-on-year, the seasonally adjusted first quarter GDP grew by 0.6%, the first annual gain since the third quarter of 2008. Exports and government spending helped sustain Europe’s recovery in the January to March quarter, offsetting declines in investment and household consumption. Inventory build-up also helped the economy, with changes in business inventories adding 1% point to growth in the first quarter.

The euro extended declines against the dollar after a separate report showed that German factory orders unexpectedly fell in May for the first time in five months.

The shared European currency traded at US$1.2563 at 11:07 a.m. in London, down 0.5% on the day.

Germany's new industrial orders, adjusted for seasonal effects, edged down 0.5% in May from the previous month, the Federal Ministry of Economics and Technology in Berlin reported today. Most analysts had expected orders to be up 0.5% month-on-month.

The ministry revised up its estimate for April manufacturing orders. It said that orders rose 3.2% in April, compared with its previous estimate of 2.8% growth.

Direct tax collections up 15.49% in Q1: Govt

Jul 06, 2010 at 18:00

Net direct tax collections during first quarter of the present fiscal (up to June 2010) stood at Rs.68,675 crore, up from Rs.59,465 crore in the same period last fiscal, registering a growth of 15.49%. Growth in Corporate Taxes was 21.65% (Rs.43,439 crore as against Rs.35,709 crore), while Personal Income Tax (including STT, and residual FBT and BCTT) grew at 1.24% (Rs.24,075 crore as against Rs.23,780 crore).

Corporate advance tax for the first quarter, at Rs.26,876 crore in FY 2010-11 against Rs.20,456 crore in FY 2009-10, grew at 31.4%, fastest since 2005. The corresponding growth in corporate advance tax stood at –3.4%, 25.1%, 30% and 26.9% for FY 2008-09, 2007-08, 2006-07 and 2005-06, respectively.

Securities Transaction Tax, however, recorded a negative growth at 25.21% during the first quarter (Rs.1,094 crore in FY 2010-11 as against Rs1,462 crore in FY 2009-10).

Euro-zone composite PMI slips in June

Jul 05, 2010 at 17:20

A closely followed measure of business activity in the debt-strapped euro zone's private sector showed that the pace of growth slowed in June.

The final composite Markit euro-zone purchasing managers index (PMI) for June released on Monday fell to 56.0 from 56.4 in May, confirming a preliminary estimate.

A reading of more than 50 indicates an expansion, while a figure of less than 50 signals a contraction.

The June reading marked a three-month low but left the gauge above its long-run average of 53.4, according to Markit.

The services PMI for the 16-nation bloc that shares euro as common currency fell to 55.5 in June, down from a 33-month high of 56.2 in May and slightly above the preliminary estimate of 55.4

Separately, the Markit/CIPS services PMI for the UK fell more than expected in June, signaling the slowest increase in activity since August 2009.

The index fell to 54.4 in June, down from 55.4 the previous month.

Economists had expected a more modest drop to 55.0.

China's service sector growth softens in June

Jul 05, 2010 at 12:20

If recent reports on manufacturing activity in China have raised concerns about the health of the world's fastest growing economy, a latest reading on its service sector will only add to those worries.

A survey of business activity in China's service sector for June indicates the weakest pace of expansion in 15 months.

The services purchasing manager's index (PMI) for June eased to 55.6 from 56.4 in May, the weakest pace of expansion since March 2009, according to survey results compiled by HSBC and Market Economics.

"This, combined with the moderating manufacturing production, implies the economy is cooling off sequentially," said HSBC's Chief Economist, Qu Hongbin, in Hong Kong.

Employment in the services sector rose in June, though the pace of job creation was the slowest in four month.

Two separate manufacturing surveys released last week showed that business conditions weakened in June for the second straight month.

Meanwhile, an official with a regional branch of the People's Bank of China (PBOC) today reportedly called for tighter monetary policy to help keep inflation under control.

Xu Nuojin, vice governor of the PBOC's Guangzhou branch, was quoted as saying that he was in favour of higher interest rates. But he also advocated moderately loose credit conditions and reduced controls over bank-credit quotas.

India's service sector growth hits 2-year high

Jul 05, 2010 at 12:15

Growth in India's manufacturing and agriculture sectors may have slowed lately but its service sector seems to be doing just fine if the results of the latest survey by HSBC and Markit is any indication.

A key benchmark tracked by the private survey expanded at its fastest pace in two years in June, led by increases in business expectations and new orders, according to a HSBC statement.

After a marginal drop in May, the HSBC Markit Business Activity Index, rose to 64.0 in June from 58.2 last month. Any figure above 50 indicates expansion.

The Indian service sector companies also raised their charges for the seventh consecutive month but the inflation rate linked to that charge was still weaker than the 20-month peak in April.

The HSBC-Markit survey showed that the input price index fell further to a three-month low in June from a 20-month high in April, signaling some moderation in price pressures.

All six sub-sectors covered by the survey recorded an increase in new business activity since May.

Separately, a HSBC-Markit survey of business conditions in China's service sector indicated the weakest pace of expansion in 15 months, adding to the mounting evidence of a slowdown in the economy.

RNRL-RPower merger...swap ratio 4:1

Jul 04, 2010 at 16:30

Anil Ambani group Company Board has announced the merger of Reliance Natural Resources Ltd with another group firm Reliance Power, according to a report.

The report stated Reliance Power will give one of its shares for every four held in RNRL

The stock deal is pegged at over Rs500bn, says report.

US economy sheds 125,000 jobs in June

Jul 02, 2010 at 18:45

The decline in the non-farm payrolls in the US last month turned out to be in line with expectations even as the unemployment rate declined for the first time this year, reflecting a drop in census workers and a smaller-than-forecast gain in private hiring.

Employers in the US shed a total of 125,000 jobs in June primarily due to the loss of 225,000 census jobs that had swelled payrolls by 433,000 net jobs in May. Economists' projections had ranged between a decline of 100,000 to 130,000 in non-farm payrolls. This was the first job reduction this year.

Private sector hiring in June fell short of expectations, suggesting that the world's largest economy is still struggling to find firm footing, the Labor Department reported showed. Private hiring increased by a disappointing 83,000 in June from a revised 33,000 gain in May, which was originally reported as a 41,000 rise. The private sector payrolls growth came weaker than the 115,000 increase expected by economists.

Besides the loss of census jobs, state and local governments cut 10,000 jobs last month. That, and the gain of 27,000 non-census jobs by the federal government, led to the overall loss in jobs.

The unemployment rate fell to 9.5% from 9.7% in May. Economists had forecast a reading of 9.8%. But the improvement was due mostly to many disillusioned job seekers opting out of the labor force. The jobless rate fell to the lowest level since July 2009. The decline in June reflected a 652,000 decrease in the size of the labor force.

This was the second straight sharp monthly decline in the work force. While unemployment fell by 350,000 to 14.6 million for June, employment also fell a sharp 301,000 to 139.1 million.

RNRL, Reliance Power to consider merger on July 4

Jul 02, 2010 at 18:30

The boards of directors of Reliance Natural Resources Ltd. (RNRL) and Reliance Power Ltd. will meet on July 4, to consider a merger of the two anil dhirubhai ambani group (ADAG) companies.

Earlier, media reports had suggested that RNRL and Reliance Power could merge, sending the shares of the two companies higher.

The announcement is significant as it comes close on the heels of the two Ambani siblings rescinding a long-standing non-compete agreement, allowing them to expand into each other's sectors.

Also, last week Reliance Industries Ltd. (RIL) and RNRL signed a new gas supply master agreement (GSMA) pursuant to the judgment of the Supreme Court, dated May 7.

RNRL said that it would now take appropriate steps requesting the Government of India for expeditious allocation of natural gas to facilitate implementation of the same.

The price, quantity and the tenure of the natural gas to be supplied by RIL to RNRL from its KG basin block will be decided by the Government.

However, some reports suggest that the new GSMA between the two companies entails supply of 28 mmscmd natural gas for 17 years at US$4.20 per mmbtu.

RIL said that the GSMA is compliant with the Gas Utilization Policy and EGoM decisions.

RBI hikes repo rate, reverse repo rate by 25 bps

Jul 02, 2010 at 18:20

The following is the full text of the Monetary Policy and Liquidity Management Measures announced by the Reserve Bank of India (RBI) today.

On an assessment of the current macroeconomic situation, it has been decided to take the following monetary policy measures as a part of the calibrated exit from the expansionary monetary policy:

• to increase the repo rate under the Liquidity Adjustment Facility (LAF) by 25 basis points from 5.25 per cent to 5.50 per cent with immediate effect.

• to increase the reverse repo rate under the LAF by 25 basis points from 3.75 per cent to 4.0 per cent with immediate effect.

Liquidity Management Measures

Also, on the basis of an assessment of the current liquidity situation, the Reserve Bank has decided to extend the following liquidity management measures:

The additional liquidity support to scheduled commercial banks under the LAF to the extent of up to 0.5 per cent of their net demand and time liabilities (NDTL) currently set to expire on July 2, 2010 is now extended up to July 16, 2010.

For any shortfall in maintenance of statutory liquidity ratio (SLR) arising out of availment of this facility, banks may seek waiver of penal interest purely as an ad hoc measure.

The second LAF (SLAF) will be conducted on a daily basis up to July 16, 2010.

Rationale for Monetary Policy Measures

There have been significant macroeconomic developments since the April 2010 Monetary Policy Statement. At the global level, the recovery is strengthening. However, the outlook continues to be clouded by uncertainty in the Euro area.

On the domestic front, the revised growth estimates by the Central Statistical Organisation (CSO) for 2009-10 and for Q4 of 2009-10 suggest that the recovery is consolidating. The manufacturing sector has recorded robust growth in recent months, aided among others, by expanding exports.

The strong underlying growth momentum is also evidenced by the sharp upturn in the capital goods sector, acceleration in credit growth and the widening current account deficit. The monsoon situation so far has been decidedly better than during last year holding prospects for good agriculture growth.

In its April policy review, the Reserve Bank projected real GDP growth for 2010-11 at 8 per cent with an upside bias. More recent data suggest that the upside bias has largely materialised. The growth projection will be reviewed in the First Quarter Review on July 27, 2010.

The developments on the inflation front, however, raise several concerns. Overall WPI inflation increased to 10.2 in May 2010, up from 9.6 per cent in April 2010. Food price inflation and consumer price inflation remain at elevated levels. There has been some moderation in food price inflation, but the price index of food articles continues to increase.

More importantly, the prices of non-food manufactured goods and fuel items have accelerated in recent months. Year-on-year WPI non-food manufacturing products (weight: 52.2 per cent) inflation, which was (-) 0.4 per cent in November 2009 and 5.4 per cent in March 2010, rose further to 6.6 per cent in May 2010. Year-on-year fuel price inflation also surged from (-) 0.8 per cent in November 2009 to 12.7 per cent in March 2010 and further to 13.1 per cent in May 2010.

