Food processing can to rural India
what it has done to urban India  

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 25 :
FOOD , a fundamental need for survival, will only see a rise in the future. India, with a large agricultural base, is rightly poised to meet the food needs of the world. If this has to happen, India has a lot to do. An exclusive summit organised by the Confederation of Indian Industry (CII), the fifth international "Food & Bev Summit 2012" discussed on the ways that India can become the food factory of the world.

Mr Rakesh Kacker, Secretary – Ministry of Food Processing Industries, GoI said, "The Government of India is committed to the growth of the food processing sector. A lot of things are happening in the sector which grew by an average of 8 percent between 2006 and 2010. This is higher than the growth of the manufacturing sector. Agriculture has also been growing 2-3 percent which means we are adding more value to agriculture."

He informed that his ministry is trying to involve the state governments more and more in their schemes.

While highlighting the problem areas, he said that many of them have been resolved or are in the process of resolving with large budgetary allocations. "The main problems have been related to land. In many projects we have worked closely with state government and removed problems. Cold chains have been doing quite well with 8 already being completed and 10-15 more to be completed by the end of the financial year.

"We have got a very good response from the private sector and just last month we have got approval for 30 new projects. The government's major area of focus is skill development. Industry needs skilled manpower and we are dedicated to developing that for the food processing industry," he added.

He said that the major thrust for the ministry is to move out of project implementation and leave it to the state government.

Dr Sudhir Kumar Goel, IAS, Principal Secretary – Agriculture & Marketing, (Additional Charge) Marketing Cooperation, Government of Maharashtra said, "I am here on behalf of state government to make a few offers. Firstly we are willing to work with industry in the back end. We will provide all inputs to farmers from where you source all material from them. Anyone willing to have an end to end solution can come up and we can start having discussions immediately. Backend will be entirely our responsibility and it will not eat upon your profit margins. We have enough projects and money allocated into it to take care of that."

He further stated that since government has legalised contract farming, corporates can work without the middle man and deal directly with farmers. "Let us not discuss further on things. Let us sit down at the table and work on how we can do things together and how farmers can benefit and how you can benefit at the same time."

Piruz Khambatta, Chairman, Food & Bev 2012 and Chairman & Managing Director, Rasna said, "Food processing can do to rural India what IT has done to urban India – bring prosperity and growth. Food processing sector can act as a vehicle for 21st century India."

Elaborating on this Mr Khambatta said, "GoI have so many schemes that industrialists have to educate themselves to take advantage of them. 31 percent of spending done by Indians is on food. You cannot thus get wrong with food processing. We are an agricultural nation and we can expand food processing. There's a huge scientific and management talent and well developed finance market."

"This sector is a boon for SMEs as you can start a business with very less money. India can rightly be food factory of the world and this can also lead to food security. We need food security more than defence. We need to feed our people. Besides that food processing can control inflation," he added.

He unveiled a 12 point agenda for exponential growth that includes definition of agriculture to include processed food products, regulations to be made conducive for contract farming, corporate farming and cooperative farming, zero goods and service tax GST on food processing, improvement of R&D, market development assistance extended to food processing companies by government etc.

Mr Pradeep Banerjee, Executive Director – Supply Chain, Hindustan Unilever said, "The call for inclusive growth is loud and clear. As an industry when we develop our plans to make India the food factory of the world, we cannot forget that inclusive growth has to be at the core. Secondly, we have talked a lot and for a long time. There is now an urgent need for action. And thirdly we need to take Private Public partnership to new heights."

The second session saw an interesting debate where adman Prahlad Kakar in his imitable humour and style, while chairing a session, taught the Food and Bev industry branding and marketing. He said that though we have great food and bev tradition, we have not known how to build brands from it and take advantage from the same.

In the session, Devendra Chawla, president – Food Bazaar, Future Group said, "Food habits of a people are hard to change and it travels with people. Brands have to be rooted in the country and begin in their own country. How many food brands are we building in India? We need more local brand which we can customise when we move to other countries."

"Food & Bev 2012" is the fourth International Exhibition for the food and beverage processing industry and is providing a platform for companies to market and promote their products and services to food and beverage industry professionals, distributors and importers, supermarket chains, hotels, restaurants, airlines, railways, food service providers and also interact with buyers and delegates on the innovations that could benefit all.

The Retail Pavilion of the exhibition is a platform for the retail chains and institutional buyers to have a face to face interaction exclusively with the exhibitors at Food and Bev 2012. The buyers who are part of the Retail B2B meeting are Aditya Birla Retail Ltd. – More, Future Group, Godrej Nature's Basket, Dmart, Reliance Fresh, The Oberoi Group and Grand Hyatt.

The exhibition that will go on for the next two days will have a special session on the New Safety Regulations by FACE. The third day is open for public visit. The Government of Maharashtra is the host for the exhibition while the Government of Gujarat is the partner state. There is also a wine pavilion in the exhibition.

State participation from Maharashtra, Gujarat, Kerala and Punjab are showcasing their strength in the food sector. International participation is represented by the Holland pavilion where Foodtech, Holland is showcasing their latest technology and trends to the Indian market.

 

 

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 22 :
THE decisions that civil servants take must be fair and objective in nature and designed to serve the best interests of the country. Their judgement should not be affected by the nature and colour of the political class. This was stated by Prime Minister Dr Manmohan Singh while inaugurating the seventh Civil Services Day in New Delhi.

He said that the significance of Civil Services Day lies in sending out a message that we all are determined to making our civil services competent and professional, alive to the requirements of the twenty first century and capable of facilitating rapid social and economic progress in India.

He further said that our bureaucracy should keep pace with the fast changing technology and adopt more modern methods and practices.

Dr Singh said that civil servants should not shy away from taking decision for fear of decisions going wrong. The Government was committed to protecting them for any bona-fide mistakes/errors, he said.

Dr Manmohan Singh said that the civil servants' decision making should be directed towards promoting inclusive growth so that SC/STs and other weaker sections of our society are also integrated into our social mainstream.

The Prime Minister also gave away the `PM's Awards for Excellence in Public Administration' for the year 2010–11. Four outstanding initiatives in three categories – individual, group and organization - have been selected for the award.

The award in the individual category was given to Ms. M. Manimekalai, IFS, the then ambassador of India in Libya for Rendering selfless service to evacuate Indian Nationals amid Civil War in Libya.

In the group category, the award was given to Village Health and Nutrition Day in Complete Convergence Mode for North Tripura district. Ms. Soumya Gupta, Distt. Collector of the district and her team members received the award and Conduct of Panchayat Elections in Jammu and Kashmir. Mr Madhav Lal, IAS, Chief Secretary, Mr Kuldeep Khoida, DGP and Mr B.R. Sharma, Chief Electoral Officer and two other officers of the state received award in this Group.

Participatory Scientific Watershed Management in Gujarat was awarded in the Organization category. Mr Ram Kumar, Chief conservator of Forests, Gujarat received the award.

Under this scheme of awards, all officers of Central and State Governments individually or as group or as organization are eligible. The award includes a medal, scroll and a cash amount of Rs.1 lakh. In case of a group, the total award money is Rs.5 lakh subject to a maximum of Rs. 1 lakh per person. For an organization this is limited to Rs. 5 lakh.

Union Minister of State for Personnel, Public Grievances & Pensions and PMO, Mr V. Naraynasamy, in his address said that the need for improved public delivery system is imperative as people's expectations from the civil servants have gone high.

He said that as a step towards this direction, 27 Mission Mode projects covering different departments have been taken up under the e-governance initiative.

The Minister further said that the Government was building capacity through training and skill upgradation of officers at various levels. We need to find innovative ways in governance to provide services in a time-bound manner and to meet aspirations of our people.

The minister outlined the steps taken by the Government recently in checking corruption in public life.

Cabinet Secretary Mr Ajit Seth, in his welcome address, said that civil servants in India had shown their capacity to deal with problems and meet challenges, of whatever nature. We are now faced with complex problems and need greater focus and inclusiveness in decision making to deal with them, he added. Stressing the need for reinforcing the value system, Shri Seth called upon the civil servants to be impartial, objective and transparent in their functioning.

THRUST ON INCREASING COMMODITIES PRODUCTION STRESSED

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 22 :
AS a major commodity importer, India is very concerned about the increase and volatility of commodity, and especially oil, prices, in recent times that seem to be not aligned with underlying economic fundamentals. These distortions are, inter alia, adding to inflationary pressures in a number of developing countries, including India, said the Union Finance Minister Mr Pranab Mukherjee in intervention statement on 'Energy and Commodities' at G-20 Finance Ministers and Central Bank Governors' (CBGs) meeting in Washington D.C.

Despite several studies, including one done by the G 20 itself, it is still not very clear as to what is driving this heightened volatility, which seems to be a mix of financialization of commodity markets, monetary policy actions, political uncertainties, and demand-supply imbalances , he added.

It is felt that improving information and transparency in commodity markets, including futures and over the counter markets would help alleviate the problem. We therefore welcome the G 20 initiatives in this direction.

There is an urgent need for countries to put in place a mechanism for gathering commodity market information and creating a publicly accessible comprehensive data base on production, price, inventories, demand and supply forecasts, etc. An unfettered access to vital information on the commodity markets would discourage excessive speculation and exaggerated price movements, he added.

In addition, there should also be a thrust towards increasing production and productivity of commodities through improved technology to relieve any demand-supply imbalances that may exist to maintain price stability.

Text of the Union Finance Minister Shri Pranab Mukherjee's Intervention Statement on 'GREEN GROWTH AND CLIMATE FINANCE' in Third Session of G-20 Finance Ministers and Central Bank Governors' Meeting in Washington D.C.

'CONCERNS ON GREEN GROWTH NEED NEW SOLUTION'

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 22 :
AS G-20 Finance Ministers, we should recognise that concerns on Green Growth and Climate Change require, inter-alia, new solutions and a closer discussion on various possible options, and that such discussions should ultimately feed into UN processes. The G20 can contribute in this area through the identification of best practices for sustainable development, provide researched inputs, sharing of technology and suggesting ways of raising resources to go forward, said Mr Pranab Mukherjee in his intervention statement on 'Green Growth and Climate Finance' in the third session of G-20 Finance Ministers and Central Bank Governors' Meeting in Washington D.C.

There is currently no internationally agreed definition of "green growth". Deliberations on the issue must therefore strike a balance between all the three pillars of sustainable development i.e. economic development, social development and environmental sustainability, on which there is consensus, and be consistent with the objectives, provisions and principles, including common but differentiated responsibilities and respective capabilities, of the UNFCCC, he said.

The proposal for setting up a new study group of co-facilitators with the objective of organizing and delivering a report on Climate Finance commitments. However, the criteria and the process as to how this study group of co-facilitators will be formed are not clear. The views and interests of all G 20 countries need to be reflected through a transparent and inclusive process, he said.

While technical analysis and researched inputs on these issues are welcome, a review of the progress on commitments on climate finance has to be done by the Conference of Parties to UNFCCC only. The study group might benefit by limiting its focus on specific areas and where finding common ground remains contentious but breakthroughs are needed, such as financing for sustainable development, Mr Mukherjee added.

CALL FOR NEW FINANCIAL REGULATORY FRAMEWORK

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 22 :
THE global financial system continues to face a complex set of challenges. While some countries and regions are recovering from the crisis of 2008, others are confronting renewed turbulence. The uncertain and uneven recovery has led to calls in some quarters to weaken financial reform initiatives. While there may be some case for some back loading of difficult adjustments to strengthen the recovery of the financial sector, any weakness shown in our resolve and commitment to reform will sow the seeds of fresh crises down the line.

The key task is to fully implement what has already been agreed in a cooperative manner, stated Union Finance Minister Mr Pranab Mukherjee in a statement on 'Financial Regulation' in the Second Session of G-20 Finance Ministers and Central Bank Governors' Meeting in Washington D.C.

There is a concern that unless the same standards are implemented in all jurisdictions simultaneously there would be scope for regulatory arbitrage that could result in financial activity migrating to less regulated jurisdictions elsewhere, as well as into shadow banking.

While all countries are committed to Basel III, major jurisdictions have separately come out with their own regulatory standards. The disharmony would be confusing and expensive for the banks, which are spending significant amounts to prepare for and comply with the new standards.

Collaboration between financial authorities has never been so testing and yet never has collaboration been so important. Collaboration is difficult when it entails profound structural change in the face of volatile financial markets and anemic growth prospects worldwide. Yet it is precisely these challenges that make it so vital that the regulatory response should be well coordinated internationally to ensure that the new regulatory framework is effectively and globally implemented.

Going forward, while we push for the progress on implementing the reform agenda to update the global financial regulatory framework, we should be mindful that our reform agenda incorporate the main lessons from the crisis and that they address the challenges posed by current conditions.

In this regard, we look forward to the outcomes of the initiatives of specific concern to the emerging and developing economies including financial inclusion, consumer protection and the study to identify the extent to which the agreed regulatory reforms may have unintended consequences for EMDEs.

With the relaxation of control of foreign investments and foreign exchange by countries, there has been a great increase in cross-border transactions which bring into focus issues of tax evasion and illicit flows that pose serious challenges to the world economy and the efforts of the countries to raise revenue for development.

India, like most of G20 countries, has signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. To make the Convention really effective, the G20 should give a call that the Convention is signed by Offshore Financial Centers and countries traditionally believing in secrecy of bank laws and that country should not give exemptions which will eclipse the efficacy of the Convention.

India believes that the automatic exchange of information is one of the most effective ways to improve voluntary tax compliance and decrease tax evasion and there is a need to make it obligatory. Members of the G20 can take a lead in this regard by exchanging information automatically with their treaty partners on a voluntary basis and then urging other countries also to do so.

India would also like to suggest that an implementation of a country-by-country financial reporting standard, which includes the obligation for each multinational company to report in every country in which it operates, can increase transparency and reduce the scope of tax evasion.

Finally, Phase 1 and Phase 2 reviews of the Global Forum should not remain one off measures. An institutional mechanism may be established so that the reviews are done at periodic intervals.

The effectiveness of the exchange of information should be monitored on a continuous basis by the Global Forum and reported to the G20 regularly.

IMF ROLE IN INVESTORS' CONFIDENCE STRESSED

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 22 :
SINCE January 2012, when the Managing Director made a proposal to augment IMF's resources, several landmark developments have taken place which have brought about a welcome change in the global economic and financial environment. In view of these developments, a measure of calm has been restored. But, several uncertainties and downside risks continue.

The recent efforts by EU to raise the size of its firewall should continue to play the primary role in addressing the needs of members of the EU as and when the situation so demands. International Monetary Fund ( IMF) assistance should only underpin the EU's efforts and play a catalytic role in order to provide confidence to investors.

Any bilateral financial contributions made should be voluntary. It should not be linked to reform of quota formula. Further these contributions should not be looked upon as a substitute to quota resources.

It is important that innocent bystanders affected by the crisis, particularly the PRGT covered and low income countries are adequately protected and there should be sufficient resources available for them.

India has already ratified the 2010 quota increase. We have also confirmed that we will maintain our relative share of the new arrangements to borrow. Considering the gravity of the economic uncertainties we support the new funding initiative. Our exact contribution will be announced in due course.

India will continue to play its role to assist the IMF in its efforts to augment permanent resources. However, governance issues are also linked with this and we are disappointed at the pace of the reform on quota and governance issues. A dynamic process of reform is necessary to ensure the legitimacy and effectiveness of the Fund and the best possible means to improve governance and legitimacy is by ensuring that there is no slippage on crucial reforms.

The Quota Formula is due for review by January 2013 and it is important that there should not be any slippage in the target date in this regard. The quota formula is of central importance since quotas are the main determinant of the voting power of members. For the emerging and developing countries, GDP is the most important variable in the quota formula and the weight of the blended GDP variable should be substantially increased in the formula. Our objective is a simple formula with GDP blend as either the sole or predominant variable and with a higher share of GDP-PPP.

NEW GLOBAL STANDARDS TO HELP ADDRERSS THREATS TO FINANCIAL SYSTEM

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 22 :
India appreciates the efforts of Financial Action Task Force (FATF) in issuing the new international standards to combat money-laundering, terrorist financing and proliferation financing. These new standards would help better address new threats to the international financial system and provide stronger framework to act against criminals, said the Union Finance Minister Pranab Mukherjee at Financial Action Task Force (FATF) Ministerial Meeting in Washington D.C.

.
Implementation of these new standards by the global community will make financial systems more transparent, safe and robust, he said.

Mr Mukherjee added that India fully shares the view that due to integration of world economies and intermingling of the threats in the international business environment, no country can alone meet the threats of money-laundering and terrorist financing. There is an ever growing need for international cooperation to deal with these threats that are increasingly acquiring international dimensions. We hope the new standards will improve the domestic and international cooperation amongst the agencies to combat these crimes.

India has special concern that in cases of terrorist financing, stronger and faster international cooperation should be encouraged. It is also important that systems are put in place to prevent and detect the misuse of formal and informal channels irrespective of the size of fund, he added.

The recommendations relating to transparency of legal entities and legal arrangements would help in promoting international cooperation in determining the controllers and beneficial owners of legal structures.

FATF, while framing the assessment methodology, will take into account the diversities in the financial and legal structures of various countries and the implementation challenges that countries with lower capacities would have to face. India will fully contribute with member countries in developing suitable assessment methodology and procedures, Mr Mukherjee added.

Thesynergyonline Economic Bureau

NEAR-TERM downside growth risks are rising. While private consumption indicators, March export data, and PMI indices look relatively stable, the view is held that downside risks to growth in the near-term are rising.

Positive economic surprises in the US are disappearing. One could now see a bigger payback in terms of slower growth in 2Q12 ( 1.2 percent SAAR vs. 1.7 percent previously expected) , since 1Q12 GDP was helped by favorable weather conditions

Delayed and more selective policy easing in China lead the team to expect slower 2Q12 growth momentum (7.9 percenty-o-y vs. previously expected forecast of 8.2 percent ). Delayed easing is likely due to lingering inflation risks ,a shift in policy priorities towards 'quality vs. 'quantity' of growth, thus preferring selective rather than broad-based easing and a very resilient labor market

Rising Eurozone risks, with growing fiscal risks in Spain and Italy alongside political risks in France and Greece.

Nonetheless, the full-year growth outlook for Asia remains largely unchanged as we maintain our second-half recovery assumption. Thus, the marginal negative shift in growth expectations is still largely seen as transitory.

Inflation pressures have continued to ease…. but favorable base effect is largely over. Inflation readings mostly surprised negatively in March, benefiting from the food-led base effect disinflation.

However, this favorable base effect is largely over. Our team does not expect a more stable food inflation environment to contribute to a further fall in headline inflation for most countries anymore (exceptions here are likely to be Vietnam and Thailand).

A rather stable and sticky inflation path is likely over the medium-term.

Where does this leave us? Asia's monetary policy is largely in a period of stasis. Incentive to sound particularly hawkish now may be lower than a month ago, but it is probably too risky for most to sound particularly dovish, given that monetary policy impacts with a sizeable lag and a 2H 12 growth recovery is still expected .

With a favorable base effect on inflation disappearing, headline inflation is still expected to be rather close to the central bank comfort thresholds- the next rate move for many by next year is still more likely to be up than down and real rates are still historically low (negative in some) and sufficiently accommodative.

Vietnam, China, and India are exceptions – they will likely still signal and pursue more monetary and/or liquidity easing to varying degrees; though India less than before.

Quick economy overviews on key countries across the South Asian region:

India

Given limited room on the monetary and fiscal front, trends in FY13 GDP would likely remain in the 7 percent range. Thanks to the base effect, near term inflation trends are likely to be benign, but trends in the latter half of the year could edge up. The RBI in its recent policy cut rates by 50 basis points , but signaled a limited scope for further easing. Taking into account FY13 expectations for growth and inflation one could see at best one more rate easing later this year, but this will be data/event dependent.