Although entirely justified in terms of long-term fiscal and energy conservation objectives, the recent increase in fuel prices will have an immediate impact of around one percentage point on WPI inflation, with second round effects being felt in the months ahead. Significantly, two-thirds of WPI inflation in May 2010 was contributed by non-food items, suggesting that inflation is now very much generalised and that demand-side pressures are evident.

Timing of the Action

This mid-cycle policy action has been warranted by the evolving macroeconomic situation. Even as data for real GDP growth and WPI inflation became available by mid-June 2010, it was considered inadvisable to raise the policy rates as the financial system was dealing with liquidity pressures triggered by sudden build-up in government cash balances occasioned by the larger than anticipated level of 3G spectrum and broadband wireless access auction realisations.

Through the month of June, liquidity under LAF operations remained in deficit mode. Consequently, the call rate moved up significantly, resulting in an effective tightening at the short end of the yield curve. The liquidity situation has since begun to ease.

Rationale for Extension of Liquidity Management Measures

In late May 2010, in anticipation of the liquidity pressures on account of payments for 3G spectrum and advance taxes, the Reserve Bank took certain liquidity easing measures. Even as the liquidity situation has begun to ease, these measures are being extended since liquidity tightness may persist.

Expected Outcomes

The above monetary measures should contain inflation and anchor inflationary expectations going forward, while not hurting the recovery process. Easing liquidity and raising rates at the same time may seem apparently inconsistent. It should be noted in this context that the liquidity easing measures have become necessary to manage what is essentially a temporary and unanticipated development. In no way should they be viewed as inconsistent with the monetary policy stance of calibrated exit, which remains focussed on containing inflation and anchoring inflationary expectations without hurting growth.

The Reserve Bank will continue to monitor the macroeconomic conditions, particularly the price situation, and take further action as warranted.

India's June manufacturing PMI falls

Jul 01, 2010 at 18:00

Growth in India's manufacturing sector slowed last month after touching the highest level in more than two months in the previous month.

India's June manufacturing PMI fell to 57.3 from 59.0 in May, according to a HSBC-Markit survey released today.

June was the 15th consecutive month that the index has been above the 50 mark that signifies expansion in business activity.

"India's economy is stepping back a little, with output growth easing into June," said Frederic Neumann, co-head of Asian Economics Research at HSBC.

New orders growth moderated slightly from last month.

The input price index fell to 53.6 from 63.8 the previous month, marking the lowest level in a year. But this was more due to competition amongst suppliers rather than a fall in demand for raw materials and semi-finished goods, according to HSBC.

"Both activity and price components are easing from very elevated levels, suggesting that it is too early to worry about growth and let down our guard on underlying price trends," said Neumann.

Manufacturers did not add new jobs to their payrolls in June, leaving the employment index stagnating.

India's industrial output, as measured by the index of industrial production (IIP), grew in double-digits for the seventh straight month in April.

Industrial output rose at a much faster-than-expected 17.6% in April from a year earlier, the strongest since 17.7% in December 2009, data showed last month.

Euro-zone manufacturing PMI slips in June

Jul 01, 2010 at 15:20

Manufacturing activity in the debt-plagued euro-zone grew at its slowest pace in four months in June, according to the final reading of the Markit purchasing managers index (PMI) for the month released on Thursday.

The PMI stood at 55.6, matching a preliminary estimate and falling slightly from 55.8 in May. A reading of more than 50 indicates expansion.

"The second quarter most likely represents a peaking in the rate of expansion of manufacturing output, as growth slows in coming months," said Chris Williamson, chief economist at Markit.

Separately, a gauge of activity in Britain's manufacturing sector showed that the pace of growth slowed in June but was within striking distance of the 15-year peak posted in May.

The Markit/CIPS manufacturing PMI slipped to 57.5 in June from a reading of 58.0 in May. Economists had forecast a decline to 57.0.

"The sector maintained strong momentum in June but looming headwinds are causing some insecurity," said David Noble, CEO of the Chartered Institute of Purchasing and Supply.

May exports up 35% yoy

Jul 01, 2010 at 12:15

India’s exports during May, 2010 were valued at US $ 16145 mn (Rs. 73964 crore) which was 35.1 per cent higher in dollar terms (27.5 per cent higher in Rupee terms) than the level of US $ 11952 mn (Rs.58005 crore) during May, 2009. Cumulative value of exports for the period April-May 2010 was US $ 33032 mn (Rs 149111 crore) as against US $ 24349 mn (Rs. 120069 crore) registering a growth of 35.7 per cent in Dollar terms and 24.2 per cent in Rupee terms over the same period last year.

India’s imports during May, 2010 were valued at US $ 27437 mn (Rs.125694 crore) representing a growth of 38.5 per cent in dollar terms (30.8 per cent in Rupee terms) over the level of imports valued at US $ 19806 mn ( Rs. 96125 crore) in May, 2009. Cumulative value of imports for the period April-May, 2010 was US $ 54745 mn (Rs. 247211 crore) as against US $ 38858 mn (Rs. 191502 crore) registering a growth of 40.9 per cent in Dollar terms and 29.1 per cent in Rupee terms over the same period last year.

Oil imports during May, 2010 were valued at US $ 8844 mn which was 66.7 per cent higher than oil imports valued at US $ 5306 mn in the corresponding period last year. Oil imports during April-May, 2010 were valued at US$ 16923 mn which was 68.5 per cent higher than the oil imports of US $ 10045 mn in the corresponding period last year.

Non-oil imports during May, 2010 were estimated at US $ 18593 mn which was 32.3 per cent higher than non-oil imports of US $ 14057 mn in May, 2009. Non-oil imports during April - May, 2010 were valued at US$ 37822 mn which was 31.2 per cent higher than the level of such imports valued at US$ 28821mn in April - May, 2009.

The trade deficit for April - May, 2010 was estimated at US $ 21712 mn which was higher than the deficit of US $ 14509 mn during April -May, 2009.

India’s food inflation slips to 12.92%

Jul 01, 2010 at 12:05

India’s food inflation slipped to 12.92% in the week ended June 19 as compared to 16.90% in the previous week. Inflation in the Food Articles group stood at 12.57% in the corresponding period last year. The index for 'Food Articles' group rose by 0.3% to 296.3

June monsoon rains 16% below normal: IMD

Jul 01, 2010 at 10:45

India's southwest monsoon has been 16% below normal but showed an improvement of 60% over the same period last year, according to the Indian Meteorological Department (IMD).

IMD said that adverse local weather conditions had weakened the monsoon currents that reached the Kerala coast on schedule but have not advanced beyond eastern and central India since June 18.

But the weather office expects revival and says that total rainfall in the June-September season would still be normal as forecast earlier.

The nation received 137.5 millimeters of rain in June, comapred with the 50-year average of 163.5 millimeters, the IMD said on its website.

The monsoon has stalled since June 18 and may revive in the next two days, the bureau said.

India's June manufacturing PMI falls

Jul 01, 2010 at 10:35

Growth in India's manufacturing sector slowed last month after touching the highest level in more than two months in the previous month.

India's June manufacturing PMI fell to 57.3 from 59.0 in May, according to a HSBC-Markit survey released today.

June was the 15th consecutive month that the index has been above the 50 mark that signifies expansion in business activity.

"India's economy is stepping back a little, with output growth easing into June," said Frederic Neumann, co-head of Asian Economics Research at HSBC.

New orders growth moderated slightly from last month.

"Both activity and price components are easing from very elevated levels, suggesting that it is too early to worry about growth and let down our guard on underlying price trends," said Neumann.

Manufacturers did not add new jobs to their payrolls in June, leaving the employment index stagnating.

India's industrial output, as measured by the index of industrial production (IIP), grew in double-digits for the seventh straight month in April.

Industrial output rose at a much faster-than-expected 17.6% in April from a year earlier, the strongest since 17.7% in December 2009, data showed last month.

TRAI reco...Good news for broadcasters

Jun 30, 2010 at 14:40

The Telecom Regulatory Authority of India (TRAI) released the recommendations on foreign investment in Broad-casting sector.

The Ministry of Information and Broadcasting has requested TRAI to review its recommendations dated 26th April, 2008 on foreign investment in Broad-casting sector in the light of recent changes in FDI policy.

The Consolidated FDI Policy dated 31st March 2010 issued by the Department of Industrial Policy & Promotion (DIPP) has come into effect since 1st April, 2010. This policy has modified the methodology of calculation of foreign investment in Indian Companies.

The Authority, after consulting with stakeholders, has sent its recommendations to the Ministry of Information and Broadcasting on 30th June, 2010. The key recommendations are as under:

Foreign investment limit for the Broadcast carriage services i.e. DTH, IPTV, Mobile TV, HITS, Teleport and MSOs who are upgrading to digital & addressable environment would be 74%; Foreign investment limit for LCOs would be 26%;The Foreign investment limits would be 26% for News & Current Affairs TV Channels and FM Radio;

There will be no restriction on Foreign investment for uplinking and downlinking of TV channels other than News & Current Affairs TV channels. All Foreign investment less than 26% would be through automatic route. Investments of 26% and above will require prior approval of the Government.

Base rate for lending at 7.5%: SBI

Jun 29, 2010 at 18:00

State Bank of India (SBI) has fixed the base rate for lending at 7.5%. Earlier, reports had suggested that the country's largest commercial bank could set the base rate at 8% or just below that.

Reserve Bank of India, has directed all the Banks to switch over to the Base Rate system from the existing Benchmark Prime Lending Rates (BPLR) system w.e.f. July 1. Based on the deliberations in the ALCO (Asset Liability Management Committee) of the Bank, State Bank of India (SBI), has decided to fix its Base Rate at 7.50% p.a.

All new loans sanctioned w.e.f July 1, and those falling due for renewal from July 1 , (except exempt categories as per RBI Guidelines) will now be priced with linkage to Base Rate.

SBI today said that it expects most public and private Banks to operate in a band of 7.5% to 8%.

The Reserve Bank of India (RBI) has stipulated that all banks should arrive at a base rate for lending below which no loans can be extended. This has been done to curb the practice of retailers and small companies subsiding large companies.

Once the new rule comes into force on July 1, large corporates, who benefited from the so-called sub-prime lending rate (PLR) lending, will have to pay at least the base rate.

ICICI Bank plans to announce its base rate on Wednesday. “We will announce our base rate on June 30,” ICICI Bank managing director & chief executive Chanda Kochhar told reporters on Monday.

As per the new norms, existing customers will have to migrate to the base rate when their loan contract comes up for renewal. The new rule does not apply to finance companies, including mortgage finance firms.