On the external front, a widening current account deficit coupled with a slowdown in capital flows (risk off/ deleveraging) would likely result in the drawdown in reserves to continue and pressure on the INR to persist. This, coupled with the deterioration in India's fiscal deficit, and global factors have resulted in a revision to our INR/USD estimates to Rs 54/$ in 6-12mos and Rs 51/$ in the long term .

Pakistan

Persistent energy shortages, an uncertain political environment and global challenges would likely keep growth subdued. We expect FY12E and FY13E GDP to come in at 2.8 percent and 3.1 percent respectively. Impending parliamentary elections makes it important to track political developments –the recent approval of terms of engagement with the US could shape the policy environment.

On the external front, the liquidity situation remains worrying, leaving the currency under pressure. Mounting price pressures are a growing concern, and leave the central bank in an unenviable position of balancing the fragile growth trends and rising inflation. (p. 36)

Sri Lanka

Although growth in 2011 came in at a record high of 8.3 percent , trends are unlikely to sustain given higher interest rates, upward revisions in fuel/electricity prices and a challenging global environment.

2012 forecast has been pared to 7.4 percent from 7.6 percent earlier. Although external liquidity pressures have eased for now, continued foreign inflows are key given the widening trade deficit. Monetary policy would likely focus on curbing high credit growth and rebuilding foreign exchange reserves.

Custom duty hike on tinplate impacts SME sector

Sanjay Bhatia, president, Metal Container
Manufacturers Association and Chairman MSME

CAN making industry which is concentrated mainly in small and medium enterprises (SME) sector In India employing about 100,000 people is badly hit due to increase in custom duty by 50 percent from 5 percent to 7.5 percent , on tinplate (flat rolled products under tariff item 7210 11 10).

The industry is concerned due to this hike as this will affect small industrial units in India.

Tin cans are widely used as an important packaging material for various food and non-food products. Total demand of tinplate is about 440,000 tons out of which nearly 50 percent is met from imports. Seventyfive percent tinplate containers are used by food industry as packaging material and any increase in this essential packaging material would result into increase in price of tin containers which would affect the food processors and ultimately result into increase in the cost of food products and add to inflation.

The industry was already suffering in the past due to increase in basic prices of tinplate and adverse rupee-dollar parity. An increase in custom duty will only add salt to injury as this packaging segment was already bleeding.

Due to high cost, metal packaging was already losing shares to alternate packaging like plastic, paper and glass and this would further affect this industry.

Metal Container Manufacturers Association has appealed to the Government to withdraw this hike as the metal container industry cannot afford any such increase.

Moreover, metal packaging is totally recyclable, environment-friendly and sustainable packaging. Rather the industry needs incentives from the Government so that the users are encouraged to use this environmental friendly packaging material in order to conserve environment. This would help to keep the environment clean and also will help rag pickers to lead better life as they are playing important part in the recycling system.

The Association has appealed to the Finance Minister to reconsider increase in custom duty as the industry is mainly in SME sector, it manufacture products which are environmental friendly and recyclable, industry was already suffering due to high cost of tinplate and adverse rupee-dollar parity.

In addition to this, tin containers are important packaging material and are being used by food processing sector which is a thrust area of the Government. It helps process food industry to reduce the food wastage and packaging provides long shelf life as compared to any other packaging material.

India economy

 

March CPI trends get worse – up 9.5%; urban inflation now in double-digits

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 18 :
FOLLOWIG the 7.6 percent  and 8.8 percent print in January and February, the upward trend in the new combined Consumer Price Index (CPI) continued in March: up 9.5 percent. Corresponding WPI prints for the same period were 6.9 percent ,7 percent and  6.9 percent respectively.

The uptrend in the CPI from 7.6 percent in January to 9.5 percent in March is due to food prices rising from 4.5 percent to 8.4 percent in the same period. Food prices incidentally also edged up in the latest WPI reading. The higher weight  of food in the CPI v/s WPI (Food wts: CPI 49.7 percent ; WPI 20.1 percent) is the primary reason for the over 200 basis points difference in the WPI/CPI inflation readings. CPI readings ex-food and fuel remain in double digits (Ex Food: 10.7 percent ; Ex Food/Fuel:10.5 percent ).

Looking ahead, given the structural factors driving food inflation, trends are likely to remain firm.
On a component-wise basis, The rise in food inflation from 4.5 percent in January  to 8.4 percent  in
March was largely due to higher oils (+14 percent ) and protein-rich products ( eggs, dairy products – up 10 percent each) and the wearing out of the seasonal effect of vegetables (+9.6 percent in March vs. -25 percent  levels in January). Apart from miscellaneous goods where the price index was up 8.7 percent , double-digit price rises were evident across housing (+14.4 percent y-o-y ), clothing and footwear (+12.5 percent ), and fuel (+11.8 percent ).

On a segmental basis, in line with trends seen earlier, prices at the urban level (+10.3 percent ) outpaced those at the rural level (+8.6 percent ). This is possibly due to the fact that housing is not included in the rural index.

As this is only the third reading of the CPI, it is difficult to gauge trends based on the data, and trends in WPI are expected to to remain key in monetary policy decision making in the coming months.

However, given that the RBI has also included retail inflation as one of its goal-posts, tracking CPI is key. Nonetheless, as mentioned in our policy note yesterday, taking into account our expectations for GDP and WPI at 7 percent  and 7.4 percent respectively, we could see at best one more rate easing later this year which will be data/event dependent.

Growth outlook should now improve : Mukherjee

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 17 :
UNION Finance Minister, Mr Pranab Mukherjee, has said that everything will be done to help maintain a supportive monetary policy stance for growth.

The Finance Minister was reacting to the Annual Monetary Policy statement for 2012-13 announced on Tuesday wherein the RBI has announced a 50 basis point reduction in the policy rates.

The repo rate under the liquidity adjustment facility now stands at 8.0 per cent and the reverse repo rate, maintaining the fixed corridor of 100 basis points, at 7 per cent with immediate effect. This marks a beginning of the reversal in the policy rates after more than two years.

Mr Mukherjee said that the moderation in the core inflation rate for four months in a row from 8.31 per cent in December 2011 to 5.18 per cent in March 2012 along with a sharper decline in the inflation for manufactured products from 7.64 per cent to 4.87 per cent in this period has facilitated the change in the monetary policy stance. However, he said that food and primary inflation has shown some signs of hardening in the month of March 2012 which is a cause for some worry. Shri Mukherjee stated that it was intended to continuously monitor the situation and take the required steps to manage the short-term supply constraints especially in those food items which have been a cause of inflationary spikes in the past months.

Mr Sutirtha Bhattacharya, principal secretary, Infrastructure and Investment, Government of Andhra Pradesh and Mr Philip Olivier, president and CEO, GDF Suez LNG UK exchanging documents post signing project framework agreement the in presence of Mr S Jaipal Reddy, Minister of Petroleum and Natural Gas, Government of India, Mr N. Kiran Kumar Reddy, Chief Minister of Andhra Pradesh and Mr B C Tripathi, Chairman and Managing Director, GAIL (India) .

 

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 14 :
INDIA'S top down macro story has de-rated over the past year. Growth expectations are now in the 6.5 percent to 7 percent range v/s 8 percent to 9 percent a year ago.

Moreover, India’s deficits – both fiscal and current account – have deteriorated. The combined fiscal deficit (including the SEB losses) is at ~9 percent of GDP while the current account deficit is at ~4 percent of GDP. Adding to the woes, are reported data credibility issues pertaining to industrial production, GDP growth and trade. Last but not the least, are the unresolved global issues – geopolitical issues including those on Iran and its impact on oil prices; Euro Area debt crisis and fears of a China slowdown.—

Excluding the ‘currently’ unreliable top down macro data (IIP, GDP etc), sectoral trends and corporate earnings clearly indicate that growth has slowed. While there are early signs of things bottoming out, there is need for policy measures to bring growth back to ~7 percent levels.

Given the intractable fiscal deficit, the difficult political environment, the onus is on executing measures proposed in the infrastructure space and some monetary easing. Thus the  view of the RBI commencing its easing cycle is held by cutting rates by 25 basis points  in its policy on Tuesday April 17.

But worries on inflation will limit rate cuts to 50-75 basis points. In its last policy on 15 March, the RBI said that “notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions”.

Moreover, in addition to its primary focus on ‘non-food manufacturing inflation’, it expressed concerns on upside arising due to  higher oil prices and suppressed inflation, currency depreciation, fiscal slippages  and price pressures at the retail level. Inflation outlook: Thanks to the base effect, near-term inflation trends are likely to be benign, but trends in the latter half of the year could edge up due to some pass through of tariffs and BoP pressures resulting in a weaker rupee. The outlook for policy rates post easing of 50 basis points would thus be data/event dependent.

Other than a rate action, key to look out for in the policy is the RBI’s guidance on growth and inflation. Given the growing element of structural as well as commodity-related factors determining inflation, key would be whether the RBI accepts a slightly higher level of inflation in the immediate near term. On growth, while budget estimates are based on a 7.6 percent GDP estimate, based on recent statements of ‘non-inflationary rate of growth’, we could see the RBI guiding a to growth of 7 percent +/- 0.5.

Lastly on liquidity, given the FY13 deficit of Rs 5136 billion or 5.1 percent of GDP, which translates into a borrowing program of Rs 5696 billion (gross) and Rs 4790 billion (net) and likely fiscal slippage in FY13 , coupled with our banks analyst’s estimates of 17 percent loan growth, liquidity conditions are likely to remain stretched. This would warrant OMO’s in FY13 similar to the quantum seen in FY12, coupled with a 50 basis points  CRR cut in FY13.

Headline inflation has come off from the 9 percent levels seen earlier this year. Going forward, we expect the strong base effect to result in headline WPI printing in the 6.5 percent .5 percent range but key to watch is the interplay between commodities and currencies and structural factors determining food prices.

Following 7.7 percent and 6.9 percent growth in 1Q and 2QFY12 respectively, GDP growth slowed to 6.1 y-o-y in  3QFY12.

While we could see a revision to the CSO’s advance estimates of 6.9 percent due  to exclusion of the SME sector… sectoral trends and corporate earnings clearly indicate a slowdown.

We expect the RBI to begin its repo rateeasing cycle in April, but we re-iterate that the quantum and window for RBI to cut is very limited. Thus, unlike the last cycle, where the RBI cut rates aggressively, given the inflation bugbear, the RBI may only cut 50 to 75 basis points  in 2012. The outlook for rates post easing of 50bps would be data/event dependent on  oil prices and fiscal consolidation.

In its 15 March policy, the RBI said that “notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions”.

Moreover instead of the usual focus on ‘non-food’ manufactured product inflation, the RBI has expressed concerns on upside arising due to higher oil prices and suppressed inflation , currency depreciation, fiscal slippages, and (e) price pressures at the retail level.

Despite the deceleration of core inflation to 5.7 percent from percent + levels just a few months ago, the RBI’s goal posts have moved to incorporate various other macro indicators. Fiscal consolidation is one of them.

While risks to the fiscal consolidation target of 5.1percent in FY13 from 5.9 percent in FY12 are dependent on oil prices and political courage for fuel-related reform, the RBI said that, as part of the government, they have to assume that proposed fiscal consolidation (from 5.9 percent to 5.1 percent of GDP) will be pursued.

Though prices of petrol and industrial fuels are market-determined, the price adjustment at times takes place with a lag, and the government regulates prices of cooking fuels as well as diesel. Statistically, the impact on WPI could range from 0.6 percent to 3.6 percent percent depending on how it is transmitted.

Given limited room on both the monetary and fiscal front, trends in FY13 GDP would likely remain in the 7 percent range.

Two critical variables remain whether recent policy efforts by the PMO to encourage investments indeed play out and the direction of oil prices.

While lower rates would help, key to the investment cycle is the implementation of steps taken by the PMO’s Committee of Secretaries, headed by Principal Secretary to PM Singh - Pulok Chatterjee to resolve bottlenecks plaguing investments.

With  the PMO driving the effort, it raises the possibility of ministries, state governments, PSUs and Coal India finally coming together and resolving the issues at hand.

While overall consumption has held up at 6 percent to 7 percent levels, tight funding/liquidity is a
constraint. Trends in consumer durables, autos are evidence of slowdown risks.

The overall BoP is expected to to post a drawdown of US$4.2bn in FY12 and US$5.7 billion in FY13.

System liquidity deficit, which due to a combination of structural and frictional factors including FX intervention, has been way above the preferred +/- 1 percent of Net Demand and Time Liabilities (which translates into Rs 581 billion or US$11.6 billion.

Imbalances in deposit and credit growth and above trend growth in currency with the public have been key factors impacting liquidity. Deposit growth has moderated to 13 percent- way below RBI’s target of 17 percent while credit growth has remained buoyant at 17 percent. Consequently, the Loan-Deposit Ratio has touched a multi-decade peak of 78.1 percent

A widening current account deficit coupled with lower capital flows is likely to result in a drawdown of reserves. This coupled with RBI intervention in the FX markets has put an additional drain on liquidity.

M3 growth slowed to 13 percent in FY13, lower than the RBI’s target of 16% and trends in nominal GDP growth. Key factors behind this are lower deposit growth coupled with an increase in currency with the public.

Inflation impacted financial savings which moderated to 10 percent  from 12.9 percent  last year. The RBI’s Annual Report indicates that this was due to lower growth in bank deposits.

Physical savings edged higher to 12.8 percent of  GDP from 12.4% last year, as households preferred to invest in gold/real estate. This is reflected in higher gold imports.

Tight liquidity conditions resulted in the RBI cutting the CRR by 125 basis points and undertaking Open Market Operation (OMO) to the tune of Rs 1245 billion (US$24.9 billion ) in FY12 . Going forward, given the FY13 deficit of Rs 5136 billion  or 5.1 percent of GDP, which translates into a borrowing program of Rs5696 billion (gross) coupled with analyst’s estimates of 17 percent loan growth, liquidity conditions are likely to remain tight. This would warrant OMO’s in FY13 similar to the quantum seen in FY12, coupled with a CRR cut to the tune of 50 basis points.

Forthcoming RBI Monetary Policy

CORPORATES WANT RBI TO SLASH REPO
RATE , CRR TO SPUR GROWTH

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 14:
WITH industrial production growing at much lower rate than expected, an overwhelming majority of corporates say the Reserve Bank of India (RBI) should cut repo rate by 100 basis points to reduce the cost of borrowings and spur fresh investments, according to a just-concluded survey by industry chamber ASSOCHAM.

The repo rate (the rate at which banks borrow money from the RBI) has moved up to 8.5 per cent as against 6.75 per cent in March last year. Nearly 68 per cent of respondents said the RBI should cut repo rate by at least 100 basis points.

At the same time, 55 per cent of respondents called for statutory liquid ratio (the portion of deposits banks keep in government securities) to be cut by 100 basis points. About 45 per cent of them were for cutting cash reserve ratio (deposits and borrowings that a bank is required to keep with the RBI) by at least 50 basis points.
The survey with top executives of 69 public and private companies with turnover of more than Rs 10 crore was conducted between March 20 and April 8 in Mumbai, Jaipur, Delhi, Gandhinagar, Faridabad, Pathankot, Kolkata, Noida, Coimbatore, Hyderabad, Jammu, Bangalore and Mangalore.

"The industry – particularly manufacturing – has been affected by slowdown in demand coupled with upward swing in input and capital costs," said Mr Rajkumar Dhoot, president of The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Nearly 95 per cent of the respondents said increase in various tax slabs like excise and service tax announced in the Budget for 2012-13 will add inflationary pressures and adversely impact the economic growth. So the cost of borrowing must be reduced to improve supply-side response to inflation.

And 90 per cent of them said economic growth will be adversely affected and the government should speed up implementation of infrastructure projects, encourage foreign investments and introduce more transparency in the system.

Government data shows agriculture performance has been unimpressive in the past one year while mining and quarrying activities got mired in legal tangles. The index of industrial production expanded by a sluggish 4.1 per cent in February 2012 relative to the 6.7 per cent growth in the same month of last year.

A total of 37 per cent respondents said the government should provide incentives for fresh investments to spur economic activity. Nearly 16 per cent of them said the government should cut excise duty and service tax rates to improve the industry's sentiment.

GDP growth in the fiscal year ended March 31 is expected to be 6.9 per cent against the budgetary target of nine per cent while the fiscal deficit is projected to end up at 5.9 percent of the GDP against the target of 4.6 per cent.

 

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 13 :
THE President of India, Mrs Pratibha Devisingh Patil addressed the top echelons of India's economic policy makers, chief executives, directors and senior executives of PSEs who gathered for the Celebration of the 3rd Public Sector Day organized by Standing Conference of Public Enterprises (SCOPE) and Department of Public Enterprises (DPE) here on Friday.

.
Union Minister of Heavy Industries & Public Enterprises, Mr Praful Patel, Chairman, BRPSE, Dr. Nitish Sengupta, Secretary, DPE, Mr. O.P. Rawat, Chairman, SCOPE Mr. Arup Roy Choudhury and Director General, SCOPE Dr U.D. Choubey also addressed the participants while Mr. K.L. Dhingra, Vice Chairman, SCOPE was present on the dais.

The chief guest also presented Gold Trophies and commendation certifications of the SCOPE Meritorious Awards in Specialized Fields. Mr. Sudhir Vasudeva, CMD, ONGC received SCOPE Gold Trophy for Environmental Excellence, Mr. C.S. Verma, Chairman, SAIL for Corporate Governance, Mr. Arup Roy Choudhury, CMD, NTPC and Mr. R.S.T. Sai, CMD, THDC for Corporate Social Responsibility, Mr. R.S. Butola, Chairman, IndianOil and Mr. Anil Kumar, CMD, BEL for R&D, Technology Development, Mr. B.P. Rao, CMD, BHEL for Best Practices in Human Resource Management, Mr. Satnam Singh, CMD, PFC for Best Managed Bank & FI and Mr. Hardip Singh Kingra, CMD, NSFDC for Best Managed Section 25 PSE.

Commendation certificates were received by Mr. B.C. Tripathi, CMD, GAIL for Corporate Governance, Mr. S. Roy Choudhury, CMD, HPCL for CSR, Mr. A.K. Purwaha, CMD, EIL for HRM and Mr. A.A. Naqvi, MD, NBCFDC for Best Managed Section 25 PSE.

FEBRUARY FACTORY OUTPUT UP 4.1%

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 12 :
FEBRUARY factory output rose 4.1 percent, lower than Citi and Consensus expectations (Citi: 5.8 percent ; Consensus 6.8 percent ) due to a lower print in mining . Encouragingly, the authorities have corrected the ~2.5X over-reporting in sugar output which led to a 93 percent jump in the food products data reported last month . Consequently, the headline January print stands revised at 1.1 percent v/s 6.8 percent previously reported.

On a cumulative basis, growth in April –February 12 was 3.5 percent v/s 8.1 percent in the same period last year.

Mining which was in the red due to policy related issues, reversed its negative streak coming in at 2.1 percent . However, this was lower than the strong numbers reported in the coal mining component of the infrastructure index.

Following the downwardly revised January manufacturing index to 1.1 percent , the February print rose 4.1 percent . Items recording strong growth include printing, medical instruments and motor vehicles. Items in the red include electrical machinery, office/computing machinery and communication equipment.

Electricity production came in at 8 percent − in line with the number reported in the infrastructure index
Similar to mining, capital goods reversed its negative trend coming in at 10.6 percent . Key items contributing to the rise included machine tools, cables, and switch gears. Consumer goods was in the red as the durables contracted for the second
month.

Taking into account the revision to the consumer non-durable numbers from 42 percent to 11 percent for January, growth in February slowed to 5.1 percent .

None-the-less taking into account sectoral trends, the view is held that the deceleration in growth coupled with the moderation in inflation bodes well for the RBI beginning its easing cycle with a 25 basis points cut at its policy on April 17. The March inflation print, due on April 16, is expected to come in at 6.75 percent with the base effect likely to result in 'non-food manufactured product inflation' coming in at sub 5 percent levels.) The outlook for policy rates post easing of 50bps would be data/event dependent including oil prices and risks to the proposed path to fiscal consolidation for FY13.

Sustainable urban development

INDIA AND GERMANY SIGN JOINT DECLARATION

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 11 :
THE Minister of Urban Development Mr Kamal Nath, and German Minister for Transport, Building and Urban Development  Dr  Peter Ramsauer on Wednesday signed a Joint Declaration in the field of Sustainable Urban Development in New Delhi. Dr. Peter Ramsauer is leading a high level German business delegation to India.

Speaking on the occasion, Mr. Kamal Nath laid stress on the immense challenges and opportunities in the urban sector in India.

He informed that the Government of India is likely to launch the next phase of the urban renewal mission shortly with an allocation of around US$ 40 billion over the 12th Five Year Plan period.

The Government of India is keen on encouraging PPP in the urban sector especially in the larger cities, he said.

Mr Nath also informed the German delegation of the major thrust of the Government towards the development of metros in the major cities across the country and invited the German companies to participate.

Minister Kamal Nath stated that both India and Germany would benefit from the Joint Declaration, as it would provide an enabling platform for the officials, professionals and business leaders to meet and share knowledge and best practices in the urban sector.

He expressed hope that this joint declaration will lead to enhanced cooperation and deepen the engagement between the two countries.

The Joint Declaration envisages - Promoting discussion and strategies on integrated policies and principles for urban development and revitalization in the two countries; and fostering fair, equitable and sustainable urban communities in the two countries and the ideals of a democratic society with equal opportunity for all.

The declaration focuses on analysis of integrated urban and regional policies relevant to the development and redevelopment of cities, metropolitan communities and rural areas in a broader framework with coordination of spatial, sectoral and temporal aspects; ways to foster the design and development of sustainable communities through integrated and inter-governmental partnerships in a federal system, with particular attention to transit-oriented development planning and finance; public-private sector investment partnerships, particularly in regard to sustainability and the revitalization of cities in transition in Germany and fast growing cities in India; urban land use, including green space planning, temporary greening, brown field rehabilitation, as well as the quality of public spaces, urban man-made landscapes and architecture and their role as locational factors.

The bilateral work under this declaration is to be jointly led by the Ministry of Urban Development of India and Ministry of Transport, Building and Urban Development of the Federal Republic of Germany. Senior officials from Germany and India were present at the signing ceremony.

PM INAUGURATES INDIA WATER WEEK

Thesynergyonline Economics Bureau

NEW DELHI, APRIL 10 :
PRIME  Minister Dr Manmohan Singh has underlined that the planning, development and management of water resources has to keep pace with current realities. He was inaugurating the India Water Week in New Delhi on Tuesday.

Dr  Singh said one of the problems in achieving better management of water is that the current institutional and legal structures that deal with water in the country are inadequate, fragmented and therefore need urgent reform.

Referring to the suggestion that a broad over-arching national legal framework of general principles on water is necessary to pave the way for essential legislation on water governance in every State, Dr  Singh added that the country needs to reflect on these and other proposals to implement an integrated and coherent water policy.

Stating that the National Water Mission sets a target of 20 percent  improvement in water use efficiency, Dr Singh said it is particularly critical in agriculture sector which uses about three fourth of water resources.

He said the management of irrigation systems should move away from a narrow engineering-construction-centric approach to a more multi-disciplinary and participatory approach.

Dr  Singh added that there is a need to move towards transparent and participatory mechanisms of pricing of water by the primary stakeholders themselves.

The Prime Minister called for giving renewed vigour to all schemes that involve water over the next five years.

He added that India need to address issues that come in the way of convergence and integration of programmes like National Rural Employment Guarantee Scheme, the Integrated Watershed Management Programme, the Programme on Repair, Renovation and Restoration (RRR) of Water Bodies and the Rainfed Area Development Programme.

Expressing concern over declining groundwater table, Dr. Manmohan Singh pointed out that the present legal situation gives every land holder the right to pump unlimited quantities of water from a bore well on his own ground. There is no regulation of ground water extraction and no coordination among competing uses.

Stating that the inadequate and sub-optimal pricing of both power and water is promoting the misuse of groundwater, Dr  Singh said that the country need to move to a situation where ground-water can be treated as a common property resource.

The Prime Minister called for mapping aquifers and promoting participatory management of aquifers to ensure sustainable and equitable use and promoting cropping patterns which are aligned with the groundwater actually available.

He also stressed on examining seriously the proposal to have a clear legal framework to govern the use of scarce groundwater resources.

Dr Singh added that in the absence of sound legal framework, drinking water systems often lose the contest.

He said the Planning Commission has identified the challenge of managing water resources in a rational and sustainable manner as one of the critical challenges in the Twelfth Five year Plan.

In his address, Minister of Water Resources and Parliamentary Affairs, Mr Pawan Kumar Bansal called for major structural changes in the way water supply systems are managed.

He said that increasing supply of water is cost extensive as most of the cheaper options have already been utilised.

He pointed out that the cost of harnessing new resources and techniques for augmenting water supply will be much higher and therefore demand side management is the more economical option. Shri Bansal said that for credible knowledge base of ground water resources, Ministry of Water Resources has launched a Web-based Ground Water Information System, putting in public domain, the ground water data.

Minister of Agriculture and Food Processing Industries, Mr Sharad Pawar, Minister of Housing and Urban Poverty Alleviation and Culture, Kumari Selja, Deputy Chairman, Planning Commission, Mr Montek Singh Ahluwalia, Minister of State for Environment and Forests, Mrs  Jayanthi Natarajan and Minister of State for Water Resources and Minority Affairs, Mr Vincent H. Pala were present on the occasion.

The first international event in the series of India Water Week being organized during April 10-14, 2012 is focusing on important themes of water, energy and food security. About 1000 participants from India and abroad are participating in the event where about 200 experts including 30 invited speakers drawn from across the world will make presentations on various issues.

 

Thesynergyonline EConomics Bureau

CHENNAI, APRIL 10 :
THE New Cities Summit, to be held from May 14 to 16 , 2012 in Paris, will unite global thought leaders, mayors and city managers, leading CEOs and representatives of civil society to discuss one of the most important topics of our time: the future of cities in the 21st century.
 
The global shift from rural to urban living is one of the most dramatic and important demographic phenomena in human history. By 2050, more than 7 billion people will live in cities worldwide.

In countries like China, which is rapidly approaching the urban billion, and other fast urbanizing parts of the world urbanization requires a profound physical, social and economic transformation. Globally, this new world of cities will have a massive impact on our economies, on government, on societies and on us as individuals in both the developed and the emerging world.

The mega trend is likely to impact each one of us in ways that we know will be profound, but are not yet fully understood.
 
The theme of the 2012 New Cities Summit, Thinking Ahead, Building Together, reflects the New Cities Foundation’s belief that understanding and contributing to our urban future requires new partnerships built on bold, audacious thinking and analysis.
 
High-level plenaries from some of the world’s greatest urban thinkers will focus on the vision of tomorrow’s urban world, and detailed workshops  deal with topics including mobility, the creative and connected city, the annotated city, the just city, water, building greener districts infrastructure financing for the urban boom.

Regional sessions explore Urban China, Latin America and India as well as Greater Paris.  “Navigating the Meta City” a highly-interactive session led by frog, a leading industrial design and engineering company, offers  a glimpse into a future city in which various layers of software constitute a powerful computing platform for hybrid digital-physical environments. 
 
Confirmed speakers and participants include leaders from industry, public sector, research, and design include:
 
            •          Bertrand Delanoë, Mayor of Paris
            •          Kasim Reed, Mayor of Atlanta
            •          Khalifa Sall Mayor of DakarHans Vestberg, CEO, Ericsson
            •          Wim Elfrink, Executive Vice President, Cisco
            •          John Rice, Vice Chairman, GE
            •          Diane Brady, Senior Editor and Content Chief, Businessweek
            •          Edwin Heathcote, Architect and Design Critic, Financial Times
            •          Daniel Libeskind , Architect
            •          Pierre Mongin, CEO, RATP
            •          Fahd Al Rasheed, Managing Director and CEO, King Abdullah Economic City
            •          Jean-Charles Decaux, Co-CEO, JCDecaux
            •          Saskia Sassen, Professor, Columbia University
            •          Oleg Alexeev, Vice President of the Skolkovo Foundation
            •          Ricky Burdett, Director, LSE Cities
            •          Xie Chengxiang, Vice-Mayor of Huangshi, China
            •          Ajit Gulabchand Chairman of the Hindustan Construction Group
            •          Vivek Badrinath, CEO, Orange Business Services
            •          Parag Khanna, Senior Research Fellow, New America Foundation
            •          Jean Pistre, Architect
            •          James Lee, architect, iContinuum
            •          Geoffrey West, Distinguished Professor, Santa Fe Institute
            •          Carlo Ratti, SENSEable Lab at Massachusetts Institute of Technology
            •          Anthony Williams, former mayor of Washington DC
            •          Robin Chase, CEO of Buzzcar, Founder of Zipcar
            •          Pablo Farias, Vice President, Ford Foundation
            •          Zhang Qin deputy director of China’s Ministry of Housing
            •          Li Dongming, Manager of the urban Fund at China Development Bank Capital
            •          Diann Eisnor, Vice-President, Waze
 
The Summit’s partners include key  innovators in the urban world, such as urban and street artists from the Magda Danysz Gallery in Paris and Shanghai, social innovators from Ashoka, great new technological innovators and start-ups  including Waze and Autolib’ who will give demos of their urban innovations at the Summit.

The Summit will also examine the New Cities Foundation’s own cutting-edge projects in the areas of healthcare and mobility.
 
“We are only at the early stages of understanding the impact of global urbanization,” says John Rossant, Chairman of the New Cities Foundation. “This is a phenomenon of unprecedented scale that will affect all of our lives. The New Cities Summit is essential as it is the sole venue which brings together great urban thinkers and builders from a range of disciplines which focuses the global conversation on the city. From the big picture vision to the hands on solutions, we want this Summit to be a watershed event.”

 

 

 

Thesynergyonline Economics Bureau

 

NEW DELHI,APRIL 08 :
IN  an endeavour to promote exports of spices from India Spice Board of India, the nodal organization of Ministry of Commerce, Govt of India, will establish 10 spice parks across the most strategic locations in India  by the end of 2012. A total of Rs. 167 core are earmarked to invest in the spices parks out of which Rs. 75 crore are already invested in three completed spices parks in Chhihdwara in MP, Puttady in Kerela and in Jodhpur.

The other parks will be completed during the year in states like Andhra Pradesh, Tamil Nadu, Madhya Pradesh and Kota in Rajasthan.

The board has completed the construction of Spice Park in Rampura Bhatia Village of Ozian Tehsil near Jodhpur in an area of 60- acres provided by the Rajasthan Government. The park in Jodhpur was inaugurated by Mr Anand Sharma, Union Minister of Commerce & Industry and Mr Ashok Gehlot, Chief Minister of Rajasthan.

The park has common infrastructure and processing facilities for the seed spices especially cumin and coriander. A public private partnership is ensured with 17 exporters to set up state of the art processing lines and also cold storage facilities and also facilities to produce oils and oleoresins from seed spices. The machineries in the Park are capable for the processing of other seed spices like fennel and fenugreek, which are quite ample in this region.

A full line processing facility with a capacity to turn out two tones per hour has inbuilt facilities for pre-cleaning, grading, colour sorting, grinding and packing.

The spice processing facilities available at Spice Park are at par with the international standards. The higher end processing plants installed is a full processing line which includes pre cleaning, grading, colour sorting, grinding and both bulk and consumer packing ranging from 100 g to 50 Kg.

The board is establishing a sterilization facility within the plant building with a capacity of 250 kg per hour in batch process. The Board will also be allotting individual slots for exporters on lease basis for developing their own processing plants in the Parks.

There was tremendous response from the exporters who wanted to set up their own facilities in the Park.

The Spices Board has set up other common infrastructures like compound wall, road, drains, water distribution system, power station, weighing bridge, common parking area, truck yard, warehouses, preliminary quality testing facility, bank counter, training center, conference hall, canteen facilities etc within the parks.

To ensure storing of raw materials for processing and to take care of the processed materials, the Parks will have warehouses exclusively devoted for various seed spices separately.

Two raw material warehouses with a storing capacity of 800 sq mtr each are devoted for Coriander while two other warehouses for other seed spices have a storing capacity of 800 sq mtrs each.

The parks are being provided with a 33 kva  substation with transformer and 250 kva DG sets for ensuring an uninterrupted power supply for the working besides a full fire fighting system.

The board’s regional and zonal offices will start functioning from the Spices Parks with more orientation towards the spices growing villages.

The other facilities provided include conference hall, training hall, and space for establishing mini QC lab, Bank and for Customs.

AMEND ARCHAIC LAWS FOR HEALTHY FINANCIAL SECTOR : ASSOCHAM

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 07 :
THE legal regime governing forward and option contracts in securities of Indian companies is archaic and needs immediate revamping for a healthy financial sector, industry body ASSOCHAM said.

No country in the world has an outright prohibition on forward contracts in securities as mentioned in sections 13 and 16 of the Securities Contracts (Regulation) Act 1956. They were enacted to solve problems of a different era and should be repealed in entirety.

Alternatively, circulars under the sections should be amended to allow genuine non-speculative contracts like forwards, call / put options, buybacks, right of first refusal and pre-emption rights in commercial agreements.

The rationale for not continuing with the law in today’s economy is clear, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM). First, speculation is not considered bad anymore as it not only provides liquidity and price discovery in the market but often offers trades on the other side of hedgers.

“If speculation is banned, traders who want to hedge their trades will be worse off and frequently let without the ability to hedge their risk,” said secretary general D.S. Rawat.

Second, most trades in secondary market – particularly exchange-traded futures – can be categorised as speculative. Even if it is assumed that on-exchange speculative transactions are more desirable for some reason, shareholder contracts are not even speculative in nature as they are based on commercial underlying and consideration, allocating real world rights.

“Prohibiting such non-speculative contracts is unintended and literally renders millions of investment agreements, private equity deals, joint venture agreements and other commercial contracts partially illegal,” said Mr Rawat.

The entire ban on non-spot contracts is wrong and must be repealed. The SCRA should not be applicable to unlisted public companies at least, he said.

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 04 :
WHILE still in expansion mode, the moderation in the Purchases Managers Index (PMI ) seen last month continued in March with the index down 1.9pts, resulting in the headline reading at 54.7. This was reflected in a drop in both the current and forward looking indicators. Current indicators as reflected in the output fell 4.2 points to 56.3 – a sharp drop since the 60 reading in January.

As regards the forward-looking indicators, new orders fell -4.7 points  to 58.1; but contrary to recent trends, new export orders posted an increase of 1.7 points.

Trends in input and output prices remain divergent. Higher oil prices possibly resulted in a 0.6pt increase in input prices to 61.2. However, output prices declined 2.5 points to 54.1, which indicates pricing pressure. Nonetheless, both price indices still remain well over the 50 mark, making monetary policy decisions difficult.

Following a slump to 0.7 percent y-o-y  last month, the infrastructure index rose 6.8 percent y-o-y  in Feb. The rise was supported by an across- the- board recovery, with strong increases in coal (+17.8 percent), cement (+10.8 percent ), electricity (+8 percent ) and refinery products (+6.2 percent ). The only indicator in the red was natural gas production. Given that the infra index has a weightage of 38 percent  in the IIP, the Feb IIP numbers due on April   12 is expected to remain healthy ~7 percent  vs. 6.8 percent  last month.

The deceleration in growth coupled with the moderation in inflation bodes well for the RBI
beginning its easing cycle at its policy on April 17. Supporting this is the short window available due to the interplay of commodity prices and currencies .

The outlook for policy rates post easing of 50bps would be data/event dependent including: oil prices, and risks to the proposed path to fiscal consolidation for FY13 .

The PMI edged lower for the second consecutive month in March, falling 1.9 points  (vs. a 0.9pt deceleration in Feb12), with the headline reading at 54.7. This was on the back of a sharp deceleration in output as well as new orders.

Reversing trends once again, input prices edged higher by 0.6pt to 61.2 (from a 3pt fall last month). However, output prices decelerated by 2.5 points to 54.1 (from a 0.5pt rise last month). While input and output prices should offer some clues on the pricing power of corporates, there has been no clear pattern so far, which makes us wary of calling a trend .

Following a slump to 0.7 percent y-o-y last month, the infrastructure index rose 6.8 percent y-o-y in February. On a cumulative basis, growth during April -February FY12 stood at 4.4 percent vs. 5.8 percent during the same period last year.

Coal  production rose to double digits, up 18 percent y-o-y. While output earlier in the year was hindered by environment/regulatory clearances, these issues appear to be receding; trends in electricity production clocked 8 percent growth, after the slow patch seen last month; the construction indicators also posted healthy trends – while cement production rose 10.8 percernt, steel production recovered from the contraction last month to post a rise of 4.3 percent y-o-y ; crude oil and refinery production both pulled out of negative territory last month to rise 0.4 percent and 6.2 percent y-o-y  respectively; the overall index in February was dragged down by natural gas, which remained in the red for over a year, down 7.6 percent , due to output reduction from Reliance’s KG Gas basin.

Given that the infra index has a weightage of 38 percent in the index of industrial production, the Feb IIP numbers due on April 12 is expected to remain relatively healthy at ~7 percent y-o-y from 6.8 percent last month .

Although natural gas production remained in the red, a strong recovery in coal production coupled with healthy trends in electricity and the construction indicators supported a 6.8 percent rise in the February infra index. On a cumulative basis, infra growth moderated to 4.4 percent during April -February FY12 from 5.8 percent last year.

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 04 :
THE UAE Ministry of Labour and India's Ministry of Overseas Indian Affairs on Wednesday signed a protocol at Abu Dhabi to streamline the admission of Indian contract workers by way of an electronic contract registration and validation system.

A milestone in the efforts to upgrade rules and procedures governing contract employment of Indian nationals in the UAE, the new system heralds a joint endeavour by the UAE and India.

Mr. Saqr Ghobash, UAE Minister of Labour underlined the commitment of the UAE to exemplary co-operation with India in a range of areas, including the employment of Indian contract workers in the UAE, whose number has grown to approximately 1.7 million.

In particular, the new system ensures the full transparency of the contracting process by mandating that the prospective worker be duly informed by Indian government-accredited recruitment agencies of the terms of the contract offer, including the scope of remuneration and employment conditions and benefits, prior to deploying to the UAE.

Mr Ghobash further elaborated that the system requires that the worker signs off on the terms of the contract and that the competent Indian government authorities approve these terms before the admission process is completed and a work permit is issued.

These same terms are then electronically captured into the formal employment contract that is signed by worker and employer in the UAE. He stressed the importance of safeguarding and protecting the interests of both workers and employers under the provisions of the UAE Labour Law.

Mr Vayalar Ravi, Minister of Overseas Indian Affairs hailed the protocol, which would protect the interest of workers as well as the employers, as a leap in India-UAE relations in the field of labour employment.

He stated that the protocol underlines the commitment of the Indian Government to the protection and welfare of the Indian workers in the UAE, in accordance with UAE legislation.

Mr Ravi said the new system safeguards the interests of workers and employers alike by validating the contract conditions of the Indian worker in the UAE.

The Minister said that India is implementing a comprehensive e-governance system towards making the process of overseas deployment of Indian workers transparent and accessible to all stakeholders. The Contract Registration and Validation System is fully aligned with India's e-governance system, allowing for a seamless application of the respective rules and procedures of both countries. He cited many projects undertaken by the Indian government to ensure welfare and protection of the Indian workers. Shri Ravi stated that the interests of workers and the employers are complementary and that the new protocol is a commitment of both the governments to jointly work towards the same.