China's Shanghai Composite falls 3.5%

Jun 29, 2010 at 17:55

China's Shanghai Composite index tumbled by as much as 3.5% in early afternoon trades to touch a new 52-week low after the Conference Board revised down its April gauge for the outlook of China’s economy.

The Shanghai Composite Index lost 74 points, or 3%, to 2,461, set for the lowest close since April 30, 2009, and extending a four-day, 2.1% decline. The five-day drop is the longest losing streak in two months.

The Shanghai gauge has tumbled 20% in the second quarter, heading for the biggest quarterly loss since December 2008, on concerns that government measures to check possible asset bubbles and Europe’s austerity measures will hurt the global economy.

The index is down 24% this year, Asia’s worst performer.

The New York-based Conference Board said that the leading economic indicator for China rose 0.35 in April, less than the 1.7% gain reported on June 15.

The increase was the least since November.

Japan's unemployment rate hits 5.2% in May

Jun 29, 2010 at 11:10

Unemployment in Japan increased in May while industrial production and household spending also slipped last month, reinforcing fears that the export-oriented recovery in the world's second largest economy is still on shaky ground.

The jobless rate reached a seasonally adjusted level of 5.2%, according to government data released on Tuesday, marking an increase from 5.1% in April and confounding expectations for a drop in the jobless rate. Economists had expected an unemployment rate 5%.

This was the third straight monthly increase in the jobless rate and the highest level since December.

Average household monthly spending in Japan dipped 0.7% in price-adjusted terms in May compared to the same month last year, the Ministry of Internal Affairs data showed today. The fall matched April's drop and was well below economists' average forecast for a 0.5% rise.

Average monthly consumption expenditures fell to 280,714 yen (US$3,142), while average monthly income per household fell 2.4% in real terms, to 421,413 yen (US$4,717).

Consumer spending is weakening because the impact from government stimulus measures is fading. Spending by Japanese households has relied on government incentives to buy things like cars and electronic appliances, but has not been able to ward off deflation.

Meanwhile, Japan's industrial output fell 0.1% in May and shipments fell by the most in more than a year, suggesting that the benefits of a rebound in exports to fast-growing Asian economies may be moderating. The May output roughly matched a median market forecast of no change.

Industrial output rose 20.2% from the year-ago level.

Shipments fell 1.7% in May, the biggest since February last year, while inventories rose 2% in May for the largest such increase since August 2004.

Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 0.4% in June and increase 1% in July, the data showed today.

The unemployment rate for 15-24 year-olds soared to 10.5%, the highest level since June 2003. The economy lost 240,000 workers in May from a month ago, bringing the seasonally adjusted number of those with work to a two-decade low.

A separate report today showed that the ratio of jobs to applicants rose to 0.50 in May, meaning there are 50 positions for every 100 candidates. The measure climbed to its highest level in more than a year.

Today's data will add to pressure on the Bank of Japan to keep policy accommodative. Also, measures to combat deflation and weaken the Japanese yen will also remain in focus.

New regulations: IRDA raises lock-in period for ULIPS

Jun 28, 2010 at 20:20

The Insurance Regulatory Authority of India (IRDA) has increased the lock-in period for unit linked insurance plans (ULIPs) from the present three years to five years.

Announcing the new regulations for ULIPs, IRDA stated that they would be applicable from September 1, 2010.

G20 agrees on cutting deficits, debt levels

Jun 28, 2010 at 09:15

Group of 20 (G20) leaders have reached a deal on cutting high budget deficits and debt levels, but each member have been allowed to adopt its own methods to reach the goals. G20 agreed to stabilize debt levels by 2016 while pledging to cut deficits in half by 2013.

"Our challenges are as diverse as our nations," US President Barack Obama said. "But together we represent some 85% of the global economy, and we have forged a coordinated response to the worst global economic crisis of our time."

President Obama said that G20 countries agreed to balance the need for continued growth in the short term and fiscal sustainability in the medium term.

The goals are based on a proposal put forward by Canadian Prime Minister Stephen Harper for advanced economies. But after some G20 countries, including the US, Japan and India, raised objections, the deficit and debt reduction goals were described more as expectations rather than deadlines.

Negotiators spent at least 45 hours drafting the summit's final communique, said Dominique Strauss-Kahn, head of the International Monetary Fund (IMF). A specific mention of the yuan, China's currency was dropped at the last minute.

How each G20 members should proceed with controversial provisions such as taxing banks to recoup bailout costs and implementing tougher bank capital rules was left open.

The next G20 summit in November in Seoul. The world's top leaders are supposed to thrash out policies on issues including bank capital rules, financial regulation, and voting rights at the IMF. The G20 must also show progress on a promise to rebalance the global economy.

Harper told reporters that Canada is likely to meet both targets by 2011.

The Obama administration said that it will work to reduce the US fiscal deficit to 3% of GDP by 2015, which the White House argues will stabilize the debt-to-GDP ratio at an acceptable level in that year.

Leaders suggested they were on track to reach an agreement on setting common standards for the amount and quality of capital big banks would need to cushion themselves against future financial crises.

"Substantial progress has been made on reforms that will materially raise levels of resilience of our banking systems," the G20 communiqué said. "The amount of capital will be significantly higher, and the quality of capital will be significantly improved, when the new reforms are fully implemented

EGoM finally does it...petrol, diesel prices to go up

Jun 25, 2010 at 14:15

The government has finally bitten the bullet. The EGoM meeting, which had been inconclusive in the past has finally met and decided to free petrol prices from government control.

In a surprise move, the price of kerosene, which was untouched for over eight years was hiked by Rs3 a litre. LPG prices have been hiked by Rs35/unit.

Diesel prices have been be increased by Rs2/Lit with the promise that it would eventually be market driven.

While this move will be a booster for the fiscal situation in the long term, it could prove to be inflationary in the near term.

Petroleum Secretary S Sudareshan said under-recovery on petrol is around Rs70bn. "Car users will be spending only Rs200 extra per month," he added.

Petroleum Minister Murli Deora said the price hike on petrol would be around Rs3.50 per litre.

Greek default fears surge

Jun 25, 2010 at 09:15

The cost to protect against a default on Greek government bonds rose to a new record on Thursday, while Spain's credit default swaps have been hovering near a record high.

CDS on Greek debt rose to 1,090.8 basis points from 934.2 on Wednesday, according to CMA DataVision.

Spain's CDS traded at 261.7 basis points, compared to 264.9 in the previous session.

The swaps are a type of derivative that pays out in the event of default.

Deora approves transparent system for selection of LPG distributors

Jun 25, 2010 at 09.10

Murli Deora , Minister of Petroleum & Natural Gas, has approved the proposal to introduce a transparent system of selection of distributors for LPG in the country through the draw of lots. This would on the pattern of selection methodology successfully introduced under Rajiv Gandhi Gramin LPG Vitrak(RGGLV). While approving the proposal Deora has observed that this change would take care of allegations of malafide activity in selection. This would also expedite the process of establishing distributorships as in the present system a number of complaints are received against the successful candidates leading to delays in commissioning. The change in the procedure would help achieve faster progress in Government’s endeavour to expand reach of LPG to uncovered areas.

Under the present system the eligible applicants are selected through documents and interviews which has been not the present selection system implemented by the officers of Oil Marketing Companies (OMCs) leads to a large number of complaints as well as litigations. A number of distributorships remains pending as the large number of unsuccessful candidates raise issues on the candidature of successful applicants.

The Minister has directed that a short list of the applicants be drawn up of candidates who fulfil minimum requirements as per the procedure of selection. The draw of lot would be held in presence of the representatives of public authorities. The process will also be video-graphed. It may be recalled that Deora had last year approved Vision 2015 for augmenting petroleum products marketing infrastructure under which the LPG network is targeted to cover 75% of the population by 2015. The present LPG coverage extends to about 55% of the country’s population. The necessary guidelines would be issued by the Ministry of Petroleum & Natural Gas to the Oil Marketing Companies soon

India’s food inflation accelerates to 16.9%

Jun 24, 2010 at 12:05

The WPI for the week ended 12th June, 2010 calculated on point to point basis, stood at 17.6% (Provisional) for the week ended 12/06/2010 (over 13/06/2009) as compared to 16.86% (Provisional) for the previous week (ended 05/06/2010) and 5.61% during the corresponding week (ended 13/06/2009) of the previous year.

The WPI for the week ended 12th June, 2010 in respect of ‘Primary Articles’ and ‘Fuel, Power, Light & Lubricants’ is given below:

PRIMARY ARTICLES (Weight 22.02%)

The index for this major group rose by 0.6% to 301.3 (Provisional) from 299.5 (Provisional) for the previous week.

The annual rate of inflation, calculated on point to point basis, stood at 17.6% (Provisional) for the week ended 12/06/2010 (over 13/06/2009) as compared to 16.86% (Provisional) for the previous week (ended 05/06/2010) and 5.61% during the corresponding week (ended 13/06/2009) of the previous year.

The groups and items for which the index showed variations during the week are as follows:-

The index for 'Food Articles' group rose by 0.7% to 295.3 (Provisional) from 293.2 (Provisional) for the previous week due to higher prices of fruits & vegetables (4%), condiments & spices (3%) and urad, moong and tea (1% each). However, the prices of mutton (2%) and fish-marine and arhar (1% each) declined.

The index for 'Non-Food Articles' group rose by 0.3% to 286.7 (Provisional) from 285.8 (Provisional) for the previous week due to higher prices of gingelly seed, raw silk and castor seed (2% each) and sunflower, copra, linseed, groundnut seed and logs & timber (1% each).

3. FUEL, POWER, LIGHT & LUBRICANTS (Weight 14.23%)

The index and rate of inflation calculated on point to point basis for this major group remained unchanged at their previous week’s (05/06/2010) level of 370.2 (Provisional) and 13.18% (Provisional). It was (-) 12.70% during the corresponding week (ended 13/06/2009) of the previous year.

Japan's May exports rise 32.1% yoy: report

Jun 24, 2010 at 08:50

Japan's exports reportedly rose 32.1% from a year earlier to 5.3 trillion yen, marking the sixth month of year-on-year increase.

According tro reports, the robust global demand, particularly in Asia, is the prime reason for fueling Japanese exports. Japan recently upgraded its growth forecast to 2.6% in the current fiscal year thanks to an upturn in exports.

Japan's exports to Asia jumped 34.4% in May and exports to the European Union rose 17.4% last month, adds report.

Fed leaves rates unchanged

Jun 24, 2010 at 08:35

The Federal Reserve on Wednesday left key interest rates unchanged but added a few words of caution about the health of the world's largest economy amid ongoing concerns over the European debt crisis.

FOMC, the Fed's policy-making arm, decided to keep the fed funds rate - a key overnight banking rate - steady at historic lows near zero.

The Committee's decision to stick with its low-interest-rate policy was widely expected, given the persistently high unemployment rate and continuing weakness in housing and consumer spending.

"Economic conditions including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period," the FOMC said in a statement.

The Fed policymakers are likely to keep interest rate policy accommodative until at least the end of the year, according to some experts.

In a statement at the end of its two-day meeting, the Fed policy makers downgraded their outlook for the US economy, saying that the recovery was "proceeding" - not strengthening as they had said in April.

Back then, the Fed had noted that the economic activity has continued to strengthen.

The Fed cautioned that financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Although it doesn't expect the problems in Europe to send the US economy back into recession, it cautioned against expecting strong economic growth.

The FOMC said it does not see any risk of inflation but Kansas City Federal Reserve President Thomas Hoenig again objected to the promise of low rates for an extended period, arguing that it could possibly lead to asset bubbles and volatility in unstable financial markets.

Hoenig was the only dissenting vote in the latest FOMC decision.

Bank lending has continued to contract, housing starts remain at a depressed level and consumer spending is still limited by high unemployment, the FOMC said.

The labor market continues to improve, it said, adding that employers remain reluctant to hire.

PM proposes 26% FDI in airlines: report

Jun 23, 2010 at 11:35

Prime Minister Dr. Mammohan Singh has reportedly proposed allowing at least 26% foreign direct investment (FDI) in domestic airlines and wants to lift a ban on foreign airlines investing in their Indian counterparts.

Reports also said that the Commerce & Industry Ministry is set to release a series of discussion papers over the coming months to seek opinion from various stakeholders on the proposed new FDI norms.

China to scrap export rebates on metals: report

Jun 23, 2010 at 10:40

China will scrap tax rebates to commodities exporters, including key steel products, corn starch, rubber products and ethanol, according to reports.

Chinese steel companies were expecting more government support as they struggle to overcome margin pressures besides further decline in exports due to the rising yuan.

From July 15, the Chinese steel industry will see the removal of 9% tax rebates on hot-rolled coil, sections, some narrow cold-rolled coil products and hot-dipped galvanized coil, reports stated.

China will also cancel 5% rebates on exports of semi-finished copper products and will do away with 5% rebates on lead products as well.

The removal of a 5% rebate on corn starch and ethanol is part of China's efforts to improve supplies on the domestic market.

UK makes sharpest cuts in decades in new budget

Jun 22, 2010 at 20:50

Britain’s new Con-Lib coalition government went for severe austerity measures in its maiden emergency budget announced by Chancellor George Osborne Tuesday, outlining almost GBP 40 billion of savings to bring down UK’s spiraling budget deficit, and also pushed ahead with a unilateral bank levy expected to net GBP 2 billion annually, without waiting for global consensus.

Mr Osborne announced a series of relatively harsh measures, but simultaneously provided sops for manufacturing, entrepreneurs, and private sector growth. "This is a kill or cure budget.

The aim is to eliminate the structural deficit over this parliament, but it risks choking off the recovery, said Andrew Smith, chief Economist, KPMG. The Chancellor reduced growth forecasts for 2011 from 2.6% to 2.3%.

The bad news begins with a 3% rise in value-added tax (sales tax) to 20% from January 2011, a move Mr Orborne insisted was ‘unavoidable’, reducing all government department budgets by 25% over 4 years, except for overseas aid and the NHS, raising capital gains tax for those on a higher tax bracket to 28% from 18%, and several measures to reduce welfare spending, including child and family oriented tax credits.

The good news is a hike in personal allowance (standard exemption) on income tax for those on lower tax rate by about GBP 1000, lowering corporation tax by 4% to 26% over 4 years, reducing small business tax rates to 1%, and additional commitments to capital and transport spends in backward regions of the UK.

Business-friendly measures also include sops on national insurance paid by employers, instead of the Labour government’s plan to raise national insurance (the mandatory contribution made by employees and employers towards financing the government’s welfare and civic spends).

“Of the three constituencies he needed to satisfy: the coalition; the electorate and markets, the latter are likely to be most pleased. It presents a clear and credible platform for rebuilding the government finances,” said Fathom Consulting, an independent financial consultancy in a statement.

While the FTSE followed global markets, gilts rose, and the sterling also held its own as markets greeted the emergency budget with a degree of relative relief. John Hawksworth, head of macroeconomics, PricewaterhouseCoopers LLP said: “The additional fiscal tightening in the Emergency Budget is likely to reduce growth and employment somewhat in the short term, but in the medium term it should contribute to interest rates remaining lower and so to a more balanced and sustainable economic recovery.

Govt calls meeting on June 25th to discuss fuel prices

Jun 22, 2010 at 18:00

A panel of ministers will meet on Friday to decide on fuel prices, Murli Deora, Oil Minister was quoted as saying. A Government panel will consider decontrol of petrol prices at this meeting, the report stated. Earlier this month, the government deferred a decision on raising fuel prices, the second time in a year.

With wholesale price inflation in May breached the double digit mark at 10.16%, may put upward pressure on the headline inflation rate and on the RBI to aggressively tighten monetary policy.

Prime Minister Manmohan Singh has said that inflation may dips between 5% and 6% by December.

The ministerial panel is expected to ask state governments to lower state-level taxes on petroleum products to cushion the blow from a possible price hike.

Inflation may slow to 5% by March: Pranab Mukherjee

Jun 22, 2010 at 10:30

India’s inflation may slow to about 5% by March 31, 2011, Finance Minister Pranab Mukherjee said in a speech at the Institute of International Finance in Washington yesterday.

Mukherjee’s speech was posted on the website of the Indian embassy in Washington.

India's annual rate of inflation, based on monthly WPI, stood at 10.16% in May 2010 as compared to 9.59% for the previous month and 1.38% during the corresponding month of the previous year. Build up inflation in the financial year so far was 1.85% compared to a build up of 2.67% in the corresponding period of the previous year.

The official Wholesale Price Index for 'All Commodities' for May 2010 rose by 1.7% to 258.1 from 253.7 for the previous month. The provisional number for March was scaled up to a 17-month high of 11.04% from 9.9%.

The Reserve Bank of India (RBI) will take appropriate action as and when needed to rein in spiraling inflation, Finance Minister Pranab Mukherjee said last week in reaction to the sharp jump in inflation.

Separately, RBI Deputy Governor K.C. Chakrabarty said that the central banker could hike policy rates before its scheduled July quarterly review.

The 10-year benchmark bond yields climbed last week following the hawkish comments by Chakrabarty and C. Rangarajan, the chairman of the Prime Minister Economic Advisory Panel.

S&P revises outlook on Vedanta Resources to positive from stable

Jun 21, 2010 at 16:10

Standard & Poor's Ratings Services said today that it had revised its outlook on London-based mining and metals company Vedanta Resources PLC to positive from stable. At the same time, we affirmed the 'BB' long-term corporate credit rating on the company. We also affirmed the 'BB' issue rating on the company's senior unsecured notes.

The positive outlook on the rating reflects our expectation that Vedanta's operating performance will improve over the next one year, supported by the progressive commissioning of sizable capacity expansion projects and benefits from a rebound in metal and mineral prices. We believe that Vedanta is on track to successfully commission its various capital expenditure programs and that metal prices will remain firm.

"We anticipate Vedanta's capacity expansion projects to come onstream progressively over the next one to two years. The company's aluminum and power expansion plans are slated for commissioning over the next four quarters, and will bolster its production volumes," said Standard & Poor's credit analyst, Suzanne Smith, managing director, Corporate & Government Ratings, South and Southeast Asia.

In addition, we expect Vedanta's iron ore mining capacity to increase. In our opinion, the combination of higher volumes, favorable prices, and a low cost profile will materially improve Vedanta's cash flows.

In our view, Vedanta's consolidated liquidity position is adequate. The company's cash and liquid investments were about US$7.2 bn at March 31, 2010, sufficient to meet its short-term debt of about US$1.0 billion.

"We could raise the rating if Vedanta successfully delivers on its major capital programs especially in its power, aluminum, and iron ore businesses; satisfactorily executes its recent asset purchase from Anglo American PLC (BBB/Stable/A-2); and maintains or improves its financial metrics," said Ms. Smith.

We could revise the outlook to stable if: (1) metal prices weaken substantially, and persistently remain subdued; and (2) major operating disruptions at existing assets, delays in commissioning new assets, or any further debt-funded acquisitions significantly weaken the company's overall financial profile.

Moody's upgrades Indonesia's outlook to positive: report

Jun 21, 2010 at 12:30

Moody's has raised Indonesia's credit rating outlook to positive from stable. The improved outlook applies to Indonesia's Ba2 local- and foreign-currency sovereign ratings, as well as to the country's Ba1 foreign currency bond ceiling and its Ba3 foreign currency deposit ceiling.

This is to reflect the country's capacity for sustained strong growth, the overall stability and effectiveness of its fiscal and monetary policies, and expectations of further improvements in the government's financial and debt position, add reports.

Qatar's sovereign fund to invest in China's AgBank IPO

Jun 21, 2010 at 10:30

Qatar Investment Authority plans to invest around US$2.8bn in Agricultural Bank of China's upcoming initial public offering, according to reports. The fund has signed the agreement on June 17. The investment would give QIA at least 10% of the shares that may be offered by AgBank. AgBank is expected to raise between US$18.9bn and US$28bn from a dual-listing in Hong Kong and Shanghai, the report stated.

Kuwait Investment Authority also plans to invest around US$2 bn in AgBank's IPO, the report stated. AgBank has chosen its internal securities unit, in addition to China International Capital Corp., Goldman Sachs and Morgan Stanley as the joint global coordinators for the IPO, the report added.

ULIPs to be governed by IRDA: Govt

Jun 20, 2010 at 09:00

The high-profile tussle between SEBI and IRDA over ULIPs seems to be over, well before the Supreme Court starts hearing the case pertaining to the popular financial product.

Insurance regulator IRDA has emerged a winner in the long-standing dispute over who should oversee ULIPs. The Government on late Friday promulgated an ordinance to amend four major laws to set at rest all conjecture and suspense over the thorny issue.

The Centre has also set up a high-level panel, to be chaired by the Finance Minister, to quell any future disputes among the regulators pertaining to the jurisdiction of any financial product(s).

The President of India has promulgated an Ordinance amending the RBI Act 1934, Insurance Act 1938, SEBI Act 1992 and Securities Contract Regulations Act 1956, thereby clarifying by way of an explanation that Life Insurance business shall include any Unit Linked Insurance Policy or scripts or any such instruments.

"This would set at rest all the issues regarding ULIPs between two financial regulators i.e. Securities Exchange Board of India (SEBI) and Insurance Regulatory Development Authority (IRDA)," the Finance Ministry said in a statement.