The new system is activated by an online application by a UAE employer for the granting of work permits that requires disclosure of the key terms of the employment offer. The UAE Ministry of Labour processes the application and provides access to the electronic record to Indian government-accredited recruitment agencies in India that are then required to obtain the worker's attested consent; a duly designated Indian government agency also accesses the record for the purpose of reviewing the terms of the employment and granting an emigration clearance accordingly. This is followed by the registration of the electronic contract and the issuance of the work permit by the Ministry of Labour of UAE .

Q3 FY12 BOP IN THE RED, TRENDS TO CONTNUE IN FY13 ; PRESSURE ON INR TO CONTINUE

Thesynergyonline Economic Bureau

NEW DELHI, APRIL 03 :
SIMILAR to trends in 1H FY12, higher oil and gold imports resulted in the 3Q FY12 trade deficit widening to US$47.7 billion . This offset the rise in invisibles to US$28.3 billion (remittances + software exports), thus resulting in the current account deficit (CAD) touching an all-time high of US$19.4 billion .

As regards the capital account, risk aversion and fears of deleveraging during 3QFY12 (Oct-Dec) resulted in capital flows slowing sharply to US$8 billion . Consequently, the overall BoP in 3QFY12 fell deep into the red at US$12.8 billion v/s a surplus of US$5.7 billion in 1HFY12.

Cumulatively, during April -December, the trade deficit widened to US$132.5 billion while invisibles rose to US$78.9 billion . This saw the CAD widen to US$53.6bn v/s US$39.5 billion in the same period last year. Capital flows came in at US$47.5 billion v/s US$53.3 billion resulting in the overall balance of payments deficit at US$7.1 billion v/s a surplus of US$11.1 billion in last year.

Due to a moderation in gold imports coupled with the seasonality in invisible earnings, a slight improvement in the CAD is expected in 4QFY12. While full year CAD of US$70.8 billion is maintained , capital flow numbers have been tweaked marginally i.e (lower FDI + loans but higher FII + NRI deposits).

An overall deficit of US$4.2 billion is expected v/s US$1.7 billion estimated earlier.

Going forward for FY13, CAD estimates of US$81.3 billion are maintained or 3.9 percent of GDP. (Incorporates crude at US$125/bbl). On the capital account, adjusting for lower FDI numbers, total flows at US$75.6 billion are expected, thus resulting in an overall deficit of US$5.7 billion .

Since Nov 2011, the RBI has been relaxing its restrictions on the pricing and quantum of dollar inflows. This was followed by measures in the recent budget. Going forward, we could also see the possibility of a commercial dollar bond issue (similar to the Resurgent India Bond and
India Millennium Deposits issuances in 1998 and 2000 respectively), dollar swap-lines, and gold imports coming under further scrutiny.

India's forex reserves have remained largely stagnant over the last three years, resulting in its forex import cover coming off significantly from 14 months of import cover in FY08 to 6.9 months in FY12E. Despite a relatively strong growth story, the fx reserve drawdown expected both in FY12 and FY13 is likely to keep the currency under pressure. Our current estimates are for the INR oscillating around the Rs50/US$ level.

Similar to trends in 1QFY12 and 2QFY12, 3QFY12 BoP data indicated a further widening of the trade deficit to US$47.7 billion , from US$43.4 billion in the previous quarter. Key factors behind the rise in the trade deficit are higher oil prices and an in ncrease in gold imports.

The higher trade deficit more than offset an improvement in invisibles, (remittances + software exports) to US$28.3 billion. As a result, the current account deficit (CAD) touched US$19.4 billion ,an all time high. On a cumulative basis during Apr-Dec 11 , India's CAD widened to US$53.6 billion v/s US$45.9 billion in the same period last year.

Following robust capital flows of US$22.3 billion in 1QFY12 and US$17.2 billion in 2QFY12, capital flows slowed sharply to US$8.0 billion in 3QFY12. This can be attributed to fears of de-leveraging during Oct-Dec 2011 which resulted in a sharp drop in loans as well as a drawdown on banking capital. This in turn resulted in the overall balance of payments coming in the red at US$12.8 billion.

Capital flows are estimated at US$66.6 billion in FY12 and US$75.6 billion in FY13. Due to various measures taken by the policy makers, these levels are higher than the past. However, despite this, the higher CAD is likely to result in a drawdown of reserves in FY12 and FY13.

Forex reserves have remained largely stagnant over the last three years, resulting in its forex import cover coming off significantly from 14 months of imports cover in FY08 to 6.9 months in FY12E .

In a bid to attract dollar inflows since November 2011, the RBI/MoF have been relaxing its restrictions on pricing i.e. raising permissible interest rates on loans/NRI deposits, and the quantum of inflows. Measures have also been taken to curb speculation and moderate un-productive imports – viz Gold. Higher duties and stricter norms on gold finance companies (LTV ratio of not more than 60 percent for loans against gold collateral, while gold financing companies are required to maintain Tier I capital of 12 percent ).

The rise in duties could thus temper gold demand and help contain the rising trade deficit.

Going forward, we could also see the possibility of a commercial dollar bond issue (similar to the Resurgent India Bond (RIB) and India Millennium Deposits (IMD) issuances in 1998 and 2000 respectively), dollar swap-lines, and gold imports coming under further scrutiny.

Steps include not allowing forward contracts to be cancelled or re-booked; administrative measures related to forward contracts for probable exposures; and reduction on the US$100 million million limit on net FX supply through rupee swaps Interbank volumes are down 40 percent from US$5 billion /day to US$3 billion .

Encouraging NRI Deposits Interest rates raised on Non-Resident (External) Rupee (NRE) Term Deposits and Foreign Currency Non-Resident (Banks) (FCNR (B)) deposits. Later in Dec, interest rates on NRE Deposits and Non-Resident Accounts were deregulated.

• Higher rates would encourage NRI deposits given soft global interest rates
• Relaxing ECB Norms Loans with a maturity between 3-5 years can now be raised at a spread of Libor+350 basis points from Libor +300 basis points previously.
• Funds raised must be brought back into India immediately.
• ECBs permitted to part finance rupee debt of existing power projects
• Withholding tax on interest payments for ECBs reduced from 20 percent to 5 percent for key infra sectors

• Measures would facilitate funding and provide cushion on the capital account as more companies, particularly in the infra sector, borrow overseas to take advantage of lower rates
• FII Flows - Permitting Qualified Foreign Investors (QFIs) to directly invest in the equity market and more recently ( in the budget) to access the Corporate Bond market
• - Relaxing foreign limits on debt
• - Permitting two-way fungibility in Indian Depository
• Receipts subject to a ceiling
• - Implementing Advance Pricing Agreement (APA)
• Measures aim to encourage greater foreign participation in Indian capital market.
• The Advance Pricing Agreement would bring down tax litigation and provide tax certainty to foreign investors
• Relaxing accounting rules for forex loans of companies
• Extending the deadline for charging losses on forex loans from March 2012 to March-end 2020.
• Fears on corporate profitability being hit due to the move in the exchange rate muted. Moreover, it reduces future pressure on hedging
• Steps to Curb Black Money - 82 Double Taxation Avoidance Agreements (DTAA) and 17 Tax Information Exchange Agreements (TIEA) finalized
• - A dedicated cell set up for the speedy exchange of tax information with treaty countries is fully functional in CBDT
• - Directorate of IT Criminal Investigation established

These steps would help tackle the circulation and transfer of black money. The govt has also proposed to table a White paper on Black Money in parliament this session Gold Imports - Basic customs duty on standard gold bars; gold coins of high purity and platinum were raised from 2 percent to 4 percent• non-standard gold from 5 percent to 10 percent in the budget Excise duty on refined gold increased from 1.5 percent to 3 percent

NBFCs required to maintain LTV ratio of <60 percent for loans against gold collateral. Gold financing companies required to maintain Tier I capital of 12 percent
Given that gold imports comprise ~ 10 percent of total imports, and prices have been steadily rising ; the govt has been taking steps to curb imports

Resurgent India Bonds were issued by the State Bank of India (SBI) in 1998 for NRIs/OCBs at a coupon of 7.75 percent with a tenor of 5 years. The scheme raised US$4.2 billion . India Millennium Deposits were issued in 2000 by the SBI at 8.5 percent , maturing in 5 years. The scheme raised ~US$5.5 billion .

 

OVER 82% OF WOMEN WRESTLE WITH HOUSEHOLD BUDGET

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 31 :
ABOUT 82 percent of women find finances getting tighter to manage the household budget due to hike in the prices of big-ticket appliances such as washing machines, dishwashers, refrigerator and air-conditioners from April, reveals the ASSOCHAM survey.

In the last six years, the salary of common man has gone up by 30 percent but on the other side the spending has increased by 65 percent . The survey further highlighted that the per capita income of an average Indian estimated about Rs 54,000 per annum in FY 2010-11 went up by about Rs 7,000 in 2011-12, amounting to Rs. 61,000 per annum.

The Associated Chamber of Commerce and Industry of India (ASSOCHAM) interacted with about 500 employees from different sectors in cities of Delhi, Mumbai, Kolkata, Chennai, Ahmedabad, Hyderabad, Pune, Chandigarh and Dehradun.

About half of the respondents were in the age bracket of 25-29 years, followed by 30-39 years (25 percent), 40-49 years (15 percent), 50-59 years (10 percent).

Over 72 percent of the respondent said that the board increase in excise duty from 10 percent to 12 percent is set to increase the price of household items ranging from processed foods, beauty products and kitchen appliances.

The survey was able to target employees from 18 broad sectors, with maximum share contributed by employees from IT/ITes sector (17 per cent). After IT/ITeS sector, contribution of the survey respondents from financial services is 11 per cent. Employees working in engineering and telecom sector contributed 9 per cent and 8 per cent respectively in the questionnaire.
The majority of the women said that due to the higher service tax rate, there will be higher service fee on phone connections at home, and eating out will be more costly. The cost of holidaying with family may also increase if packaged tours are opted, adds the survey.

Nearly 72 percent of the women said that due to hike in import duty, the price of jewellery is set to rise (with import duty on gold being increased to 4 percent) and also studded jewellery will cost more as import duty on polished gem stones has also increased.

Also, if the purchase value exceeds Rs. 2 lakh and payment by cash will face an immediate tax of 1 per cent.

Releasing the ASSOCHAM survey, High Income Group in urban and other part of the country remained totally immune with rising cost of economy as their income levels hardly got severed with rising cost of inputs.

ASSOCHAM nationwide survey revealed that Middle Income Group, uncomfortable with the hike in service tax and are changing their overall spending habits including dining out, clothing, vacations, electronics, automobiles and real estate.

Consumers' growing unease is reflected in their saving and spending habits, with many middle and lower income groups indicating that they are finding ways to cut back spending now or indicating they will do so in the future, added Mr. D S Rawat, Secretary General ASSOCHAM.

Over 65 percent students who are planning to write the GMAT or GRE will to shell out more from April as fees on coaching classes are set to rise with the increase in service tax rate.

Majority of the students said that the peak rate of service tax has been increased from 10 percent to 12 percent. On a fee of Rs. 50,000 service tax is currently 5,000 (education cess additional), from April this will increase to Rs 6,000.

The students who train at a dance or sports academy may also have to pay a higher fee. Accommodation and canteen service charges at PG hostels may also go up.

Service charges paid to the stock broker or any other investment agent may increase now. The service tax on mortality charge of the life insurance policies too will rise. In case of ULIPs (unit linked investment plan) the tax outgo will increase further given that in the first year of the premium will be taxed at 3 percent now (1.5 per cent earlier).

 

 

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 30 :
AS tensions with Iran mount, forecasts for Brent crude has been raised from US$110/$ to US$125/$ in 2012.

Given India's high energy dependence on Iran (the second-largest source of crude imports), higher oil would take a toll on the economy through several key channels. Apart from the more complex fiscal impact, key to watch are BoP – Oil comprises 30 percent of the total import bill, and a US$1/bbl increase in prices would raise the trade deficit by US$800 million ; Inflation – the statistical impact on the WPI could range from 0.6 percent to 3.6 percent depending on the degree of transmission.

Budget FY13's arithmetic hinges on oil prices and political courage to implement fuel price reform. Oil at US$125/bbl results in oil company losses rising to US$32 billion with the government's share likely at ~US$15 billion . The fuel subsidy in Budget FY13 provides for US$9.4 billion – most of which will be utilized towards FY12's deferred payments.

Thus, while we expect a slippage to 5.5 percent vs budget estimates of 5.1 percent key to watch is the proposed cap on subsidies.

With the RBI expressing concerns on upside risks to inflation arising from (a) higher oil prices and suppressed inflation, currency depreciation, fiscal slippages and price pressures at the retail level and the likelihood of less-than-expected fiscal consolidation in FY13; the scope for monetary easing now appears more limited to 50-75 basis points in 2012.

Given limited room on both the monetary and fiscal front, trends in FY13 GDP would likely remain subdued in the 7 percent range. Two critical variables remain: whether recent policy efforts by the PMO to encourage investments indeed play out and the direction of oil prices. If tensions do ease and oil corrects, India could be among the biggest beneficiaries.

Nonetheless, there is pain in the near term and, given the deterioration in the macro, risks arise to India's sovereign rating.

Recent developments in Iran have prompted us to raise its forecasts for oil prices. The new base case incorporates Brent trading between US$125-130/bbl during 2Q-4Q12, which would bring the CY12 average to ~US$125/bbl, up from the original forecasts of US$110/bbl.

Tensions between Iran and the US/EU have been mounting since late last year, largely due to Iran's active nuclear program. Earlier this year, the US tightened its sanctions on Iran by preventing foreign institutions that are engaged in oil business with the Iranian central bank from operating in US markets, directing US banks to freeze assets linked to the Iranian government, the EU has also begun to phase in an embargo of crude imports from Iran, which will come into effect by Jul-12.

In response to these pressures, Iran has stated that it would block the Strait of Hormuz – which is perhaps the world's most strategically important choke point between the Gulf of Oman and the Persian Gulf.

Iran oil production amounts to ~3.5mn barrels/day – this is ~4% of global crude supplies. Thus, sanctions on Iranian crude imports have significantly dented global demand-supply dynamics.

While Saudi Arabia is making efforts to ramp up production, to meet the supply gap, there are doubts it will be able to sustain strong production. However, our global analysts believe that, even if Saudi production reaches 11mn b/d, the world's cushion of spare capacity would be close to zero. This has left markets extremely jittery on developments in the space.

As the fourth largest consumer of oil in the world, most of India's oil energy needs are met through imports, making it the world's fifth-largest oil- importing nation. Total crude oil imports are likely to touch 170mn tonnes in FY12E, or US$148bn.

Following Saudi Arabia, Iran is the second-largest source of India's crude oil imports, with total imports at 21mn tones or 12 percent of its total crude imports. Thus, cutbacks in oil imports from Iran would have wide-ranging macro implications.
India to continue to trade with Iran…but Payments the Key:

While Indian authorities have stated that they would continue to trade with Iran, the on-the-ground realities are a bit more complex. Faced with growing diplomatic pressures, the RBI had stopped the clearing mechanism for Iran oil payments in Dec-10. As a result, refiners began to route payments through a bank in Turkey. However, there are now risks to this mechanism as well.

Authorities have now said that that India could make a partial payment for Iran oil imports in rupees (~45 percent ), wherein an Iranian Bank would open an account with an Indian bank to settle its bills. Moreover, to alleviate tax-related implications, on grounds of national interest, Budget FY13's finance bill has proposed to insert a new clause" to provide for exemption in respect of any income of a foreign company received in India in Indian currency on account of sale of crude oil to any person in India".

Given India's high energy dependence, higher oil prices would undoubtedly take a toll on the economy. Moreover, while declining oil intensities (the amount of oil required to produce each unit of output) are an offsetting factor for many Asian economies, India unfortunately does not see significant benefits from this. India has witnessed only a gradual decline in oil intensity. As a result, higher oil prices will have a larger impact on India. Moreover, during our recent investor trip all officials indicated that the biggest risk to India's outlook was oil prices.

LIMIT DEFENCE IMPORTS, BOOST DOMESTIC PRODUCTION, SAYS ARMY CHIEF

Thesynergyonline Economic Bureau 

 NEW DELHI, MARCH 30 :
CHIEF of Army staff V K Singh on Friday called for reversing 70 per cent of India’s  defence requirements being met through imports and urged private sector to set up a strong production base to achieve the challenging target of 70 per cent localisation.

“With apparent weaknesses indigenous defence production and often very limited access to cutting-edge technologies, the idea of joint design and development as well as co-production needs greater analysis to fill the visible technological gap,” he said while addressing a conference organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

 Gen Singh said the brief experience of defence industrial production shows that while it started from the scratch, it has not only been able to learn and absorb various technologies but also produce complex systems locally. But domestic production still constitutes only 30 per cent of the overall requirements.

 “The industry must analyse the offset policy to deal with complexities of defence production and partnership with global companies, and suggest measures for it to become more effective,” he said adding foreign companies may not be easily forthcoming to part with critical technologies.

 However, enhancing technological and manufacturing thresholds will spread the costs of indigenous development and also provide funds crucial to sustain high-cost defence R & D. Increase in private public partnerships at this juncture will assist in achieving self-reliance, he said.

 Vice chief of air staff K.K. Nohwar also said that due to limited domestic production, India’s current dependence on major global arms manufacturers is inevitable, he said.

India is one of the largest importers of defence equipment in the world as the forces need to be equipped with state-of-the-art weapons, he added.

Though private public partnerships and foreign direct investments in the sector have gained prominence in recent years, self-reliance must be maximized, he said.

India’s defence budget is about Rs 1.9 lakh crore or 2.14 per cent of the GDP. Nearly 40 per cent of this is spent annually on capital acquisitions, he informed.

Vice admiral (retd) P.C. Bhasin, who is chairman of ASSOCHAM defence committee, said nearly 100 billion dollars worth of defence imports are likely in the next ten years. The offsets figure could well be above $30 billion .  The implementation of this value of offsets is both a challenge and opportunity for foreign and domestic investors.

ASSOCHAM secretary general D S Rawat said any defence programme’s success or failure is because of the supply chain execution. It is precisely due to this that small and medium companies will play a critical role in the entire supply chain for aerospace and defence sector.

 India has been able to attract a meager Rs 18.6 crore in over 10 years that defence sector opened up for foreign investments with a cap of 26 per cent.

Others present during the conference were secretary at the ministry of micro, small and medium enterprises R K Mathur, Sweden’s ambassador to India Lars Olof Lindgren, French ambassador Francois Richier, Mr Marcin Idzik, deputy minister for armament and modernisation at Poland’s ministry of national defence, and Mr Kamlesh Gupta, co-chairman of ASSOCHAM defence committee.

Thesynergyonline News Bureau

NEW DELHI, MARCH 27 :
DELHI is soon going to get a new English broadsheet paper called Millennium Post. The name of the broadsheet has been exclusively shared with exchange4media.

Durbar Ganguly, Former Vice-Chairman and Joint Managing Director, The Pioneer Group is the promoter of the broadsheet. The launch has been fixed for last week of April.

Rana Some, Former Chairman of National Mineral Development Corporation (NMDC) has joined as Chairman of the advisory board which also includes Former Chairman of Coal India, Partho Bhattacharya.

Confirming the news to exchange4media, Ganguly said, "We feel that the current broadsheet newspapers very often don't tell the full truth or give a concocted version of news. There is a growing demand in public to know the truth." He pointed out that "mainstream media has got corporatised and very often there's a hidden agenda."

The property has been in existence since 2005 but Ganguly's promoted company, Frontrow Media, has taken over its management. The broadsheet, a 16-page all-colour paper, will now appear in a new avatar.

This broadsheet will be printed in Delhi but it will "be highly active in the digital space" as well; there will be a website, e-paper, mobile version and so on, specified Ganguly.

Talking about the target audience, he elaborated, "It will be largely people who are opinion-makers, i.e. bureaucrats, politicians, the intelligentsia, doctors, lawyers and so on." The content will be a mix of all elements "like a normal newspaper."