Further, for sorting-out all issues of jurisdiction regarding hybrid products, a high level Committee under Chairmanship of Union Finance Minister has been constituted.

Finance Secretary to Government of India, Secretary, Department of Financial Services and the Chiefs of four Financial Regulators viz. Reserve Bank of India (RBI), Insurance Regulatory Development Authority (IRDA), Securities Exchange Board of India (SEBI) and Pension Fund Regulatory Development Authority (PFRDA) will be the members of the Committee.

Mukesh Ambani Stresses on Power & Telecom

Jun 18, 2010 at 13:00

Addressing the 36th AGM of Reliance Industries Ltd, Mukesh Ambani chalked out the major plans of the company going forward. He divulged details of his aggressive and mega plans in the oil & gas, power and telecom sectors.

He opened the speech by his comment on his company's estranged relationship with Anil-Ambani-led ADAG group. He said that his company will have a constructive relationship with ADAG and will provide gas to ADAG projects when they are ready. He said the company was conscious of government's stake in gas operations.

The senior Ambani expressed concerns hovering above the global economy. Slower than anticipated economic growth will give rise to protectionsim, he said. On the brighter side, Indian government's efforts in sustaining growth is laudable. India is set to become the fastest growing econominc in coming years and Reliance is well placed to take a lead position in nation-building, he said.

Elaborating further, Ambani said that the company has cash equivalent of Rs 21,874 crore, which will give space for inorganic growth. He said that the company is planning significant capacity in the polyester segment and to unleash new petrochem projects. For the same, the company is setting up a 2.3 mt PTA 5.4 lakh tonne capacity.

On Oil & Gas sector

RIL is planning to set up coke gasification unit and will also start producing kerosene at Jamnagar refining facility. He has informed that the company has already supplied 510 billion cubic metre of gas from D6 Block.

Further divulging on the plans, Ambani said that the company is looking to drill exploration wells in Iran and East Timor. He added that its tie-up with Atlas Energy will give them access to 13 tonne cubic feet gas in the US. According to him, the Shale gas deal will change the energy landscape.

He said that the cancellation of the non-compete pact with ADAG has allowed RIL to foray in the power sector. On an optimistic note, Ambani said RIL’s retail business is poised to grow 10 fold from it current revenue of Rs 4,500 crore. It is planning to participate in value chain of power business both in the natural and synergetic. It is also looking at investing in hydel, solar and nuclear power projects.

On the telecom sector

On its recent foray into the telecom sector, Ambani said that it will add shareholder value.

Speaking on its acquisition of Infotel, he said that the company will adopt ‘asset light partner’ broadband partner in its nationwide broadband foray. He further divulged that the telecom company will offer fourth generation of Wireless Broadband service and will also tie-up with content creators for broadband. The company will also set up a wireless internet platform in Mumbai

Food and fuel inflation moderates

Jun 17, 2010 at 12:15

India's inflation in the crucial food and fuel groups subsided a little in the early part of June even as monsoon was making a slow progress across the country, data released by the government showed on Thursday.

If this trend of softening of food and fuel prices continues for a few days, the RBI may not opt for a rate hike ahead of its July policy review. It may be recalled that WPI-based inflation shot up to 10.16% in May from 9.59% in April, while the March figure was revised to over 11% from 9.9%.

The data issued by the Commerce & Industry ministry today revealed that inflation in the Food Articles group eased to 16.12% in the week ended June 5 from 16.74% in the previous week. It was at 9.45% in the year-ago period. The index for 'Food Articles' group declined by 1.1% to 293.2.

Fuel Group inflation stood at 13.18% in the week under review versus 14.23% in the week ended May 29. Inflation in this group was at -12.59% in the corresponding week of the last year. The index for this major group declined by 0.6% to 370.2.

Inflation in the Primary Articles space declined to 16.86% versus 17.21% in the preceding week. Inflation in this group stood at 5.91% during the corresponding week of the previous year. The index for this major group declined by 0.7% to 299.50.

Inflation in the Non-Food Articles stood at 18.25% vs 1.51% in the year-earlier period. The index for 'Non-Food Articles' group rose by 0.04% to 285.80.

Govt approves 17 FDI proposals worth Rs5.69bn

Jun 16, 2010 at 09.15

The Government has approved 17 proposals of Foreign Direct Investment (FDI) totaling Rs5.69bn approximately based on the recommendations of Foreign Investment Promotion Board (FIPB) in its meeting held on May 31.

A proposal by Hindustan Media Ventures Ltd. to bring in foreign investment of Rs3.5bn was approved by the Finance Ministry. The publisher of Hindi daily 'Hindustan' will bring in foreign investment from FIIs and venture capital funds.

Turmeric Vision's proposal to bring in FDI of Rs1.22bn for inducting foreign equity into its business of "originating, aggregating, distributing and operating a 24-hour food television channel was also cleared by the Finance Ministry.

The Government also cleared a plan by Geomysore Services India to undertake minerals exploration and mining of gold nickel, platinum, diamonds, copper and zinc. The proposal entails FDI of Rs367.6mn.

The Finance Ministry deferred 20 proposals, while nine applications were rejected.

UK annual inflation falls to 3.4% in May

Jun 15, 2010 at 15:15

Inflation in the UK declined in May, marking the first fall in three months, but still continued to be way above the government's 3% upper limit for a third straight month, data released on Tuesday showed.

The annual pace of consumer inflation in Great Britain slowed to 3.4% in May from 3.7% in April, the Office for National Statistics reported today.

On a monthly basis, consumer price inflation rose 0.2%.

Economists had forecast a 0.3% monthly rise and a 3.5% annual reading.

The rate remains well above the Bank of England's annual target rate of 2%. The inflation rate has now held above the central bank’s 2% target for six successive months.

Lower prices of food, transport, alcohol, tobacco and recreation offset higher fuel costs in May. Gasoline prices rose to 120.5 pence per liter in the month, the highest since records began in 1996, the statistics office said.

Core inflation, which excludes the cost of food, tobacco, alcohol and energy prices, slowed to 2.9% from 3.1% the previous month, the statistics office said.

FY10 import of sensitive items up 40% yoy

Jun 15, 2010 at 14:05

The total import of sensitive items for the period April-March 2010 has been Rs.65564.59 crore as compared to Rs.46667.04 crore during the corresponding period of last year thereby showing an increase of 40.5%. The gross import of all commodities during same period of current year was Rs.1318188 crore as compared to Rs.1374434 crore during the same period of last year. Thus import of sensitive items constitutes 3.4% and 5.0% of the gross imports during last year and current year respectively.

Imports of cotton & silk, automobiles, products of SSI, alcoholic beverages and marble & granite have shown a decline at broad group level during the period. Imports of all other items viz. edible oil, Pulses, fruits & vegetables (including nuts), rubber, spices, milk & milk products, tea & coffee and food grains have shown increase during the period under reference.

In the edible oil segment, the import has increased from Rs.15908.84 crore last year to Rs.25975.34 crore for the corresponding period of this year. The imports of both crude edible oil as well as refined oil have gone up by 68.7% and 39.7% respectively. The increase in edible oil import is mainly due to substantial increase in import of crude palm oil and its fractions.

Imports of sensitive items from Indonesia, China P RP, Brazil, Myanmar, Malaysia, Korea RP, United States of America, Japan, Canada, Argentina, Ukraine, Thailand, Australia, Czech Republic, etc. have gone up while those from Germany, Cote D’ Ivoire, Tanzania etc. have shown a decrease.

Fitch revises India's local currency outlook to stable; affirms at BBB-

Jun 14, 2010 at 15:25

Fitch Ratings has revised the Outlook on India's Long-term local currency Issuer Default Rating (IDR) to Stable from Negative. At the same time, the agency affirmed India's Long-term foreign and local currency IDRs at 'BBB-'. The Outlook on the foreign

currency IDR remains at Stable. Fitch has also affirmed the Short-term foreign currency IDR at 'F3' and the Country Ceiling at 'BBB-'.

"India's strong growth prospects and the one-off positive impact from the telecoms auctions underpin Fitch's forecast that government debt to GDP ratio will decline, easing the near-term pressure on India's local currency ratings. However, public finances remain a clear weakness, and downward pressure on the ratings could resume if India veers too far off the deficit reduction path as outlined by the Thirteenth Finance Commission," said Andrew Colquhoun, Director in Fitch's Asia-Pacific Sovereigns Group.

Fitch projects general government debt to fall to 80% of GDP by end-March 2011 (end-FY11) from 83% at end-FY10, reflecting the impact of strong GDP growth on the denominator and the one-off revenues from the 3G licence and broadband spectrum auctions. The agency has revised India's FY11 growth forecast up to 8.5% from 7% on signs of strong growth momentum, including industrial production growth of 17.6% in April 2010, year-on-year. The telecom licence auctions together netted the government INR1,060bn, representing about 1.6% of projected FY11 GDP, as against the INR350bn budgeted originally (Fitch's February review of India took the cautious approach of assuming zero auction revenues). The agency anticipates some pressure on the government to spend some of the revenue windfall and estimates an additional 0.3pp spending in FY11, still delivering a net 1.3pp fiscal saving.

However, fiscal management remains relatively weak. Fitch anticipates that the central government's deficit on the government basis (including privatisation and auction receipts as revenue and excluding some off-budget items) to be at 5.7% of GDP in FY11, just 1pp down from FY10, despite the 1.6% of GDP reaped from the telecom auction. The report of the Thirteenth Finance Commission (TFC) in February laid out a path of deficit reduction towards a "golden rule" of borrowing only to finance investment by FY15. India's track record on sticking with medium-term fiscal plans is not good, although the Congress-led government has at least voiced its commitment to debt reduction. If the authorities stray too far from the TFC's consolidation path and debt ratios resume rising, it could impact the ratings negatively.

A significant drop in the country's growth momentum to below Fitch's projections would worsen India's debt dynamics and put downward pressure on its ratings. However, India's credit profile continues to benefit from the largely local-currency profile of its debt (95% of the stock), and from the sovereign's stable access to domestic-currency financing, mainly from the banking system. Signs that India's banking system was under stress would likely be negative for the sovereign ratings, although this is not the agency's base case. Inflation remains uncomfortably high, with wholesale prices up 10.2% in the year to May, prompting the central bank to hike rates twice in response so far in 2010. An intensified inflation shock that is severe enough to disrupt macroeconomic and/or financial stability would be negative for India's ratings.

India's strong external finances, including its sovereign and overall net creditor status and official reserves of USD271bn by June 4 2010 (up 3.6% on a year earlier), continue to support its foreign currency ratings. By contrast, poor physical infrastructure, underdevelopment reflected in low average incomes, and weak governance indicators relative to rated peers constrains the ratings.

India’s May Inflation rises to 10.16%

Jun 14, 2010 at 11:45

India’s May Inflation rose to 10.16% as compared to 9.59% in the previous month.

The government also announced that it revised March inflation to 11.04%

The official Wholesale Price Index for 'All Commodities' (Base: 1993-94 = 100) for the month of May, 2010 rose by 1.7% to 258.1 (Provisional) from 253.7 (Provisional) for the previous month.

Inflation

The annual rate of inflation, based on monthly WPI, stood at 10.16% (Provisional) for the month of May, 2010 (over May, 2009) as compared to 9.59 % (Provisional) for the previous month and 1.38% during the corresponding month of the previous year. Build up inflation in the financial year so far was 1.85% compared to a build up of 2.67% in the corresponding period of the previous year.

Inflation for important commodities / commodity groups is indicated in Annex-1.

The movement of the index for the various commodity groups is summarized below:-

Primary Articles (Weight 22.02%)

The index for this major group rose by 3.5% to 299.9 (Provisional) from 289.7 (Provisional) for the previous month. The groups and items for which the index showed variations during the month are as follows:-

The index for 'Food Articles' group rose by 0.8% to 294.6 (Provisional) from 292.4 (Provisional) for the previous month due to higher prices of tea (21%), urad (5%), fish-marine (4%), moong, condiments & spices and mutton (3% each), poultry chicken, fruits & vegetables, arhar, fish-inland and beef & buffalo meat (2% each) and gram (1%). However, the prices of wheat (3%), coffee, jowar, barley and masur (2% each) and maize and ragi (1% each) declined.

The index for ‘Non-Food Articles’ group rose by 10.5% to 283.1 (Provisional) from 256.1 (Provisional) for the previous month due to higher prices of sugarcane (50%), castor seed and raw silk (5% each), logs & timber (4%), raw cotton (3%), sunflower and copra (2% each) and raw jute, groundnut seed and mesta (1% each). However, the prices of fodder (10%), tobacco (2%) and niger seed, linseed, raw rubber, gingelly seed and cotton seed (1% each) declined.

The index for 'Minerals' group rose by 8.4% to 682.2 (Provisional) from 629.2 (Provisional) for the previous month due to higher prices of feldspar (10%), asbestos (8%) and steatite and chromite (6% each). However, the prices of magnesite (18%), barytes (9%) and vermiculite (6%) declined.

FUEL, POWER, LIGHT & LUBRICANTS (Weight 14.23%)

The index for this major group rose by 1.2% to 368.2 (Provisional) from 364.0 (Provisional) for the previous month due to higher prices of lubricants (5%), aviation turbine fuel and electricity (3% each), liquefied petroleum gas (2%) and light diesel oil and furnace oil (1% each). However, the prices of bitumen (1%) declined.

MANUFACTURED PRODUCTS (Weight 63.75%)

The index for this major group rose by 1.2% to 219.1 (Provisional) from 216.6 (Provisional) for the previous month. The groups and items for which the index showed variations during the month are as follows:-

The index for 'Food Products' group declined by 1.1% to 246.4 (Provisional) from 249.1 (Provisional) for the previous month due to lower prices of sugar and oil cakes (3% each), khandsari and salt (2% each) and rape & mustard oil, bran (all kinds), sooji (rawa), unrefined oil and cotton seed oil (1% each). However, the prices of atta and maida (4% each), cakes & sweet rolls and malted food (3% each), gur, imported edible oil, groundnut oil and biscuits (2% each) and ghee (1%) moved up.

The index for 'Beverages Tobacco & Tobacco Products' group rose by 1.3% to 324.3 (Provisional) from 320.1 (Provisional) for the previous month due to higher prices of bidi (7%). However, the prices of rectified spirit (1%) declined.

The index for 'Textiles' group rose by 3.0% to 163.0 (Provisional) from 158.2 (Provisional) for the previous month due to higher prices of cotton grey drills & jeans and terry cotton shirting (11% each), cotton knitted garments and cotton grey cloth (others) (10% each), polyester yarn (8%), cotton yarn-hanks (7%), synthetic yarn (5%), other cotton yarn (4%), dhoties, sarees & voils and polyester staple fibre (3% each), woollen cloth, woollen yarn and nylon filament yarn (2% each) and cotton yarn-cones and viscose filament yarn (1% each). However, the prices of texturised yarn (8%) and hessian cloth (4%) declined.

The index for 'Wood & Wood Products' group rose by 8.8% to 258.5 (Provisional) from 237.6 (Provisional) for the previous month due to higher prices of plywood commercial planks (19%).

The index for 'Paper & Paper Products' group rose by 0.7% to 207.3 (Provisional) from 205.9 (Provisional) for the previous month due to higher prices of newsprint (4%) and kraft paper and m.g. poster paper (1% each).

The index for 'Leather & Leather Products' group rose by 1.0% to 166.0 (Provisional) from 164.4 (Provisional) for the previous month due to higher prices of footwear western type (1%).

The index for 'Rubber & Plastic Products' group rose by 1.1% to 177.9 (Provisional) from 175.9 (Provisional) for the previous month due to higher prices of cycle tubes (5%), giant tubes (3%) and giant tyres, tractor tyres and motor tyres (1% each). However, the prices of pvc fitting & accessories (2%) declined.

The index for 'Chemicals & Chemical Products' group rose by 1.6% to 236.5 (Provisional) from 232.8 (Provisional) for the previous month due to higher prices of carbon black (21%), urea n_content (6%), calcium ammonium nitrate n-content and di_ammonium phosphate n-content (5% each), complex fertilizers-npk content and endosulfan (4% each), hair oil, liquid chlorine, liquid oral other than vitamins and benzene (3% each), acid (all kinds), varnishes, caustic soda and polystyrene (2% each) and oxygen, titanium dioxide, resins (all kinds), enamels, soda ash and monocrotophos (1% each). However, the prices of other fertilizers (4%), ammonium sulphate n_content (2%) and complex fertilizer n_content and purified terephthalic acid (pta) (1% each) declined.

The index for 'Non-Metallic Mineral Products' group declined by 0.5% to 225.9 (Provisional) from 227.0 (Provisional) for the previous month due to lower prices of cement (1%). However, the price of asbestos cement corrugated sheets (1%) moved up.

The index for 'Basic Metals Alloys & Metal Products' group rose by 3.4% to 285.8 (Provisional) from 276.5 (Provisional) for the previous month due to higher prices of alloy stainless steel (26%), steel sheets, plates & strips (14%), ms bars & rounds (10%), nickel alloy (9%), other iron steel, basic pig iron, foundry pig iron and alloy steel casting (8% each), blooms and billets & slabs (7% each), skelps and pipes & tubes (5% each), wire (all kinds), oromild steel & tensile plates and cr coils (4% each), bars & rods and cr sheets (3% each), steel wire and angles, channels & sections (2% each) and cast iron spun pipes and bolts & nuts (1% each). However, the prices of steel ingots (8%) and lead ingots and zinc ingots (6% each) declined.

The index for 'Transport Equipment & Parts' group rose by 0.8% to 178.1 (Provisional) from 176.6 (Provisional) for the previous month due to higher prices of broad gauge passenger carriage (13%), broad gauge other coaching vehicles (6%), crank shafts (2%) and bus chassis (diesel), truck chassis (diesel), bicycles and other automobile spare parts (1% each).

FINAL INDEX FOR THE MONTH MARCH, 2010

For the month of March, 2010, the final wholesale price index for ‘All Commodities’ (Base:1993-94=100) stood at 253.4 as compared to 250.8 (Provisional) and annual rate of inflation based on final index stood at 11.04% as compared to 9.90 % (Provisional) reported earlier vide press note dated 14/05/2010

India April IIP jumps to 17.6%

Jun 11, 2010 at 11:10

India's industrial production expanded in April at a much faster pace than anticipated, putting additional pressure on the Reserve Bank of India (RBI) to undertake more monetary tightening at its policy review next month. Growth was once again led by a strong performance by the crucial manufacturing segment, even as electricity turned out to be a laggard.

Industrial output, as measured by the index of industrial production (IIP), stood at 17.6% in April as against an upwardly revised growth rate of 13.9% in March, data released by the Central Statistical Organisation (CSO) showed on Friday. The IIP reading beat consensus estimates of 13.5-14%.

IIP growth stood at a mere 1.1% in April last year, as India's factories, mines and power utilities remained under pressure amid a sluggish global economy.

Manufacturing output grew by 19.4% in April as against 0.4% in the same month last year while mining production came in at 11.4% versus 3.4% in the corresponding period a year earlier, the CSO data showed.

Meanwhile, the electricity sub-segment registered a growth rate of 6% in April compared to 6.7% in the same month last year.

Growth in Basic Goods category stood at 8.8% versus 4.4% a year ago, while Capital Goods output surged to a whopping 72.8% from a contraction of 5.9% in April 2009. Intermediate Goods output rose to 10.8% as against 7.9% in the same month last year.

Consumer Goods output in April increased to 14.5% from a drop of 4.6% in the corresponding month a year earlier. Growth in Consumer Durables production jumped to 37% from 17.6% a year ago while that in Consumer Non-durables segment bounced to a growth of 6.6% versus a contraction of 10.5% in April 2009.

China’s inflation picks up pace in May

Jun 11, 2010 at 11:00

Consumer and producer prices in China accelerated in May with retail inflation outpacing the upper end of the government's target, while bank lending rose faster than expected and retail sales beat estimates.

Consumer price index (CPI) rose 3.1% in May from a year earlier, while wholesale price index (WPI) rose 7.1%, according to figures from the National Bureau of Statistics. The results exceeded expectations for a 3% rise in CPI and a 6.9% gain in PPI.

The CPI is now exceeding the 3% ceiling of the government's targeted inflation range. However, some analysts expressed doubt the CPI figures would prompt a major tightening response from Beijing.

Other data showed that Chinese banks extended 639.4 billion yuan (US$93.6bn) in new loans for the month, down from the 774 billion yuan extended in April, according to figures published by the People's Bank of China. The lending figure exceeded forecasts for 600 billion yuan in new loans.

Separately, money supply as measured by M1 rose 29.9%, easing from April's 31.3%, while the broader M2 metric was up 21%, easing from 21.5% in April, according to data Friday.

May industrial-production growth eased to 16.5% from 17.8% in the previous month, missing economists' estimates for 17%. In the year-ago period China's export-oriented economy was just beginning to recover from the collapse in global trade.

Urban fixed-asset investments for the first five months of this year (January-May) eased to 25.9% from 26.1% in the January-April period, though the result was slightly higher than the 25.8% growth anticipated by analysts.

But retail sales jumped 18.7% in May, compared with an 18.5% gain in the previous month, today’s data showed.