On what would be the differentiator, Ganguly specified, "We will be attempting to deal with certain subjects that some may not dare to touch. We would like to bring back good journalism."
About promoting this new publication, he said, "We will be actively marketing our new broadsheet and targeting advertisers in a big way through outdoor and digital." As far as distribution goes, they have their own channels and also the team is in place. Deep Haldar, Former Resident Editor of Mid Day, Delhi, has taken the charge as Executive Editor. He said, "There's a clutter in the news segment today. This broadsheet will be to watch out for."

Thesynergyonliner Economic Bureau

NEW DELHI, MARCH 26 :
INDUSTRY body ASSOCHAM on Monday called for urgent consultations between the government, its auditor CAG and business bodies for framing fresh guidelines on the allocation of natural resources to infrastructure projects to avoid generating 'exaggerated fears' of about benefits to project implementers and controversies over it stalling progress of vital projects.

Reacting to the recent event when a news report carrying what proved to be a preliminary draft of an assessment by the CAG on the allocation of coal blocs to power generating companies, ASSOCHAM said, "there is no way the price of products and services could be made affordable if the basic natural resources on which the projects are based are priced high through auctions or Government's price discovery".

ASSOCHAM delegation consisting of its president Mr. R.N. Dhoot, Dr. Rana Kapoor, senior vice president, Mr Sunil Kanoria, vice president and Mr D S Rawat, Secretary General had just after the budget met the Prime Minister Dr. Manmohan Singh and in the discussion the question of proper and consensual approach on pricing of natural resources came up.

The delegation pointed out that pricing the natural resources high would spill into huge rise in project costs and make their products/services too expensive and not affordable for the common man.

There should be a national consensus on what should be the method of pricing and what should govern the pricing in order to provide affordable products and services from infrastructure projects like power, telecom, drinking and irrigation water, port s and airports, roads, etc.

In the instant case of power, even the idea of notional loss to Government and benefit to the power project owners did not arise as the power projects are awarded on the basis of the lowest price at which the bidder for the project could supply power to the national grid", ASSOCHAM pointed out. If the coal price goes sky-high in a market driven auction, the cost of power to the grid and ultimately to the public would go up in the same proportion, ASSOCHAM said.

The industry body also pointed out that on licences for 3G while Government benefited through huge auction based pricing of the spectrum, the successful bidders were now finding it difficult to provide service especially to rural consumers who need it most.

The question therefore, the industry body said, was whether there should be some balance between what market price for natural resources that are scarce and the need for products and services being affordable is maintained in the pricing throughout the projects.

The apex chamber also agrees that the natural resources should not be used for trading purposes by firms that were allotted these. "We are for reasonable restrictions on firms against trading these resources and benefiting by simply selling the licences to others at higher price or gaining any other unjustified benefit by firms that get access to natural resources at nationally agreed consensual price, ASSOCHAM emphasised.

It called for an agreement among all stake holders on pricing and method of selection of project awardees so that ultimately the products and services are affordable and reasonable return is obtained by the project implementing firms.

Thesynergyonline Economic Bureau

Prime Minister, Dr Manmohan Singh, delivering the inaugural address at the 7th Asia Gas Partnership Summit in New Delhi on Friday.

NEW DELHI, MARCH 23 :
"AS an incentive to production of natural gas, the government has initiated gas pricing policy reforms as "remunerative energy prices are needed to ensure expanded energy supplies. At the same time since oil and gas are national resources they should be within the framework of government and regulatory oversight," said the Prime Minister, Dr Manmohan Singh, here on Friday while inaugurating the two-day 7th Asia Gas Partnership Summit, promoted by GAIL and organized by FICCI with the support of the International Gas Union.

The economic exploitation of these resources should lead, therefore, to win-win solutions for both the investors as well as the people of India at large,Dr Singh said at the summit

Dr Singh dedicated GAIL's 2200 km Dahej-Vijaipur-Dadri-Bawana-Nangal-Bhatinda cross-country pipeline running through North West corridor of India on the occasion.

The Gas Authority of India alone will expand its pipeline length from the existing 9000 km to around 14,500 km by 2014, Dr Singh said.

Private operators are also expected to add another 5,000 km in the same period. The target is to have a countrywide gas grid of about 30,000 km by the end of the 12th Five-Year Plan in 2017, Dr Singh added.

The gas pipeline is designed to deliver 66 million metric standard (mmscmd) of gas per day.

With Rs 13, 000 crore investment the pipeline project covers Gujarat, Madhya Pradesh, Rajasthan, Uttar Pradesh, Haryana, Delhi (UT), Punjab and Uttarakhand.

This project has the potential to energize 3500 mw of power supply, 1.8 MMTPA of Urea productions and provide cities along the pipeline network with CNG/PNG/Natural gas for industrial and domestic applications.

He said that expanding the use of natural gas in India is one of the most important and immediate ways of responding to the challenges of energy security and the management of climate change. The Government of India had launched the New Exploration Licensing Policy (NELP) way back in the year 1997-98.

The policy has resulted in investments of over US$14 billion and discovery of 87 oil and gas blocks, with three blocks in production. The 9th round of NELP has just been completed covering a sedimentary area of about 88,000 sq km, which saw participation by 37 companies including eight foreign ones, Dr Singh added.

He said that to cater to the large demand for gas, India has accelerated investment in creation of LNG re-gasification facilities. With new re-gasification LNG terminals coming up at Kochi and Dabhol, the country's current import capacity of 14 million tonnes a year is set to increase to 20 million tonnes a year by 2012-13.

"We have also launched an ambitious pipeline development programme. I understand that the Gas Authority of India alone will expand its pipeline length from the existing 9000 Km to around 14,500 km by 2014. Private operators are also expected to add another 5,000 km in the same period. The target is to have a country-wide gas grid of about 30,000 km by the end of the 12th Five-Year Plan in 2017," the Prime Minister said.

The government is also pursuing the development of sources of unconventional gas such as shale gas and coal bed methane. "The mapping of India's shale gas resources has been undertaken and we are working to put in place a regulatory regime for licensing rounds by the end of 2013. We are also harnessing coal bed methane for which four licensing rounds have been held and commercial production has commenced at Raniganj in West Bengal. As India has one of the world's largest coal reserves, we wish to work with international companies having the requisite experience and expertise for exploitation of coal seam gas," Dr Manmohan Singh declared.

Dr Singh said that the emerging economies of Asia are rapidly increasing their use of natural gas. In the last five years, natural gas consumption in India and China has witnessed compound annual growth rates of 14 percent and 18 percent , respectively. The remarkable growth in the use of gas in the Asian economies underscores the greater role that this region is poised to play in the future development of gas markets in the world.

Mr S Jaipal Reddy, Union Minister for Petroleum & Natural Gas, said that India was poised to see the emergence of a national gas grid of 30, 000 km. by 2017, with a capacity of 875 mmscmd, to take natural gas to different markets in the country. India's current gas pipeline capacity of 230 mmscmd is projected to quadruple in the next five years.

"We have a countrywide network of 12,500 km. of gas pipelines, with another 12,000 km of pipelines under construction and 7,000 km under bidding by PNGRB, Mr Reddy said.

He also pointed out that India today has 51 cities and towns covered under city gas distribution (CGD) network as part of which PNG for cooking and CNG for transport sector are being supplied. "PNGRB has plans to roll out CGD networks in over 300 geographical areas in the country," the Minister remarked.

To cater to the increase in demand for imported LNG, "We are in the process of increasing our current LNG handling capacity of 13.5 mmtpa to nearly 50 mmtpa by 2017," he said.

He urged industry to tap the potential in India's gas market and become a part of the unfolding success story," adding that up to 100 percent FDI is allowed through the automatic route in exploration, marketing infrastructure for petroleum and natural gas, pipelines for petroleum products and natural gas, LNG regasification and infrastructure.

EYEWEAR MARKET TO REACH RS 43K CRORE BY 2015

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 22 :
GROWING at a compounded annual growth rate (CAGR) of about 30 per cent, the Indian eyewear market is likely to reach Rs 43,000 crore by 2015, apex industry body ASSOCHAM said on Thursday.

The eyewear market in India comprising of optical products including – contact lens, intraocular lens (IOLs), lasik, lens cleaning solutions, spectacle lenses, frames and sunglasses is currently poised at about Rs 21,000 crore, according to The Associated Chamber of Commerce and Industry of India (ASSOCHAM) study titled ‘Indian Optical Sector’.

Growing at a CAGR of about 20 per cent, the global eyewear industry is currently poised at about Rs 4.5 lakh crore and is likely to reach 7.5 lakh crore in 2015, according to the ASSOCHAM study.

“Ever-changing consumer preferences, rising per-capita income, growing awareness amid consumers and with eyewear becoming more of a fashion accessory and a lifestyle product the optical products’ industry in India is likely to see robust growth during the course of next few years,” said Mr D.S. Rawat, secretary general, ASSOCHAM while releasing the findings of the study.

“Long working hours leading to increased levels of exposure to digital screens causing strain on eyes and continuous stress due to work and deadline pressure resulting in poor eye health are also certain significant reasons behind the upward spiraling growth of eyewear trade in India,” said Mr Rawat.

Organised segement accounts for about 25 per cent of the overall domestic eyewear industry with a share of over Rs 5,200 crore. The unorganised segement has a huge base in tier II, tier III and rural markets.

With sales of about 45 crore pieces of glass lenses, the prescription eyewear market in India is currently estimated at about Rs 8,500 crore. Besides, about 80 per cent of this segement is in the unorganised sector, according to ASSOCHAM study. Spectacle frame manufacturers in the state of Gujarat manufacture nearly 75,000 frames daily.

High end branded eyewear market is largely dependent on imports. Most of the companies also import lenses from Europe, Hong Kong, Chinese Mainland and South Korea.

Nearly three crore pieces of sunglasses are sold annually across India and the sunglasses market in India is currently estimated at Rs 2,200 crore. Sales in premium sunglasses’ market consisting of international eyewear brands like Esprit, Giorgio Armani, Cartier, Tommy Hilfiger, Ray-Ban, Dolce & Gabana, Calvin Klein, Police and others are growing at a faster rate of about 40 per cent and the high end fashion eyewear account for about 30 per cent of the overall sunglasses market.

The contact lenses market in India is growing at CAGR of about 25 per cent. Besides, about 40 lakh pairs of contact lens are sold annually across India and the market is estimated at about Rs 700 crore. Growth in market for contact lenses is led by growing demand for daily disposables and frequent replacement contacts including coloured contacts amid youth especially, the college going crowd as they mix and match the colour of lenses with their wardrobe.

As per an industry estimate, sales of disposable contacts is rising at about 30 per cent as even ophthalmologists recommend frequent replacement of contacts to ensure a healthier and comfortable eye-view via contacts. 

Penetration of eyewear market in India is confined only to the metros, tier II and tier III cities to a large extent and the share of eyewear in the rural sector is a miniscule 15 per cent mainly due to lack of infrastructure like eye-testing facilities and optical products.

There is huge scope for growth and development of eyewear industry as about 30 per cent of India’s population is suffering from one or the other eye ailments reflecting to the large untapped potential in Indian eyewear market.

Thesynergyonline Economic Bureau

NEW DELHI , MARCH 21 :
FOLLOWING the 7.6 percent  y-o-y  print in January  the new combined Consumer Price Index (CPI) rose 8.8 percent y-o-y  in February ; indicating that price pressures at the retail level are over 100 basis points higher than those at the wholesale level (the WPI for February was 6.95 basis points). The rise in February  CPI can largely be attributed to food prices, which have begun to edge up even in the WPI, as a favourable base effect wears out. As this is only the second available y-o-y  reading for the new CPI index, it is difficult to gauge trends based on the data.

While the RBI has acknowledged that “the new CPI gives potential but needs history”, in its recent policy it included prices at the retail level as being one of the goalposts for monetary easing. This warrants keeping a track on CPI.

On a component-wise basis the CPI was led by housing (+13.6 percent y-o-y ), clothing
and footwear (+13.2 percent ), and fuel (+12.8 percent ).  The growth in food products was up 7.0 percent from 4.5 percent the previous month, with trends driven by protein-rich products and the
wearing out of the seasonal effect of vegetables.

In line with trends seen last month, prices at the urban level (+9.45 percent ) outpaced those at the rural level (+8.36 percent ). A quick re-cap, housing is not included in the rural index, which has left prices subdued.

In its last policy statement on March 15 , the RBI said that “notwithstanding the deceleration in growth, inflation risks remain, which will influence both the timing and magnitude of future rate actions”. Moreover, instead of the inflation focus being primarily on ‘non-food manufacturing inflation’, it expressed concerns on upsides arising due to  higher oil prices and suppressed inflation, currency depreciation, (c) fiscal slippages, and price pressures at the retail level.

This, coupled with the fact that FY13 fiscal consolidation may be less than expected, means we are revising our rate call reduction for 2012 from 100 basis points to 50-75 basis points .

It is maintained that the deceleration in growth coupled with the moderation in inflation bodes well for the RBI beginning its easing cycle from April. Supporting this is the short window available due
to the interplay of commodity prices and currencies – e.g. an adjustment in domestic fuel prices could have a direct impact on the WPI ranging from 0.6-3.6 percent .

The outlook for policy rates post easing of 50bps would be data/event dependent including on oil prices, and risks to the proposed path to fiscal consolidation for FY13. Key to watch would be government’s commitment to stick to its budget proposal of limiting the cap on subsidies to 2 percent of GDP.

GOLD IMPORTS BILL COULD TOTAL $100 B BY 2015-16

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 20 :
INDUSTRY body ASSOCHAM said on Tuesday India’s gold imports bill could total  $100 billion  by 2015-16 and the government should strictly monitor in the inflows with higher customs duty.

The recent hike in customs duty to four percent will not be enough to control gold imports. Every ounce of imported gold means that the country’s savings flow out to other countries and create jobs there, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

As gold imports become unsustainable and cause strain on the balance of payments besides affecting exchange rate, the government should undertake extensive education campaigns and encourage channelising savings in formal financial instruments to increase productive capacity of the economy, said secretary general D.S. Rawat.

“Post offices – especially in rural areas – should be used to sell such government guaranteed instruments to extend their reach throughout the country,” he said.

India produces around two tonnes of gold a year against the imports of 900 tonnes. Being the largest importer of gold in the world, India accounts for nearly one-third of the annual demand with import bill rising from 4.1 billion dollars in 2001-02 to 33.8 billion dollars in 2010-11.

At these levels, gold imports are a huge burden on the balance of payments and accentuates the current account deficit. On the other hand, it represents a massive strain on investable resources and weaning away domestic savings from gold assume importance.

According to a recent ASSOCHAM study titled ‘India’s Gold Rush – Its Impact and Sustainability,’ the total import value of gold during last financial year was higher than the gross state domestic product of 12 states and budgeted estimated expenditure on fertiliser and food subsidy.

Equally astounding is the fact that India imported more gold than the annual budgeted estimated expenditure outlay on water supply urban development and sanitation. India’s gold demand is ironically 37.6 per cent more than China’s although China’s GDP is 3.5 times of India’s GDP. Compared with the United States which has a 14 trillion dollar economy – ten times the size of Indian economy – India’s gold demand is almost five times.

The ASSOCHAM study said gold as a commodity does not add much to the productive capacity of an economy. Moreover, foreign exchange reserves used to import gold can be used to get other commodities. According to the Reserve Bank of India’s review of macro-economic situation, the current account deficit is a cause of concern because of inelastic gold and oil demand.

Calculated on the basis of compound annual growth rate of period 2010-11 over 1999-2000, the gold import bill could total 100 billion dollars by 2015-16. India has one of the highest savings rate in the world to the tune of 30 per cent but lags behind major economies in terms of key economic indicators.

PPP STRESSED FOR WATER AND SOLID WASTE MANAGEMENT

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 20 :
UNION Minister for Urban Development, Mr Kamal Nath, while speaking at a workshop on "Making Water & Solid Waste Management Sectors Investor Friendly" in New Delhi stated that there is a critical need for mainstreaming PPP in these sectors not only because it brings in much needed capital but also because it brings about greater efficiency and higher levels of customer satisfaction.

Given the fact that the total investment over the last 20- year period is approximately one-10th of that required, PPP needs to be considered as one of the key strategies to increase investment in the sector.

Further, the implementation of projects on PPP basis in cities such as Nagpur,Hubli Dharwad,Navi Mumbai have been able to demonstrate excellent service outcomes such as round the clock supply and lower incidence of diseases without significant increase in cost to the consumer.

He pointed out that it is equally important to prioritize wastewater management.

He stated that one of the key objectives of JNNURM Phase-II would be to mainstream PPP models.

He said that there is also a proposal to launch an urban infrastructure fund for PPP with German collaboration, the corpus of which is expected to be 200 million Euros. He said that the pressure in percentage terms is more in smaller Municipal Corporations than in larger ones and therefore, it was imperative that special attention is given to smaller cities.

The Minister also highlighted the need for reforms and capacity building in urban local bodies and water and sanitation utilities.

The workshop was attended by senior government officials of Ministry of Urban Development, States and Representatives of Water Sector Industry.

INDIA READIES FOR ROADMAP FOR SHALE GAS DEVELOPMENT

Thesynergyonline Econpmic Bureau

 
NEW DELHI, MARCH 19 :
AS the shale gas policy is expected early next year, India has accelerated the progress towards achieving the best results from the developments around the unconventional gas resource. CII and Pandit Deen Dayal Petroleum University has organized a 2- day "India US Bilateral Conference on Shale Gas" in New Delhi. The industry and business fraternity has come together to discuss the issues that are posing challenges for the growth of this sector.

The US is already leading the efforts in shale gas and has been commercially exploiting shale gas since last few years. The biggest net result being that many LNG import terminals in the US are now seeking licenses for conversion of regasification terminals to liquefaction terminals, in order to accommodate the surge in domestic gas production.

Such interesting turn around market dynamics attributable to shale gas have led many nations to initiate and attempt the best moves and India is closely monitoring these developments.
 
The conference was opened on a thoughtful note by highlighting the workshop held on shale gas in PDPU last year with collaboration from Okhlahoma University and the visionary intention of establishing a Shale Gas Excellency Centre in India.

Mr DJ Pandian, Principal Secretary (Energy & Petrochemical Department), Government of Gujarat spoke on the persisting gas supply constraints in a developing economy like ours. He said that on the positive note, the demand of gas is supply driven and has been rightly captured by aggressively provisioning for natural gas transportation infrastructure in Western and Northern India.

Highlighting that the recently cleared trunk-pipelines by PNGRB, upcoming R-LNG terminals at Dabhol and Kochi, and many proposed R-LNG terminals across the East and West coast would still not be able to meet the growing gas demand.

Moreover, the natural gas consumption has penetrated rightly across the sectors, which started from fertilizer and power, but gas is now welcomed in steel and CGD sectors. With the decreasing availability of domestic gas and higher prices of imported gas in the form of LNG; the burgeoning demand for natural gas would need to be addressed by tapping the domestic un-conventional gas resource in the form of Shale Gas.
 
Mr Pandian emphasized that it took the US 20 years to commercialize the Shale Gas resource and India is in discussions with US to understand how best to capitalize on this resource that holds high promises for the energy industry. He also pressed the point that the shale gas basins in India need to be studied from the prospects of the underlying geology, economics, environmental impacts; and in this concern the knowledge transfer becomes all the more important. He further said that Gujarat is well poised to take the lead in developing the Shale Gas Excellency Centre in India, for promotion and development of shale gas in India. The role of government, states and institutions becomes critical to achieve this.
 
The two- day conference would dwell on best practices in shale gas production with specific focus on seismic and Petrophysical consideration in evaluating and producing shale gas resources. How production of shale gas can contribute towards the energy security of the country?

The discussion on various technological options including its feasibility with respect to economics, infrastructure, supply chain, logistic and shale gas exploration by 2020 to suite Indian business environment. 

The conference would also focus on Raodmap on strategy and policy developments that will provide impetus to the future of shale gas in India including industry expectation from future regulations.
 

 
 

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 15 :
INDUSTRY chamber ASSOCHAM said the Economic Survey shows that the long-term India growth story remains intact despite present economic challenges which indicate that deceleration of investment activity, weak supply response and high inflation have collectively slowed down growth.

The return to high growth looks achievable in view of strong basic fundamentals of the economy, said ASSOCHAM president Rajkumar Dhoot. “The country needs immediate financial and structural reforms to boost the falling business confidence and growth momentum.”

The extension of coverage of MNREGA and rise in the spending on social services show that the direction of government policy is positively inclined to create more resources for the masses, he said.

“This is the right opportunity for the government to manage its finances for creating resources needed for developing infrastructure as well as move towards fiscal consolidation to improve its global image which is important to attract investments.”

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 14 :
BAFFLING questions for Union Budget 2012-13 are : Will the fiscal deficit be brought credibly down to 5 percent ; Will taxes rise? – If so, what about demand? ; Government’s UP election setback (and National elections in 2014): More aggressive economic reform, or a defensive response (i.e. more social spend)? ; Who will bear the benefits/burden – Consumption or Investment, Investors or savers, rich or the subsidized, foreigners or locals? There are no easy answers (or clear expectations), but the budget cannot please all (a sub 5 percent fiscal might go a long way) and, for the market, downside risks probably outweigh upside ones.

A fiscal deficit target of 5.2 percent is expected with some tax increases (excise/service up from 10 percent to 12 percent ), divestment initiatives, some tax rationalization (as a prelude to GST/DTC), tinkering with expenditures (a little oil reform), and only modest spending outlays.

Reform measures – GST/DTC, FDI, subsidy pricing and visibility on project execution should also make the agenda. But the credibility of the budget estimates and reform measures will carry more weight than the announcements themselves.

The Union Budget 2012-13 is also at a  time when  industries/businesses ask for  concessions/incentives. This time is no different – but we see more negative risks on excise duties (most manufactured goods), cigarettes, diesel vehicles, income tax – high income earners. There is upside risks for domestic capital goods – duty protection, infrastructure sectors-particularly power and energy.  

The budget matters most for fiscal deficit probably more than anything else medium-term market driver; market usually does well one month after the budget (+5 percent in last  three years); and domestic sectors that do best post budget (energy, autos, consumers); and worst (banks, utilities, small caps).

While the Budget’s influence has dimmed over the years, this one could be fairly critical in determining whether, over the medium term, the economy (and the market) goes up or down.

The Budget has always been about the Government’s finances, and how it proposes to balance its books – while initially directing and, more lately, in coaxing the economy along a certain growth path.

While in the pre 2000 decades, the nitty gritty of taxes had an overwhelming influence on individual sectors and business, liberalization has continued to diminish that bit of the budget.

This has now been subsumed by the bigger picture: how the Government is doing with its own finances (read fiscal deficit), the broader tax structure, the balance between investment and consumption support, and how it is reforming the economy– through legislative and investment direction.

This has also meant that the market response has tended to focus more and more on the most quantifiable aspect of it – the fiscal deficit (even though the implications are more medium term).

We believe this will probably be even more the case this time – given the sharp deterioration versus expectations in the current year, and the mixed political signals that have continued to come out from the Government. While a large measure of this will be the actual target that the Government sets – of greater import will be the credibility of these numbers, as any reform measures that are taken, that would structurally boost either the growth or the revenue prospects for the economy.

With even the Finance Minister confessing that he has been ‘losing sleep’ over subsidies, curtailing the bloated subsidy bill is likely topmost on the government’s agenda.

Apart from the widely-acknowledged possibility of the Food Security Bill being implemented in the Budget, theere are some areas where we could see some reforms.

While the de-regulation of petrol subsidies last year has helped, oil companies are making major losses on diesel and the cooking fuels. Brent prices staying firm, coupled with the weak rupee, have  exacerbated the woes of OMCs.

According to an oil and gas analyst, assuming oil at US$113/bbl, gross under-recoveries could rise to Rs1.6trillion in FY13 (even after assuming that the gov’t would be able to raise prices of diesel by ~Rs3/l, LPG by ~Rs50/cyl, and kerosene by ~Rs2/l) , from an estimated Rs1.5 trillion in FY12 .

While diesel de-regulation may be too bold a move, we could see the imposition of a tax on diesel vehicles.

 With subsidies on fertilizers, including diammonium phosphate (DAP) and muriate of potash (MOP) being reduced across the board by 10-33 percent  last month and effective through FY13, any major step is unlikely on this front. A positive move would be steps towards de-regulation of urea prices, although this appears uncertain.

Other measures could include streamlining expenditure as per recommendations of the BK Chaturvedi Committee Report, which includesreducing the number of centrally sponsored schemes and possibly revisiting the classification of expenditure into plan and non-plan, and some clarity on the UID project, which is currently held up due to data collection issues between various ministries.

With the economic recovery still fragile, improving investor sentiment is also likely to be key. To this end, we could see a focus on infrastructure development.

Steps could include FDI in retail or aviation, measure to resolve the poor health of State Electricity Boards, and to expedite land acquisition/environmental clearances.

Concentrate on livelihood security : PM

]]>

Thesynergyonline Economic Bureau

 
NEW DELHI, MARCH 09 :
THE  Prime Minister Dr. Manmohan Singh on Friday asked apex industry body ASSOCHAM to concentrate around livelihood security through masses through 5- pronged strategy of ‘Livelihood Security’, ’Economic Security’, ‘Energy Security’, ‘Ecological Security’ as well as ‘National Security’.

The Associated Chamber of Commerce and Industry of India (ASSOCHAM) delegation comprising of Mr. R.N. Dhoot, president; Dr. Rana Kapoor, senior vice-president; Mr Sunil Kanoria, vice-president and Mr D.S. Rawat, secretary general, met the Prime Minster to discuss issues concerning the Indian telecom industry and other economic concerns.

The Prime Minister assured industry leaders that it is working on economic reforms and making "renewed efforts" to evolve consensus among stakeholders on allowing Foreign Direct Investment in multi-brand retail.

In a presentation to the Prime Minister, the delegation submitted the need for policy intervention in the social areas of achieving basic security for masses, and of the chamber’s support in this endeavour.

“ASSOCHAM will be working closely with various ministries including  the Ministry of Human Resources Development, Agriculture as well as Health & Family Welfare among others to help champion the various initiatives by the government and work towards consensus building on second generation reforms,” said the chamber president, Mr R.N. Dhoot.

"The  Prime Minister has communicated to us that renewed efforts are being made to form a consensus and open up multi-brand retail for foreign investments," said Dr. Rana Kapoor, senior vice-president, ASSOCHAM, after the meeting with the Prime Minister.

On allowing investments by foreign airlines in Indian carriers, Dr. Kapoor said, "the Prime Minister said the government is actively looking into it." Recently, the Group of Ministers (GoM) on civil aviation has cleared the proposal to allow foreign airlines to take up to 49 per cent equity stake in India's domestic airlines, but the Cabinet nod is expected only after the Budget.

The meeting was part of the first formal meeting by newly elected representatives of the ASSOCHAM.

 

 

Thesynergyonline Economic Bureau

NEW DELHI,MARCH 06 :
ACCORDING to the 2012 Global aerospace and defense outlook: A tale of two industries launched by Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry group, the commercial aircraft sector is likely to enter a prolonged upcycle in production in 2012 as a result of increasing demand for leisure and business travel, particularly in the Asia Pacific region, while the global defense market is expected to experience flat or declining growth due to anticipated decreases in military spending, principally in the United States and Europe.

According to the report, the growth in the commercial aircraft industry is expected to be driven by continued production and development of next-generation aircraft programs that aim to address increasing fuel costs.

Nidhi Goyal, Director, Deloitte India, says, “While a trend in the US and Europe is seen for decrease in spending in defense, countries like India are on the ascent in terms of spending on space, commercial air transportation and defense sectors”.

Nidhi also said, “India is also amongst the fastest growing aviation markets in the global arena. The Government of India appears to be keen to provide the best possible support given the limitations of regulations, political situation and capacity of the industry in India. The industry should take advantage of the opportunity by adopting global best practices. This should help the Indian industry to integrate with the global supply chain and in the process create an indigenous base in India.”

“The commercial aircraft sector has taken an innovative approach to responding to increasing fuel costs,” said Tom Captain, Global Aerospace and Defense sector leader, DTTL. “The development of fuel-efficient aircrafts that utilize next-generation engine technology has resulted in a significant rise in aircraft orders. However, certain suppliers will be challenged to keep pace with the expected increase in production rates and new program introductions this year.”

Meanwhile, continued global economic challenges coupled with revenue gaps and cost pressures may result in margin contraction for global defense players.

As a result, the defense sector is likely to undergo more streamlining of its cost structure, divestiture of non-core assets, and additions of gap filling, as well as transformation acquisitions.

“Expect to see more aggressive competition for the fewer large defense programs of record, as well as growth in defense sales to India, Brazil, the United Arab Emirates, the Kingdom of Saudi Arabia, Brazil, Japan, and South Korea—countries with emerging wealth and a need to strengthen their defense capabilities,” continued Captain.

Overall, the financial performance of the top global aerospace and defense companies in 2012 is expected to be similar to 2011 performance, with the decline in defense revenues offset by cost-cutting and aggressive growth actions. 

In 2012, the aerospace and defense industry is likely to continue to develop game-changing technology innovations in areas such as cyber-security, directed energy, high-powered microwave weapons, hypersonic missiles, long-range and high-altitude unmanned aerial systems, and extraordinary software that can trace financial transactions of known terrorists.

 

Thesynergyonline Economic Bureau

A large element of nostalgia

   
NEW DELHI, MARCH 04 :
WITH most of the vegetable supply in Delhi coming from polluted Yamuna river bed,  cultivating  own  vegetables, fruits ,  herbs and spices is becoming  more and more popular in Delhi . Beating the space crunch in houses, having a  balcony kitchen garden  is the newest fad in the Capital.
 
Crowds thronging the two day Vegetable and flower show  organised by All India Kitchen Garden Association (AIKGA) which concluded  here in Gulmohar Park  on Saturday were  seen evincing more interest in aromatic herbs, vegetables and medicinal plants instead of seasonal flowers and plants.
 
" There's a large element of nostalgia in this, and searching for your roots. Everyone has memories of their grandmother or a loved one cultivating a garden. Plants have a marvellous effect on stress! And also, there is a convivial aspect to it: it is always nice to organise an aperitif with cherry tomatoes and lemons from the balcony. Not forgetting that it can be educational and fun for children as well."said Mrs Bella Gupta, Secretary, All India Kitchen Garden Association (AIKGA) .
 
" Now days kitchen garden does not require much area as people are opting for having a little kitchen garden on balconies with potted plants . Delhiites are opting for seeds as well as plants already potted up . Aloe Vera, green coriander, salad vegetables, Parsley, mint, raddish, green chillies, baby tomatoes, rosemary  and lettuce are the most popular plants for balcony gardening." Said Mrs Gupta.

 "Planting bonsai  citrus fruits like lemons, limes and kumquats is also fast catching up as it has ornamental value also" she added.
 
"Those who have a a big backyard are already into kitchen gardening for years and are even sharing their home grown vegetables with neighbours and relatives" she added.

SP emerging single largest party in UP

]]>

Thesynergyonline News Bureau

 

NEW DELHI, MARCH 03 :
SAMAJWADI Party is all set to regain power in the Uttar Pradesh as it is likely to win 185 seats in the 403 member state assembly though this is short of  clear majority, according to News24-Today’s Chanakya exit poll.

BSP is facing total rout as it is likely to secure barely 85 seats.

Congress and BJP are fighting tooth and nail to secure third spot.

Exit poll indicates that both the parties are getting 55 seats each. The rest 23 will be shared by others.

According to the News 24-Today’s Chanakya exit poll, there can be shift of
15 to 18 seats in favour of any party. If we talk about the vote percentage, SP is likely to  secure 31 per cent votes followed by BSP 23 per cent,Congress-BJP around 16 per cent each. The rest will go in favour of others.

In the 2007 assembly elections, BSP got staggering 206 seats and SP managed to secure only 97 seats. Then BJP and Congress bagged 51 and 27 seats respectively.

Meanwhile, Congress is heading for decisive victory in the Punjab assembly elections, while the party is emerging as the single largest party with wafer-thin margin in Uttarakhand, according to News24-Today’s Chanakya exit poll.

As far as Punjab is concerned, Congress is winning 60 seats in the 117 member assembly. This is big gain from party’s dismal 2007 elections when it bagged only 44 seats.

According to News24-Today’s Chanakya exit poll, Congress took winning lead over SAD-BJP combine thanks to just three per cent votes swing. It is translated into big gain for Congress.

SAD-BJP combine is facing humiliating defeat in the exit polls, is getting 52 seats. This is massive slide in terms of their seats in the last elections when they got 67 seats. The remaining 5 seats will be shared by Manpreet Singh Badal’s PPP and independents.

 And it is a photo finish in Uttrakhand as the difference between projected winner of exit poll is barely two seats between Congress and BJP.

In the 68 member assembly of hill state, Congress is getting 30 seats compared  to arch-rival BJP 28. In the last 2007 elections, Congress and BJP got 21 and 34 seats respectively.

Exit poll results show that BSP is emerging as a powerful force there. BSP and other parties are likely to get 12 seats.

 

Increase tax holiday to 10 years

]]>  

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 03 :
INDUSTRY body ASSOCHAM today called for increasing the tax holiday period for highly capital intensive oil and gas exploration industry which has a long gestation period and is strategically important for India.

 Provision of section 80-1B (9) of the Income Tax Act should be amended to extend the period of seven years of tax holiday to 10 years and to allow flexibility to companies involved to chose the period during initial 15 year period of operations.

 In the initial seven years, companies have large expenditure to set off and hence the actual benefit of tax holiday does not reach them, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM). This period is less than the tax holiday period available to companies in infrastructure sector like power generation and distribution.

Given India’s energy requirements, the sunset clause for commencement of refining should be extended by a year to March 31, 2013. “It is expected that extension of tax holiday will benefit refining companies starting operations in 2012-13 and the benefit be passed on to consumers,” said president Rajkumar Dhoot in a pre-Budget memorandum to the finance minister.

It is important that expenditure for drilling and exploration activities be treated as the same as research and development expenditure, and weighted deduction of the actual expenses incurred by the assessee is allowed.

Mr Dhoot said there is need to increase depreciation rate for tax deduction under income tax to improve internal accrual for replacement of assets in the current difficult financial market and volatile crude oil prices. Inverted duty structure in case of certain industries should be removed.
 
The current rate of excise duty needs to be retained in view of falling industrial growth. Tax refund procedures for exporters of goods and services must be simplified and authorities should ensure that refunds are made within a reasonable time period.

 There is also need to remove double taxation of same tax-able items under value added tax like in case of copyright, software, right to use goods and immovable properties, said ASSOCHAM.

 It said section 73A restricts the claim of adjustment of loss of specified business from profits of other businesses. This discrimination needs to be removed.

Anand Sharma meets high power delegation from Japan and US

]]>

Thesynergyonline Economic Bureau  

NEW DELHI, MARCH 02 :
INDIA’S Commerce Minister Mr  Anand Sharma met delegates of the United States and Japan on a trilateral dialogue, here . Addressing the delegates Mr Sharma said, “It is indeed befitting that such a dialogue should take place given that the three countries are vibrant democracies and leading economies in the Asia- Pacific region.

The changing contours of global economic architecture have made such a dialogue even more opportune & necessary.” In the emerging paradigm, India views its relationship with both US and Japan that transcends trade related relationship to a long term technology, innovation & investment relationship.”

The India’s Commerce Minister while addressing the delegates said, Ensuing long- term energy security and development of green and sustainable technologies for the future should be an area of high priority. The Minister later added that collaboration in agro- processing, pharmaceuticals would be essential for the larger objective of ensuring global food security and health security.

Mr Sharma while commenting on the Pakistan initiative to shift to negative list said, “Our immediate neighborhoods have given a positive movement on the economic side with Pakistan.” The delegation expressed appreciation for normalization process in the economic relations of the two neighbors.

Delegation comprised of Mr. Richard Armitage, president, Armitage International LC (co-chair), Mr. Tim Adams, Managing Director, The Lindsey Group, Mr. Michael Green, Senior Advisor and Japan chair, CSIS, Mr Karl Inderfurth, Mr. Roger Rose, Lockheed Martin, Mr. Torkel Patterson, President, US- Japan MAGLEV, LLC & Nicholas Szechenyi, Senior Fellow & Deputy Director, Japan chair, CSIS.

The Japan delegation comprised of Mr. Yoshiyuki Kasai, Chairman, Central Japan Railway Company (CO-Chair), Mr. Yorihiko Kojima, Chairman, Mitsubishi Corporation, Teruaki Masumoto, Executive Advisor, Tokyo Electric Power Company, Mr. Kazuo Tsukuda, Chairman Mitsubishi Heavy Industries, Mr. Tomohiko Taniguchi, Senior Advisor, Central Japan Railway Company.

From India side the dialogue is co-chaired by Mr Tarun Das.

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 01 :
FOLLOWING the 7.7 percent and 6.9 percent growth in 1Q and 2QFY12 respectively, GDP growth slowed further to 6.1 percent y-o-y in 3QFY12 ( Citi& Consensus: 6.3 percent ). Cumulative 9MFY12 growth was 6.9 percent y-o-y vs. 8.1 percent last year. This implies that, in order for the government to meet its first advance GDP estimate of 6.9 percent for FY12 growth in 4Q is likely to be 6.9 percent . The deceleration seen in growth supports our view of cumulative easing of 100bps, although oil remains a wildcard.

Weak growth was due to a slowdown in industry, to 2.6 percent y-o-y – led by a deceleration in manufacturing (+0.4 percent ) and a contraction in mining (-3.1 percent ). However, this has already been largely priced in (the Index of Industrial Production averaged 1 percent during 3Q). Service sector growth held up at 8.9 percent y-o-y , supported by healthy trends in trade and communication (+9.2 percent ) and financing and insurance (+9 percent ). Agri growth remained lacklustre at 2.7 percent y-o-y .

On the expenditure front,Gross fixed capital formation posted a contraction (-1.2 percent y-o-y ) for the second consecutive quarter, a result of policy-related bottlenecks and coal/gas shortages. A point to note is that past data has been revised down significantly (e.g growth during
1HFY12 was revised from ~3.5 percent y-o-y to 0.5 percent ). However, consumption growth edged higher to 5.9 percent y-o-y , with trends supported by private consumption (+6.2 percent ) while public consumption slowed marginally (+4.4 percent ). Net exports widened to -7.8 percent of GDP as export growth moderated, even as imports posted double-digit growth.

As highlighted earlier, the deceleration in growth in FY12 has been due to a collapse in investments. While we are aintaining our 7 percent GDP estimate for FY13 , recent steps taken by the Committee of Secretaries, headed by Principal Secretary to the PM Singh - Pulok Chatterjee - are positive and could result in the investment cycle recovering in the latter half of the year. Key proposals include: Fast track clearances for power and coal projects; expansion in coal production of existing mines without fresh clearance; Coal India instructed to sign fuel supply agreements with power plants that have implemented PPAs.

Soft GDP data supports our view of the RBI easing the repo rate by 100bps in 2012, but the recent rally in commodities could influence rate decisions. Given that RBI has said that the quantum/timing of rate cuts would be dependent on fiscal consolidation, we expect the repo rate to be cut post the budget (on 16 March), during the RBI's 17 April policy.

However, given tight liquidity conditions we expect the RBI to cut the CRR by 50bps in the March 15 policy.