ECB holds rate steady

Jun 10, 2010 at 17:55

As expected, the European Central Bank (ECB) on Thursday left its key lending rate unchanged at a record low 1%. With this, the ECB has held interest rates unchanged for 10 successive months. The move came a day after EU finance ministers met to discuss cuts in budget deficits across the continent.

Attention now turns to ECB President Jean-Claude Trichet's monthly news conference in Frankfurt, where he is expected to comment on details of the central bank's bond-purchase program

BOE keeps rate, monetary stimulus unchanged

Jun 10, 2010 at 17:50

The Bank of England (BOE) on Thursday maintained status quo on its bond-purchase programme and left its benchmark interest rates unchanged at a record low amid concerns that sharp spending cuts planned by the new government would hurt the UK economy.

The decision was widely expected.

The British central bank provided no further details of the Monetary Policy Committee's decision. Minutes of the meeting will be released on June 23.

The European Central Bank (ECB) is scheduled to announce its latest policy decision later today. It is also widely expected to leave its key lending rate unchanged at a record low 1%.

The focus will be on ECB President Jean-Claude Trichet's monthly news conference.

The BOE move comes after several inflation reports came in ahead of the MPC’s medium-term target of 2%. Inflation, as measured by the Consumer Price Index (CPI), rose in April at an annualised rate of 3.4%.

June 1-9 monsoon 6% below normal: IMD

Jun 10, 2010 at 15:50

The southwest monsoon is 6% below average so far this season due to two tropical cyclones, the India Meteorological Department (IMD) said on Thursday. India received 31.1 millimeters of rain from June 1 to June 9, the weather bureau said on its website. An average of 33.1 millimeters is considered normal.

Tropical cyclone Laila, which lashed the South Indian coast on May 20, stalled the monsoon’s progress after it arrived over the east coast three days ahead of schedule on May 17. Cyclone Phet caused widespread rainfall in parts of Gujarat, Rajasthan and Uttar Pradesh early this week.

Northwest India had 107% more rain than normal in the period under review, while central India received 53% less showers, IMD data showed. Rainfall was 37% lower in the south peninsula, while it was 9% above average in the northeastern states, the weather office said.

Rains this year may reach 98% of the 50-year average, the IMD said on April 23. The bureau considers normal rainfall to be between 96% and 104% of the long-range average.

Separately, the IMD said today that monsoon flow over Arabian Sea is likely to intensify during the next 2-3 days.

Southwest monsoon has advanced into some parts of Konkan, Goa, south Madhya Maharashtra and north interior Karnataka, remaining parts of coastal and south interior Karnataka, some more parts of Rayalaseema and coastal Andhra Pradesh, the IMD said.

Fairly widespread rainfall activity would occur over Madhya Maharashtra, Konkan, Goa, Coastal Karnataka, Kerala, Lakshadweep, northeastern states and Andaman & Nicobar Islands, it added.

Conditions are favourable for further advance of monsoon into some more parts of Maharashtra, north interior Karnataka and Andhra Pradesh during the next 48 hours, according to the IMD.

Food inflation rises further to 16.74%

Jun 10, 2010 at 12:35

On a week on week basis, the index for food articles group rose by 0.4% to 296.4 (provisional) from 295.1 (provisional) for the previous week due to higher prices of beef & buffalo meat (8%), fish-marine (3%) and urad, fruits & vegetables, arhar and moong (1% each). However, the prices of bajra (1%) declined.

The WPI for the week ended 29th May, 2010 in respect of ‘Primary Articles’ and ‘Fuel. Power, Light & Lubricants’ is given below:

PRIMARY ARTICLES (Weight 22.02%)

The index for this major group rose by 0.5% to 301.7 (Provisional) from 300.3 (Provisional) for the previous week.

The annual rate of inflation, calculated on point to point basis, stood at 17.21% (Provisional) for the week ended 29/05/2010 (over 30/05/2009) as compared to 16.89% (Provisional) for the previous week (ended 22/05/2010) and 5.58% during the corresponding week (ended 30/05/2009) of the previous year.

The groups and items for which the index showed variations during the week are as follows:-

The index for 'Food Articles' group rose by 0.4% to 296.4 (Provisional) from 295.1 (Provisional) for the previous week due to higher prices of beef & buffalo meat (8%), fish-marine (3%) and urad, fruits & vegetables, arhar and moong (1% each). However, the prices of bajra (1%) declined.

The index for 'Non-Food Articles' group rose by 1.0% to 285.7 (Provisional) from 283.0 (Provisional) for the previous week due to higher prices of fodder and raw rubber (6% each), raw cotton (3%), castor seed (2%) and raw silk, groundnut seed and cotton seed (1% each). However, the prices of raw jute (4%), rape & mustard seed (2%) and skins (raw) (1%) declined.

The index for 'Minerals' group declined by 1.3% to 674.9 (Provisional) from 684.0 (Provisional) for the previous week due to lower prices of vermiculite (29%), feldspar (8%), iron ore (2%) and magnesite (1%). However, the prices of chromite (28%) and barytes (1%) moved up.

FUEL, POWER, LIGHT & LUBRICANTS (Weight 14.23%)

The index for this major group rose by 0.1% to 372.5 (Provisional) from 372.2 (Provisional) for the previous week due to higher prices of lubricants (8%).

The annual rate of inflation, calculated on point to point basis, stood at 14.23% (Provisional) for the week ended 29/05/2010 (over 30/05/2009) as compared to 14.14% (Provisional) for the previous week (ended 22/05/2010) and -6.08% during the corresponding week (ended 30/05/2009) of the previous year.

Build up inflation over the week, financial year end and over the year is given below for some important items.
Domestic car sales up 30% yoy in May: SIAM

Jun 09, 2010 at 13:40

India's domestic car sales rose 30% year on year in May, according to Society of Indian Automobile Manufacturers (SIAM). The rise is attributed to rising incomes and a rapidly expanding economy that has offset the impact of price increases.

Domestic firms have sold 148,481 cars in the month of May, compared with 113,810 units a year ago, the SIAM data showed. Sales of trucks and buses, a barometer of economic activity, rose 58% to 48,580 units in May, the report added.

Fed may hike rates before full employment: Ben Bernanke

Jun 09, 2010 at 10:20

"US recovery probably won’t quickly bring down the unemployment rate, which is likely to stay “high for a while.” Given the depth of the recession, the recovery is “moderate paced," Federal Reserve chairman Ben S Bernanke was quoted as saying.

While the Fed will raise interest rates from a record low before the economy returns to “full employment,” Bernanke said officials don’t know when that process will start. The banking system isn’t fully healthy and lenders are “cautious” in providing credit, he said.

“The unemployment rate is still going to be high for a while, and lot of people are going to be under financial stress,” Bernanke said at the event in Washington. Bernanke’s stance is consistent with that of several Fed colleagues. Atlanta Fed President Dennis Lockhart said June 3 that the central bank may need to raise rates even with “unacceptable levels of unemployment,” while Eric Rosengren of the Boston Fed said last month it wouldn’t be “appropriate” to have rates close to zero with the economy at full employment.

The Fed chief reiterated that the central bank’s “extended period” of a record low interbank lending rate is conditioned on high unemployment, low inflation and stable price expectations. “We have right now a very accommodative, very easy monetary policy,” Bernanke said. “We can’t wait until unemployment is where we’d like it to be” or inflation gets “out of control” to tighten credit, he said.

UK deficit at US$226bn...Worse than we thought: David Cameron

Jun 08, 2010 at 15:45

David Cameron, Prime Minister, UK, said that the country's financial situation is worse than previously thought. He further added that steep budget cuts needed to stop the growing deficit inorder to avoid a debt crisis like that in Greece.

Britain's budget deficit is about US$226bn.

The debt crisis in Greece was a warning of what could happen in countries that "lose their credibility" by continuing to spend much more money than they take in, adds Cameron.

Government to amend license conditions for Telecom Service Providers

Jun 08, 2010 at 15:30

The Government is contemplating certain amendments in the conditions of license for Telecom Service Providers (TSPs) and shall be issuing necessary instructions to help the Telecom Service Providers to address security threats in their networks in short term, medium term and long term future. The Department of Telecommunications, Ministry of Communications & Information Technology has said that the consultation with stake holders including the Telecom Service Providers will be initiated within a week to evolve workable solution in this regard.

The Government has been working on security concerns in Telecom Sector to address the security threats/vulnerabilities of Telecom Networks. It considers that TSPs should have well outlined organisational policy on security and security management of their networks and they should be completely and totally responsible for security of their networks.

India to sign civil nuclear pact with Canada

Jun 08, 2010 at 14:30

India and Canada will sign a civil nuclear agreement during the Prime Minister Dr Manmohan Singh’s forthcoming visit to the G-20 Summit in Toronto later this month. The four-day visit commences on June 26, according to reports.

The agreement will be signed after a bilateral meeting between Dr Manmohan Singh and his Canadian counterpart, Stephen Harper, who will be hosting a special dinner in honour of the Indian Prime Minister on June 27, the report stated.

The two countries will also review their bilateral economic and cultural ties. The agreement will allow Indian firms to export and import controlled nuclear material, equipment and technology to and from Canada, the report quoted.

Besides uranium exports, Canada is pitching its 1200-MWe class Advanced CANDU reactor as a good fit for the Indian nuclear programme due to its size and localisation potential.

Dr Manmohan will review the progress in the proposed comprehensive economic partnership agreement, the Foreign Investment Protection and Promotion Agreement (FIPPA), MoUs signed by the two countries in energy sector and cultural and social security agreements.

India’s growth expected to rise to 9% in 2011: World bank

Jun 08, 2010 at 08:55

'The South Asia Economic Update 2010: Moving Up, Looking East', the World Bank’s first yearly assessment of the economies of the region said that the region is poised to grow by about 7% in 2010 and nearly 8% in 2011. The drop in growth during the crisis was the smallest among all regions.

South Asia's rebound since March 2009 has been strong, thanks to the strong recovery in India, good performance in Bangladesh, post-conflict bounce in Sri Lanka, recovery in Pakistan, and turnarounds in other countries, including Afghanistan, Bhutan, and Maldives.

The region's prospective growth is close to pre-crisis peak levels and faster than the high rates of the early part of the decade (6.5% annually from 2000 to 2007). "The recovery is being led by rising domestic confidence and is balanced in terms of domestic versus external demand, consumption versus investment, and private demand versus reliance on stimulus," said Dipak Dasgupta.

India’s growth is expected to rise to 9% in 2011, Bangladesh to 6.4%, Bhutan to 7%, and Sri Lanka to above 6%, the report says.