 

Thesynergyonline Economic Bureau

NEW DELHI, MARCH 01 :
FOLLOWING the 3 point + expansion seen in December 11 and January 12, the Purchasing Managers Index (PMI) fell by 0.9 points in February 12, with the headline reading at 56.6. Looking at detailed data, trends appear mixed. Current indicators point to slower output, which declined 2.4 points to 60.5. Within the forward-looking indicators, new orders edged higher by 0.6pts to 62.8; but new export orders posted a decline of 2.75pts ( after 5 consecutive months of expansion) to 53.9.

While the PMI remains in expansionary mode, the mixed data for Feb is somewhat corroborated by lackluster sectoral data.

Reversing trends seen last month, input prices fell significantly ( -2.75pts to 60.6 ). However, output prices posted a slight uptick (+0.5 points to 56.6).

The divergence does suggest that the pricing power of corporates may have improved. Judging from oscillation in data in the past, it may still be too soon to call a trend, but key to note is that both indices remain well over the 50-mark, thereby complicating monetary policy decisions.

Following the 3.1 percent growth seen last month, the index for eight core infrastructure industries slowed to just 0.5 percent y-o-y in January on the back of a continued contraction in natural gas and crude oil production , while refinery and steel production also turned negative.

Given that the infra index has a weightage of 38 percent in the index of industrial production, the January IIP numbers due on Mar12th are likely to show a continued moderation.

However, weak IIP data appears to have been largely factored into the govt's 6.9 percent advance GDP estimates for FY12.

We maintain our 7 percent GDP estimate, but believe a sustained policy thrust – as seen with the recent measures taken by the PM's committee – is imperative.

The recent spate of weak data (3QFY12 GDP, Infrastructure and PMI) supports our view of the RBI easing the repo rate by 100bps in 2012, but as we mentioned earlier, the recent rally in commodities could influence rate decisions.

Given that RBI has said that the quantum/timing of rate cuts would be dependent on fiscal consolidation, we expect the repo rate to be cut post the budget (on 16 March), in the RBI's 17 April policy. However, given tight liquidity conditions, we expect the RBI to cut the CRR by 50bps in the March 15th policy. Indeed, March is a crucial month for the economy and markets with upcoming data points/events to watch being: January IIP data on March 12 , Feb WPI data on March 14, RBI's monetary policy on 15 March, the FY13 Budget, on March 16.

 

Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 29 :
THE government will limit imports and encourage domestic manufacturing through public private partnerships (PPPs) to boost solar energy generation as power consumption goes up dramatically with the fast-growing economy, minister for new and renewable energy Farooq Abdullah said on Wednesday.

Foreign companies must set up manufacturing facilities along with research and development centres if they want to enter India for solar power generation, he said while inaugurating a conference organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

About 170 megawatt capacity of grid solar power has already been set up under the Jawaharlal Nehru National Solar Mission. During its first phase, 1,100 mw capacity is envisaged by 2013. In the second phase, additional capacity of 10,000 mw capacity for various off-grid applications has been sanctioned.

"This scale-up will require a paradigm shift in the approach. We must continue to rely more
on the regulatory framework, development of transmission infrastructure and developing innovative business models. The sector will require an investment of 20 billion dollars by 2017," said Mr Abdullah.

The challenge is to introduce newer and efficient technologies which can lead to cost
reduction and ultimately help in grid parity, he said adding there is need to grab opportunities in developing partnerships in all spheres of research, development, designing and setting up projects.

Meanwhile, ASSOCHAM president Rajkumar Dhoot said the country is endowed with vast solar energy potential and 5,000 trillion kilowatt hour per year energy is incident over the land area with most parts receiving four to seven KWh per square metre daily.

Hence both technology routes for conversion of solar radiation into heat and electricity –
solar thermal and solar photovoltaic – can be effectively harnessed providing huge scalability. Mr Dhoot said the government should allocate a substantial portion of clean energy fund to service capital requirements of solar energy projects at low bank interest rates.

Others present during the conference were Mr Pramod Deo, chairman of the Central Electricity Regulatory Commission, Mr Anil Agarwal, past president of ASSOCHAM, Mr Rakesh Bakshi, chairman of ASSOCHAM council on new and renewable energy, and Mr N.K. Bansal, former head of department at Indian Institute of Technology's centre for energy studies.

They said solar energy applications are cost effective in remote and far-flung areas where grid penetration is not feasible. These applications ensure that people without access to electricity move directly to solar power by leap frogging the fossil fuel growth trajectory.

Also, the mobile phone network infrastructure in the country consists of more than three lakh towers with 3,000 new ones being added every month. By 2015 India is expected to have over five lakh telecom towers with almost all of them having a diesel back-up. This is another area where solar power can play a substantial role.

‘Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 28 :
THE  Rural Development Minister Mr Jairam Ramesh on Tuesday said that National Social Assisstance Programme ( NSAP) will be completely restructured and all payments under the scheme will be done through Aadhar-based payment system. Talking to a select group of mediapersons here, he said, the restructured system will be in place by March 10 this year and it will ensure that each beneficiary under old age, disabilities and widow pension schemes will get ones entitlement every month and there will be no delay in payments.

He said, the Central Government spends nearly Rs 8,000 crore rupees under the NSAP scheme but the devolvement of funds is being done in a complicated process in a layered manner, which he said will be rectified and only one State Agency will be identified for receipt of funds for final disbursement to pass book holders through Aadhar-based system.

The Minister informed that he had already written to the Finance Ministry for relaxation of certain norms like reducing the criteria for disability to 40 percent  from the existing 80 percent  which leads to exclusion of a very large number of disabled persons in rural areas.

Moreover, they also face problem in getting a medical certificate verifying 80 percent criteria. Mr  Ramesh said, presently the Indira Gandhi National Widow Pension Scheme gives assistance of Rs 200 per month to BPL widows over the age of 40, which can be modified to cover widows over the age of 18. There is also a demand to enhance the amount under National Family Benefit Scheme from Rs-10,000 to Rs 20,000, which is paid to a BPL family whose main bread-winner dies, besides inclusion of children/youth in the 5 to 20 age group to get the disability pension benefit, which is now restricted to those over the age of 20.
        
 
  

 

Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 27 :
THE pace of economic recovery is expected to lose momentum in the near term – after a strong year-end bounce in 2011 – as a sharp contraction in Europe, slowdown in China and some waning US core retail sales momentum work their way through the production cycle. But we remain reasonably sanguine about Asia’s growth.

Some of the recent data weakness is distorted by the Lunar New Year. With global manufacturing indices bottoming, the US employment situation improving, labor markets in Asia surprisingly resilient, G4 central bank policies accommodative and China’s bias towards easing policy emerging, we see the near-term slowing momentum as a soft patch. Our growth forecasts are largely unchanged.

Economies in TH, KR, SG and TW appear relatively more vulnerable given their oil-intensive nature, with the first two being the largest net oil importers in the region. Their trade dependence also makes them more exposed to the adverse impact of any potential oil shock on global demand.

An oil shock reduces expectations of monetary easing (if any) in the region. It may impact the pace and quantum of expected rate cuts in India and force Sri Lanka to tighten if external finances are undermined. Moreover, if escalating global oil prices call for energy subsidy reforms in Indonesia, especially via fuel price hikes, this could unhinge inflation expectations and bond market stability.

Against current backdrop, we like MYR, PHP, THB relative to IDR, TWD, KRW — As the risk rally advances, we look for fundamental divergences rather than just pursuing high-beta plays.

Currencies of countries with growth dynamics that are less vulnerable to external risks and where macro policies are sound (MYR, PHP, THB) could outperform those with ‘unconventional’ monetary policies (IDR) or where the incentive to intervene in the FX market is likely to be higher (KRW, TWD).

The Philippines’ fiscal position is solid, domestic liquidity is ample, FX reserve coverage is among the strongest, ratings will likely be upgraded, and the central bank has room to cut rates and ease liquidity further without undermining its inflation credibility, all of which should be supportive of PHP bonds.

Stabilization of external finances via tighter macro policies and/or tapping undisbursed IMF funds would be positive triggers, while external commercial borrowing ahead of FX/reserve stability and an oil shock are key risks.

 Manufacturing production could lose some momentum from the strong bounce we saw in late 2011. The overall manufacturing cycle in the region has bottomed and could see further expansion going into 2H12. However, in the near term, the pace of recovery may lose momentum as a sharper contraction in Europe (exacerbated by a harsh winter), a slowdown in China, and some waning US core retail sales momentum work their way through the production cycle.

However, we should not exaggerate some of the recent data weakness that is likely distorted by the Lunar New Year – we’ll get more clarity when the Feb data comes out (and we suspect stabilization of momentum rather than a sharp contraction). Moreover, an improving US employment situation and surprisingly resilient labor markets across Asia (unemployment rates have barely budged) alongside accommodative G4 central bank policies should continue to provide support to global final demand.

China’s growth is likely to decelerate on a seasonally adjusted annualized basis to 6.8 percent in 1Q 2012 (8.0 percent y-o -y) from 8.7 percent  in 4Q 2011 (9.1 percent y-o-y ), but a slowdown should be no surprise to anyone. Policymakers will provide sufficient policy easing to keep growth close to the 8 percent  range this year. However, if the slower than expected M2 growth, new loans and total social financing are a harbinger of much sharper than expected investment-led slowdown in 1Q 2012, then we could see downside risk to the rest of the region.

This could make the more China-trade linked countries like Singapore, Hong Kong, Taiwan, Malaysia and Korea relatively more vulnerable. However, as China’s slowdown is likely to be more investment-driven, fueled by property/construction, we can take comfort in the fact that Asia’s exports to China that are targeted for domestic investment is, on average, well below 30 percent  of its total exports to China.

But  China’s policy easing may gain momentum in the coming month as inflation is likely to come off sharply and sufficient consensus may be built in the upcoming National People’s Congress. With the reverse impact of the Lunar New Year food-price inflation, China’s Feb inflation reading to is likely to fall significantly to a sub-4 percent  reading (as low as 3.5 percent ) when released in March.

That should remove the political hurdle to more overtly ease liquidity conditions via a few more reserve requirement cuts and other macro-prudential measures on LDR without being overly worried about unsettling inflation expectations. However, in the end, we think China has more room on the fiscal than monetary front to support demand (given very low real deposit rates, and financial stability risks associated with the legacy credit expansion of the last few years).

The National People’s Congress convenes on  March 5 , and  this could set the stage for passage of a more proactive fiscal policy – we forecast a deficit of 2.5 percent  of GDP in 2012F (vs. last year’s deficit undershoot of ~1 percent of GDP), though policy lags will mean a more pronounced bounce in economic activity will wait until 2H 2012.

 Inflation may dip below 3 percent  briefly at the middle of the year, with average inflation falling from 5.4 percent  in 2011 to about 3.5 percent  in 2012.

PMI rebounded but remained weak. Jan official PMI rose by 0.2ppt m-o-omto 50.5 percent .

The better-than-expected PMI reading was partly driven by holiday effect on demand. While production growth stabilized, it has to be monitored closely with the fall in employment.

Despite the rebound, the overall reading was still in the slow expansion territory.

The HSBC flash PMI rose to 49.7 in February , the fourth consecutive month that the index has registered a reading below the threshold.

Forex purchase turned positive in January. Net forex purchased by the banking system was Rmb 140.9bn, a reversal of three consecutive months of net sales. The number almost offset the net sales of Q4 2011, but still indicates non-FDI capital outflows.

Commodity housing price further dropped in Jan. MoM price for new homes dropped for 48 of the 70 cities in survey, and kept flat for the remaining cities. This is the first month that no price rise has been seen across all sample cities.

Easing policies to continue with incremental reform. The recent RRR cut confirmed easing stance. The PBOC announced a cut in RRR by 50bps, effective from Feb 24. This would unlock about Rmb390bn of deposits and increase banks' excess reserves that can be used to extend loans.

The later-than-expected action appears to suggest that the policy priority in the near term is to prevent the economy from hard landing. Before this movement, the PBOC chose to inject liquidity through open market operations.

Even with this RRR cut, we do not expect the interbank liquidity to get much loosened.

We expect more policy easing following the release of weak Q1 data. We believe the policymakers are de facto targeting above 8 percent  growth for 2012. We foresee at least three more RRR cuts (50bps each time). Fiscal policy should become more active following the passage of the budget in March. Property tightening measures including the purchase restriction could be relaxed by the middle of the year.

Consistent policy stance is expected to aid small enterprises. As a continuation of a series of supportive measures adopted since 4Q11, the State Council released more policies favoring small and micro enterprises in early February . Besides extending previous supportive measures, the cabinet announced additional stimulus packages comprising fiscal and financial measures, including setting up of a development fund of Rmb15bn that would focus on newly established small enterprises.

The movement picked up previous policy tone and encouraged the application of technology innovation on small enterprises, consistent with the country’s strategy in restructuring and rebalancing the economy. We expect more supportive measures to foster the growth of small enterprises.

Subdued inflation opens more room for further reform on natural resources. Resource taxes were raised on six products including iron, tin, etc, effective from Feb 1. The hike is not expected to drastically lift the price of relevant resources, and in turn impose little impact on the overall consumer price. Higher tax on coal products becomes more likely once the progressive electricity price mechanism is implemented during 2012. Going forward, ad valorem tax will be gradually extended to more resource products including coal. Resource tax reform should facilitate economic rebalancing and increase tax revenue of local government over time.

Our recently lowered GDP (3 percent y-o -y ) for 2012E is at the high- end of the official forecast range, as we see factor in possible stimulus from many Governments. The Budget will be administering HK$80bn of fiscal measures in FY2012/13 to stimulate GDP growth by 1.5ppt. Inflation is likely to moderate after Jan (post Chinese New Year) and on base effects, but on average could still stay above 4 percent  for 2012 on the tight job market, lingering food price increases and delayed fee hikes.

Trade worries weigh on our growth outlook. Although exports (g&s) rebounded to positive in 4Q11 from 3Q11’s YoY contraction, we expect a renewed slowdown in HK’s trade performances in 1Q12 amidst global slowdown and seasonal effects. Although exagerated by seasonal effects, Jan exports of goods fell 8.6 percent y-o-y ; while imports fell 10.5 percent y-o-y . Negative implications could cascade throughout the economy as the trading and logistic sectors hire 27 percent  of HK’s labor force, thus weighing on consumption ability by those in the sector. Growing conservatism expected to slow consumption and business expansion.  

On full employment and rising income, domestic consumption was the main pillar for growth in 2011. However, a sense of job insecurity is likely surfacing in affected industries, like trading, logistics, real estate, financial and insurance; these segments make up near 47 percent  of the working population. Also, components that held up better than expected (including private investments and inventories) will likely reflect worsening business conservatism in 1Q. The  new 3 percent  GDP forecast is at the top of the official forecast range of 2-3 percent .

Selective easing in China and easy money from central banks will alleviate trade damage, stimulus measures from HK Government could help contain some of the job losses, and recent liquidity inflows would also offer a timely buffer for credit. Some greenshoots (no matter if they are sustainable) are good temporary relief: for example: Jan PMI data recovering back to expansion mode (51.9) with improvements seen in new orders (but this could have been caused by pre-ordering before the holidays). We see 1Q12 as the trough of this GDP down-cycle.  

Although the government expects its inflation relief measures could relax headline CPI to 3.5 percent y-o-y in 2012, we raised our 2012E CPI forecast to 4 percent y-o-y (from 3.8 percent ) on higher-than-expected Jan inflation print (6.1 percent y-o-y vs. consensus of 5.8 percent ) and persistent price pressures from rentals, food (which is only slowly easing), and delayed rises in wages and service charges. But we are cognizant that the February inflation reading will fall substantially as base impacts

 

Thesynergyonline Economic Bureau  

 NEW DELHI, FEBRUARY 27 :
A high-powered CII-CEOs delegation led by Mr Vikram Mehta, Chairman, CII National Committee on Hydrocarbons and Chairman, Shell Group of Companies, called upon Mr Jaipal Reddy, Union Minister for Petroleum and Natural Gas, recently in  New Delhi.

The CEOs emphasized on the need to accelerate exploration activity in deep offshore and onshore areas.

 The delegation included Mr PMS Prasad, Executive Director, Reliance Industries; Mr Rahul Dhir, Managing Director, Cairn India ; Mr Walter Simpson, Managing Director, BG India ; Mr Larry Fisher, Managing Director, Niko Resources India ; Mr Ajay Khandelwal, CEO, Jubilant Energy and Mr Nitin Shukla, Managing Director, Hazira Group of Companies.

 The CII CEOs delegation highlighted need to reassess the policy framework and hasten decision-making. It suggested solutions to expedite investments into the sector and to ensure that companies have access to off-shore drilling technologies.
 Decision Making Process , according to CII, lack of inter-ministerial coordination on policy / regulatory issues is leading to significant delays.

A possible solution is to offer blocks only after all regulatory and statutory approvals are in place, said the CII statement. Governance of the Management Committee also needs to be streamlined.

As exploration for hydrocarbons is a high risk business, it is important to not burden it with additional risk of fiscal uncertainty.

Sanctity of the legally binding Contracts should be maintained. A prime issue, the 7-year 80IB tax holiday, for which, there should not be any discrimination between Oil and Gas.
 
Independent Upstream Regulator - CII has long recommended creation of an independent empowered regulator for the industry. Demarcating clearly the roles of a Regulator and a Policymaker will pave the way for accelerating exploration, development and production projects in the oil and gas sector.
 
Transition to a gas-based economy with marketing and pricing freedom would give flexibility to manage technical and commercial risks, felt CII. The industry association pointed out that the proposed gas price pooling mechanism under Production Sharing Contract (PSC) can potentially distort price discovery. In addition, a “Declared Good Status” for natural gas, again a long standing demand of the industry, will avoid varying sales tax /VAT in different states. The Gas Marketing should be as per the PSC which  is an arms length market determined price.
 
The quality of blocks and data quality on offered blocks must be addressed to maximize the exploration potential and ensure adequate returns, recommended CII, adding that this would additionally encourage global players to invest.
 
The CII delegation also called for transition to Open Acreage Licensing Policy (OALP) to further open up exploration. Currently New Exploration Licensing Policy (NELP) is restricted primarily to blocs identified by Directorate General of Hydrocarbons (DGH). OALP could identify more prospects as sufficient data is already available.

OALP can be done in two phases - the Reconnaissance phase, to identify opportunities, and the Exploration phase, with back in rights for the initial explorer. However, the National Data Repository will need to be built for these blocks, suggested CII.
 
CII recommended early introduction of an Tax Royalty Regime which should be simple and easy to administer, in line with global practices. Almost all the advanced countries have Tax Royalty regime as against PSC system. The existing CBM contracts are principally tax royalty contracts though called Production Sharing Contract
 
India imports over 75 per cent of its annual crude oil requirement, with oil and gas accounting for nearly 45 percent of India’s energy needs. Increasing indigenous production of oil and gas will enhance the energy security of the nation. This can be achieved by accelerating exploration activity in deep offshore, unexplored offshore and onshore areas.
 
The Indian government, through the NELP, made a concerted effort to expedite the pace of exploration in the inadequately explored and unexplored areas of the country’s sedimentary basins.  However, NELP, which permitted global and domestic companies to participate in the ensuing bidding rounds and allowed 100 per cent foreign direct investment (FDI) in E&P sector has witnessed investments of only a little over USD 15 billion in the nine rounds conducted so far which entailed auctioning of about  270 blocks.
 
Investments in the sector of late have varied from low to moderate and companies, in particular, key global players, are not capitalising on the potential. 15 per cent of the total area is yet to be explored and only 1.06 million square kilometers (sq km) area is under active petroleum Exploration Licenses out of an estimated sedimentary area of 3.14 million sq km.  In addition, the latest technologies for deep sea drilling are yet to be deployed in India.

 

Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 24 :
THE Ministry of Statistics' new combined Consumer Price Index (CPI) pegs inflation at 7.7 percent y-o-y in January '12.