EGoM...Decision on fuel prices deferred

Jun 07, 2010 at 17:35

The much awaited decision on freeing fuel prices is yet to happen. India needs to discuss fuel prices further because of the impact they have on inflation, said petroleum secretary S Sundareshan.

The Empowered Group of Ministers (EGoM) which met today could not reach any decision. All that was known was that there would be another meeting 'soon.'

The meeting was called today to consider the Kirit Parikh Committee report, which calls for freeing petrol and diesel prices from government control.

A free-pricing decision implies both petrol and diesel prices will go up by around Rs3.50 per litre considering the current price of crude oil of US$72 per barrel.

The Kirit Parikh panel had also recommended an increase of Rs6 per litre of kerosene and Rs100 per cooking gas cylinder, apart from a Rs80,000 levy on diesel cars. A Rs20-25 per cylinder increase in LPG price may be approved, adds report.

25% public exposure must for listed entities: Govt

4 Jun 04, 2010 at 17:20

The government on Friday made it mandatory for listed companies to raise public shareholding to 25 per cent, with at least five per cent dilution a year, a move that would attract more investors and check price share manipulation.

In keeping with the Budgetary promise, the Finance Ministry amended the relevant regulations to the effect that "the minimum threshold level of public holding will be 25 per cent for all listed companies."

Accordingly, all listed entities would have to dilute at least five per cent additional equity annually till they reach the threshold limit of 25 per cent. And fulfilment of this condition would be must to remain listed.

The new rules were announced shortly after close of stock market. The BSE benchamrk Sensex, which rose by 95 points today on top of a 450-point rally in past two days, could come under pressure on Monday, analysts said.

For a company seeking listing, it would have to dilute 25 per cent in one go in case the issue size is just up to Rs 4,000 crore. However, those already in the process of going public and have filed draft prospectus could disinvest stipulated 10 per cent and later meet the condition notified today.

The decision on mandatory increase in public exposure of a company to 25 per cent had been hanging fire for more than a year due to differences the market regulator Sebi had with the Finance Ministry.

While Sebi's contention was that such broad-basing would require huge funds, which some estimates pegged at over Rs two lakh crore, the government was firm on enforcing the decision announced in the 2009-10 Budget as an effective means to check price manipulation by promoters.

A top government adviser on financial sector and HDFC Chairman Deepak Parekh told PTI last week that the increased public exposure was one of the effective ways to tackle the problem of over-pricing of public issues.

"Tell me one IPO that has succeeded," asked Parekh, who heads the Primary Market Advisory Committee of market regulator SEBI.

Elaborating, Parekh said: "Our issuers (entities coming out with public offers) don't want to leave money on the table. They want to maximise the price. You need to have a heart to give money and let others make money."

The Finance Ministry had come out with a discussion paper in February 2008 and was to complete the discussion in May that year, but the same could not happen on account of divergence of views. Thereafter, Finance Minister Pranab Mukherjee came out with the proposal while presenting the 2009-10 Budget in July 2009.

The argument was that larger the number of shares and the number of shareholders, the less is the scope for price manipulation.

At present, most companies dilute just 10 per cent stake and the shares tend to trade at a premium.

RBI issues draft guidelines on loan securitisation by NBFCs

Jun 04, 2010 at 12:45

The Reserve Bank of India (RBI) has released draft guidelines on loan securitisation by non-banking finance companies (NBFCs), outlining planned rules for minimum holding period, retention and special purpose vehicle exposure.

RBI said for loans maturing in up to 24 months, the company would have to hold the asset on its books for at least nine months and retain 5% of the book value of theloans being securitised.

Twelve months is the minimum holding period for loans maturing in more than 24 months and which have periodic repayment schedules, while 10% of the book value of securitised loans will have to be retained.

"No securitisation of loans with maturity exceeding 24 months and bullet repayment is envisaged," the RBI circular stated.

The RBI said NBFCs must not have an exposure of more than 20% to special purpose vehicle (SPV) or securitised assets undertaken after June 2.

The central bank said finance firms should not hedge the credit risk to the minimum retained exposures.

Food inflation rises to 16.55% yoy

Jun 03, 2010 at 14:00

India's food price index rose 16.55% for the week ended May 22 due to rise in prices of pulses, fruits and vegetables. The fuel price index climbed 14.14%, Government data released showed.

The pace of increase in food prices accelerated from the previous week's annual rise of 16.23%, while fuel price inflation quickened from the previous week's 12.08%.

The primary articles index was up 16.89%, compared with the previous week's annual reading of 15.9%.

Wholesale prices rose 9.59% in April from a year earlier, slightly low from 9.9% in March.

India's service sector growth remains strong

Jun 03, 2010 at 12:10

Business activity remained strong for India's vast services sector in May, with a key gauge growing for a 13th consecutive month, though some momentum was lost over the previous month.

The HSBC-Markit Purchasing Managers’ Index (PMI) stood at 58.2 in May versus 62.1 in April. A reading above 50 indicates expansion.

Services make up about 55% of India’s US$1.2 trillion economy.

Government data released this week showed that India’s economy expanded by 8.6% in the January-March quarter, while another report by HSBC-Markit showed manufacturing in May growing at the fastest pace in more than two years.

The PMI for manufacturing rose to 59, the highest since February 2008, HSBC and Markit said earlier this week.

"The Reserve Bank of India (RBI) is likely to tighten interest rates before its next policy review meeting on July 27," Frederic Neumann, a Hong Kong-based economist at HSBC, said today. The central bank has raised rates twice since mid-March.

Yen weakens as Japan's PM resigns

Jun 02, 2010 at 11:25

The Japanese yen dips further against both the U.S. dollar and euro on Wednesday afternoon in Asia over the news of Prime Minister Yukio Hatoyama's resignation.

In a televised appearance before Democratic Party of Japan lawmakers Wednesday, Hatoyama announced his resignation and said he would take responsibility for his reversal on a decision to relocate a U.S. Marine base on Japan's southern island of Okinawa, and also political funding scandals.

In early afternoon trading in Asia, one U.S. dollar bought ¥91.52, up from ¥91.02 late in North American trading Tuesday, while one euro bought ¥111.92, up from ¥111.40.

The yen moved inversely with the Nikkei Stock Average, which was up 0.4% in afternoon dealings after a weak open.

India's exports surge by 36% in April

Jun 01, 2010 at 11:45

India's merchandise exports continued to show strong growth in April with shipments rising by 36% to US$16.9bn, and imports growing by 43.3% to US$27.31bn, the Government said on Tuesday.

This was the sixth consecutive gain in exports after 13 straight months of decline. India's exports dropped 4.7% in the fiscal year 2009-10 as a global economic slowdown hurt demand for its products.

The trade deficit for the month under review stood at US$10.4bn in April as against US$6.65bn in the same month last year.

The jump in India's exports over the past couple of years can be partly attributed to a low base effect and there are some concerns that the ongoing debt crisis in the euro-zone could dampen demand.

The Government has targeted a 15% growth in exports in the fiscal year ending March 2011.

In the Indian rupee terms, India's exports in April were up by 21.1% while imports by the same measure grew by 27.4%, the Government said today.

Oil imports during April jumped by 70.5% to US$8.08bn while non-oil imports climbed by 34.3% to US$19.23bn

India's manufacturing PMI hits 27-month high

Jun 01, 2010 at 11:30

India's manufacturing sector grew at its fastest pace in more than two years in May on the back of steady growth in output, new orders and employment, a private survey showed on Tuesday.

The HSBC Markit Purchasing Managers' Index (PMI) surged to a 27-month high of 59.0 from 57.2 in April.

This was the 14th consecutive month of expansion and came on the back of some moderation in March and April.

"The Indian economy is hardly pausing for breath," said Frederic Neumann, co-head of Asian Economics Research at HSBC.

"Output growth remains at a robust pace and new orders continue to pour in. This is benefiting the job market as more and more firms are hiring," he added.

The new orders index climbed to 63.7 in May from 61.9 in April, according to the PMI report. It was the 14th straight month when new orders expanded.

The employment index touched its highest reading since August 2005, and backlogs in work index and stocks of raw materials hit five-year series highs.

Reserve Bank of Australia leaves key rate steady

Jun 01, 2010 at 11:20

The Reserve Bank of Australia decided to leave the cash rate unchanged at 4.5%. This is the first pause in rate hikes.The decision was largely expected. The RBA has hiked rates six times since October 2009.

RBA Governor, Glenn Stevens said that domestic inflation appears likely to be in the upper half of the target zone over the next year. He also noted concerns about sovereign creditworthiness in several European countries, and said "the effects of these various factors on the world economy will need to remain under review.

The following is the statement of Stevens:

Since the Board last met, concerns about sovereign creditworthiness in several European countries have been a focus of financial markets. Investors have generally displayed a good deal more caution.

As a result, equity prices have fallen and long-term government bond rates have declined outside of the countries most affected by the sovereign concerns. The Australian dollar fell sharply as part of this adjustment. Commodity prices have also softened, though those important for Australia remain at very high levels.

European policymakers have responded by assembling a large package to provide financing for the relevant countries for a period of time, stabilise bond markets and provide liquidity. They have also committed to action to bring budget deficits down and stabilise debt over time.

The effects of these various factors on the world economy will need to remain under review. At this stage, global growth is still expected to be at about trend pace in 2010. Conditions in Europe overall have been relatively weak, and the foreshadowed budgetary tightening will probably mean that this will continue, but growth is becoming more established in North America. In Asia, growth has continued to be quite strong and may need to moderate in the year ahead.

In Australia, with the high level of the terms of trade expected to add to incomes and demand, output growth over the year ahead is likely to be about trend, even though the effects of earlier expansionary policy measures will be diminishing. Inflation appears likely to be in the upper half of the target zone over the next year.

Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago. Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term.

China's manufacturing PMI slows in May

Jun 01, 2010 at 10:10

China's manufacturing sector growth slowed in May, reinforcing a growing view that growth may be easing in the world’s third-biggest economy.

China’s Shanghai Composite Index declined after a purchasing managers’ index (PMI) showed that the country’s manufacturing industry expanded at a slower pace in May.

The official China Federation of Logistics and Purchasing purchasing managers index (PMI) fell to 53.9 from 55.7 in April.

That was less than the median estimate of 54.5.

An output index fell to 58.2 from 59.1 in April, today’s report showed. The new-order index slid to 54.8 from 59.3 and an export-order index dropped to 53.8 from 54.5. The input-price index decreased to 58.9 from 72.6.

Separately, HSBC Holdings' PMI fell to 52.7 in May from a revised 55.2 in April. This is the lowest since June 2009.

“The overheating risk is likely to ease as tightening measures filter through,” Qu Hongbin, chief China economist at HSBC, said today. “We see robust economic growth without double-dip risks not least because of massive existing infrastructure investment and resilient private consumption.”

(Sources)

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