The new index calculates CPI at an all-India and state-level, combining rural and urban inflation in the ratio 57:43. It was released in February last year; but in the absence of time series data, y-o-y comparisons were not possible. The January '12 release now enables y-o-y comparisons; 7.7 percent suggests that at the retail level inflation is ~100bps higher than the wholesale level (the WPI posted 6.6 percent growth in January).

The CPI also replaces three inflation indices, i.e. the CPI for Industrial Workers, Agricultural Laborers and Rural Laborers, which ranged in the 6.4-6.7 percent range as per latest data available for December'11.

On a component-wise basis, the CPI in January was led by clothing (+14.3 percent , fuels (+13.1 percent ) housing (+12.7 percent ), miscellaneous items (+8.9 percent ), while food and beverages and tobacco were up 4.6 percent . Interestingly, similar to the latest WPI edges lower to 6.55 percent in January ; slowdown in core inflation makes stronger case for easing) the low food print was due to a 25 percent contraction in vegetables, which have a weight of 5.4 percent .

On a segmental basis, urban inflation was up 8.25 percent y-o-y , while rural CPI was up 7.38 percent . A key difference between the two components is that housing is not included in the rural index, which is likely why prices remained relatively subdued.

On a statewise basis, the highest price increases were seen in some North Eastern states (ranging between 9-19 percent ), Karnataka (+9.9 percent ), the UT of Chandigarh (+9.8 percent ), followed by Gujarat, Madhya Pradesh, Rajasthan, and Uttarakhand (8 -9 percent range). States posting the lowest inflation included Orissa, Chhattisgarh (4-5 percent ).

Given that the CPI is globally used for policy analysis, the introduction of the combined CPI in India is encouraging. With y-o-y comparisons now possible, we could see a gradual shift to this index as a parameter for measuring inflation. Looking ahead, while the Jan print appears to have benefited by the sharp contraction in vegetables, key risks to the inflation outlook are the structural factors impacting inflation, suppressed fuel prices, inter-play of commodity prices and currencies.

Maintaining the view of the RBI easing the repo rate by 100bps in 2012 is , the recent rally in commodities (driven by liquidity/ geopolitical factors) needs to be carefully monitored and could influence rate decisions.

The combined CPI calculates CPI at an all-India and state-level, combining rural and urban inflation with the ratio 57:43. CPI has so far been measured by three inflation indices i.e the CPI for Industrial Workers , Agricultural Laborers and Rural Laborers . But given that these indices related to different base years and segments, they were not a true measure of economy-wide price fluctuations.

 

Thesynergyonline Economic Bureau  

NEW DELHI, FEBRUARY 24 :
THE Government is keen to upgrade the delivery services in the health, education, skill development and employment sectors so that the disadvantaged sections of society are well equipped to benefit from the growth process. Today our expenditure on social services as per cent of GDP has gone up from 5.6 per cent in 2006-07 to 7.3 per cent in 2010-11. Similarly, expenditure on education and health has gone up 2.7 per cent and 1.25 per cent respectively in 2006-07 to 3.3 per cent and 1.4 per cent, respectively in 2010-11, said Union Finance Minister Mr Pranab Mukherjee at the concluding function of Diamond Jubilee Celebrations of Employees’ State Insurance Corporation (ESIC) in  New Delhi.

The Government has been implementing several programmes to address the development gaps in social attainments. There is the Mahatma Gandhi NREGA and Swarnajayanti Gram Swarozgar Yojana both intended to provide wage and self-employment respectively in the rural areas , Rajiv Gandhi National Drinking Water Mission to ensure drinking water security in rural areas, Backward Regions Grant Fund for development of infrastructure in identified backward areas , the National Rural Health Mission to provide health care services, and the Rashtriya Swasthya Bima Yojana to provide health insurance, he stated.

Similarly, there is also Indira Awas Yojana to provide dwelling units to the shelter less in rural areas and Jawahar Lal Nehru National Urban Renewal Mission to improve urban infrastructure , the Pradhan Mantri Gram Sadak Yojana to provide all weather rural road connectivity , Sarv Siksha Abhiyan(SSY) to provide elementary education to all children in the 6-14 age group supported by Mid-Day Meal programme and the recently launched programme for vocational education at the school level, he said.

Besides National Skill Development Corporation set up as part of the three tier Skill Development Mission has been mandated to achieve the target of skilled workforce of 150 million persons by 2022. These programmes are making a positive impact on the quality of life of the poor and the marginalized of our society, he added.

The Government has also expanded the coverage of social security schemes to provide a minimum level of social protection to workers in the unorganized sector. The Aam Admi Bima Yojana has provided insurance coverage to nearly 2 crore persons in the country till January 2012, Mr Mukherjee informed.

Under the Janashree Bima Yojana more than 2 crore lives have been covered during 2010-11. Similarly, more than 2.5 crore smart cards have been issued under the Rashtriya Swasthya Bima Yojana.

The Government has set up a National Social Security Fund with an initial allocation of Rs.1000 crore to support schemes for weavers, toddy tappers, rickshaw pullars, bidi workers, etc.

With development and benefits accruing from all these initiatives, the expectations of the people on the quality and availability of public services is improving. ESIC is also addressing this challenge.

To serve an ever increasing numbers of ESI beneficiaries, the Corporation started a massive IT rollout programme named ‘Project Panchdeep’. With completion of digitization of the operations of ESIC, the stakeholders find the procedures have become hassle free.

It has created transparency for the beneficiaries and has also enabled the doctors and the medical administrators for analyzing the trends related to sickness, diseases pattern, occupational health of workforce etc. I understand that the ESI Corporation has entered in the field of medical education. This will help the Corporation in upgrading the health care delivery system of ESI Scheme and creating medical human resources for its own hospitals and  dispensaries. ESIC initiative on providing unemployment allowance through a scheme named ‘Rajiv Gandhi Shramik Kalyan Yojna’ has shown impressive performance , he added.

 

Thesynergyonline Economic Bureau

NEW DELHI,FEBRUARY 24 :
ENVIRONMENTAL clearances, land acquisition hurdles and shortage of fuel supplies need to be quickly resolved as the country plans to spend one trillion dollars on infrastructure development during 12th Five Year Plan period 2012-17, deputy chairman of the Planning Commission Montek Singh Ahluwalia said.

Getting long-term debt is going to be a problem for infrastructure companies as a lot of issues like banks' exposure to certain sectors need to be looked into from the risk mitigation point of view, he said while inaugurating a conference organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

At the same time, interest rates are going to be determined by the growing fiscal deficit and flow of funds from overseas, said Mr Ahluwalia. The government's target maintaining the fiscal deficit at 4.6 per cent of GDP is likely to exceed by at least one percentage point during 2011-12.

In the power sector, finances of state electricity boards as well as transmission and distribution companies are not good. Nearly 53,000 megawatt of capacity could be installed during the 11th Plan period (2007-12) against the target of 78,000 megawatt.

The telecom sector too faces new regulatory and legal uncertainties, he said. "Still India is poised for nine per cent annual GDP growth rate in the next five years amid uncertain economic conditions globally. Growth prospects in the United States are
around 2.5 per cent while the European Union nations may range around 1.5 per cent compared to 6 and 7.5 per cent in emerging markets.

"If we have political and regulatory certainties in key infrastructure sectors and implementation issues are resolved, there are large pools of capital waiting to be deployed," said Mr Ahluwalia pointing out that investments by private sector have increased from 33 in the 10th Plan period to 50 per cent in the 11th Plan period. He said guidelines for Infrastructure Debt Fund have been issued and one or more projects will be fully operational by 2012-13.

Meanwhile, ASSOCHAM president Rajkumar Dhoot said with government finances under constraints, public private partnerships must be encouraged. Modern infrastructure across the country will be the foundation for maintaining growth momentum and equitable development.
The industry needs a large debt fund market as returns are spread over a large period, he said.

ASSOCHAM secretary general D.S. Rawat said land acquisition problems, delayed environmental clearances, fund constraints and slow progress in works are prime reasons for cost overruns. Delays pile up supply side constraints, leading to expected demand not being matched and pushing inflation to higher levels.

Others present at the meet titled 'Infrastructure Finance – At the Crossroads' were Mr Saud Siddique, joint managing director of SREI Infrastructure Finance, Mr T.N. Thakur, chairman and managing director of PTC India Financial Services, and Mr Jagannadham, strategist and equity head at SMC Global Securities.

     

 

Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 23 :
PRINCE  Abdul Aziz Bin Salman Bin Abdulaziz, Assistant Minister for Petroleum Affairs, Saudi Arabia held bilateral discussions with Mr R.P.N. Singh, Minister of State for Petroleum & Natural Gas here on Thursday  on matters of bilateral cooperation in the oil and gas sector.

Mr Singh led the Indian side while Prince Abdul Aziz Bin Salman Bin Abdulaziz led the Saudi side at the delegation-level talks under the India-Saudi Arabia Energy
Consultations. The Indian delegation included senior officials of the Ministry of
Petroleum & Natural Gas and CEOs of IOCL, ONGC, BPCL, HPCL and EIL.

After the delegation level talks, the Assistant Minister from Saudi Arabia also called
on Mr  S Jaipal Reddy, Minister for Petroleum & Natural Gas and held discussions
on wide ranging issues related to cooperation in the hydrocarbons sector between
the two countries. .

The two sides discussed the World Oil Outlook, especially the growing demand for hydrocarbons in Asia and India during the delegation level talks. Mr  R.P.N. Singh
conveyed India’s requirement of incremental quantities of Saudi Arabian oil imports
in the years ahead considering the ongoing expansion in India’s refining capacity.

The Indian side also conveyed its growing requirement of LPG (Butane and Propane) considering the accelerated expansion of LPG coverage in the country’s rural areas under the Rajiv Gandhi Gramin LPG Vitran Yojana (RGGLVY). India imports nearly 2 million tonnes of LPG from Saudi Arabia. Other related issues such as the imposition of arbitrary cuts imposed by Saudi ARAMCO on supply of Butane and Propane from time to time, MRPL’s request for supply of crude oil on the basis of parent company guarantee instead of letter of credit, etc. were taken up with the Saudi side. .

India invited Saudi participation in upcoming investment opportunities in its petroleum upstream and downstream sector including OPaL’s Petrochemical project at Dahej and OMPL’s Petrochemical project at Mangalore. An offer was made to the Saudi side for considering equity participation in these projects as a strategic investor.

Other proposed investment opportunities such as IOC’s LNG project at Ennore,
BPCL’s LNG terminal at Kochi, HPCL’s grass-root refinery in Vizag and IOC’s
petrochemical plant at Paradip were also discussed. .

Since both Saudi Arabia and India are prominent actors in the International Energy Forum (IEF) comprising 88 countries, which is the world’s principal vehicle for the ongoing global energy dialogue, several issues related to the IEF were also discussed. .

Acknowledging India’s importance as one of the fastest growing markets in the world, Saudi Arabia expressed its readiness to engage India and fulfill its energy requirements on a long-term basis. The Saudi side assured affirmative consideration of India’s request for larger quantities of crude oil and LPG while also agreeing to look into the issues raised by India relating to the hydrocarbon trade and investment between the two countries. .

The discussions between Saudi Arabia, a leading producer of crude oil and India, the world’s 4th largest oil importer are significant as they come at a time of heightened uncertainty in the international oil markets. Saudi Arabia supplied 27 million metric tonnes of crude oil to India during 2010-11, making it India’s largest crude oil supplier. .

  

Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 22 :
THE Union Finance Minister Mr Pranab Mukherjee said that with the introduction
of Goods and Services Tax (GST), we are now perhaps at the doorstep of
the most significant reform in the history of indirect taxes in the country.

He said that GST is expected to be a more efficient system of taxation and
is likely to give a boost to the tax revenues of the Centre and the States.

Mr Mukherjee said that GST will also remove barriers amongst States and
convert the entire country into a common market. Once implemented, GST
will bring about a paradigm shift in the arena of indirect taxation in the
country, the Finance Minister added.

He was speaking at the investiture ceremony organized here on
Wednesday to confer Presidential Award of Appreciation Certificates
notified for the year 2011, to 35 officers and staff of the Customs and
Central Excise Department. One of the officers was awarded the
certificate for exceptionally meritorious service at the risk of his life.

Mr Mukherjee said that the Customs and Excise Department has shown
an ability to adapt quickly and successfully to the challenges of the rapidly
changing economic environment in the country.

Mr Mukherjee said that the introduction of mandatory e-filing of Central Excise
and Service tax returns would not only make the process convenient for
the assesses and reduce the transaction costs, but would also throw
up useful information for analysis and for policy formulation.

The Finance Minister said that Central Excise is a significant contributor
to the indirect tax revenues of the Union Government.

He said that the Central Excise revenue has more than doubled over the
last 10 years from Rs. 68,282 crore in 2000-01 to Rs. 1,37,427 crore in
2010-11 which is 40 per cent of the total revenue from Indirect Taxes.

Mr Mukherjee said that the in the current financial year, the collections
from Central Excise up to January, 2012 stand at Rs. 1,17,730 crore,
out of total indirect tax collections of Rs. 3,17, 233 crore.

He said that there has been exponential growth in the service tax revenues
over the years. As compared to a revenue of just Rs. 2612 crore in 2000-01, the service tax collections in 2010-11 stood at Rs. 70,391 crore, which is about
20 per cent of total indirect tax collections, the Finance Minister said.

Mr Mukherjee said that the indirect tax collection figures up to January
2012 indicate that there have been some gains over the last year.
However, the Finance Minister said that still further efforts are required
to ensure to meet the target of indirect tax collections for the current fiscal.

Appreciating the performance of the Central Customs and Excise Department
in adapting quickly and successfully to the changing economic environment,
he stated that the department has come a long way from the control based
system to a record based system. Towards this end, he welcomed the IT
initiatives of the Department including the steps to introduce mandatory
e-filing of Central Excise and Service tax returns.

Mr Mukherjee hoped that the customs department would continue to play
a vital role in combating the menace of fake Indian currency, counterfeit products, narcotic drugs and psychotropic substances, smuggling of which has become
a major economic threat.

He said the department has been proactive in co-operating with other
countries for the prevention and detection of customs offences.

Congratulating the recipients of the Presidential Award, the Finance Secretary
Mr R.S.Gujral said that their achievements would be a source of inspiration
to the other officers of the Service.

On the revenue front, he mentioned that while Service tax revenues had been buoyant, there were challenges in so far as Central Excise & Customs
revenue were concerned. However, he expressed the hope that the budgetary targets would be achieved by the Department.

Quoting the report of the Global Financial Integrity that 70 percent of the
illicit outflow of funds is through trade mispricing, he highlighted the role of the Department in combating various forms of organized economic crimes.

He mentioned that there was a good momentum on the GST front, the
implementation of which required the concurrence of the States.

Speaking about the welfare measures of the staff, Mr Gujral mentioned that the Cadre review of the Department is expected to be through within a period of one month.

Chairman CBEC Mr S.K.Goel informed that the indirect tax collections
of Rs. 3,17,233 crore till January 2012 in the current financial year, are
15 percent more as compared to the revenues of the corresponding period last year.

He was optimistic that the Budget Estimates for the current financial year will be completely met.

He mentioned that the Department has to constantly strike a balance
between trade facilitation and enforcement measures.

He highlighted the efforts of the Department to encourage voluntary compliance through automation, improved taxpayer service delivery and non-intrusive
methods of cargo .

 

 

 
Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 21 :
AS  the FY13 UNION  Budget (due on March 16) draws closer, there is growing chatter that the government may introduce a ‘negative list’ of services. Currently, India taxes services based on a ‘positive’ list, i.e only certain services are taxed. A ‘negative’ list refers to a list of services that will not be taxed and other than that, all services would be subject to the prevailing service tax. Introduction of a negative list would raise service tax revenues considerably and would be an important step towards subsuming service taxes into a comprehensive Goods and Services Tax.

Services currently account for 59 percent of India’s GDP and have been clocking a steady average growth rate of 10 percent over the last few years. Services are broadly divided into: Trade, hotels and restaurants (share of ~30 percent in total services); Transport, Storage and Communication (18 percent ) ;  Financing, Insurance and Real Estate (30 percent) and Community, Social and Personal Services (22 percent).

Apart from their role in GDP, services are a major contributor to employment (~25 percent  of total) as well as foreign direct investment.

 Although services contribute close to 60 percent  of GDP, they generate tax revenues to the tune of just 1 percent  of GDP or 8.8 percent  of total tax revenues. Industry on the other hand , contributes 27 percent  of GDP but contributes over 70 percent of total taxes. Service taxes were introduced in 1994, on just 3 services at a rate of 5 percent , with revenue collections at Rs 4 billion.

Today, taxes are levied on over ~120 services, at an average rate of 10 percent  with collections at Rs 694 billion  (targeted to improve to Rs 820 billion  in FY12E). While service taxes are currently the purview of the Centre, a key aspect of GST is anticipated  constitutional amendments permitting States to tax Services. Thus, in the transition phase where
such amendments have not been passed, we could see services that fall within the jurisdiction of taxation by the states such as transport, tolls, entertainment etc, coming
under the negative list.

According to the Central Board of Excise and Customs (CBEC), other categories that may qualify for the negative list include services that have welfare considerations (education, public transport, health), and economic importance (agri services, infra development) etc.
Apart from focusing on widening the tax net under services, the Ministry of Finance has defined a number of other major service-related policy issues :  Raising FDI limits for some categories, including multibrand retail, insurance, banking, telecom, transport, etc , utilizing the scope of divestment for PSUs in the service sector (27 PSUs qualify, including Shipping Corp of India, RITES, Engineers India, STC, MMTC etc) ;  Tariff related issues for various sectors, transfer pricing, refunds, etc and  credit/finance related issues e.g venture capital funding Economics .

Revenues from service taxes have been growing at a steady pace, but remain low, at just Rs 694 billion  or 0.8 percent of GDP. This is just 8.8 percent  of total tax revenues.

Over time, the number of services under the tax net has widened from just 3 services at a rate of 5 percent , to over 120 services, at an average rate of 10 percent.
Currently, India follows a ‘positive’ list or an incremental system of adding new services each year to the tax net.

However, with the introduction of a ‘negative’ list, all services would be taxed with some exceptions.

The key contributors to total services are telecom, banking, insurance and business auxilliary services

 

 

Thesynergyonline Economic Bureau

NEW DELHI, FEBRUARY 20 :
GROWING at a compounded annual growth rate (CAGR) of about 30 per cent, the video surveillance and closed circuit television (CCTV) camera market in India is likely to reach Rs 2,200 crore by 2015, apex industry body ASSOCHAM said on Monday.

Indian CCTV camera market is currently poised at about Rs 1,000 crore and accounts for over 40 per cent of the Rs 2,400 crore worth total electronic security market in India, according to a study titled 'Indian CCTV/Video Surveillance Market: The Way Ahead' released by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

"Rapid economic growth and rising industrial activities amid security threats, fear of potential terrorist attacks has fuelled the demand for CCTV cameras evidently as government authorities and even private sector are investing huge amount of money in installing CCTVs to secure their offices and public places across the country," said Mr D.S. Rawat, secretary general, ASSOCHAM while releasing the findings of the study.

The global CCTV and video surveillance market is growing at a CAGR of about 25 per cent and is currently poised at about Rs 80,000 crore and is likely to cross Rs 1.5 lakh crore mark by 2015, according to the ASSOCHAM study. Asia accounts for nearly 35 per cent of the global CCTV market with a share of over Rs 27,000 crore.

CCTVs are the most sought after security systems and apart from government, both at the central and the state levels, the private sector is also going to increase their expenditure on security surveillance and as a result the cost of the CCTVs are going to head south, highlights the study.

"Tier II and tier III cities, currently having a small proportion of security system installations are going to emerge as the real growth drivers of this technology driven industry in the long run," said Mr Rawat. "Economic liberalisation will create jobs and income opportunities, attract migrants and foster a cosmopolitan culture in these cities making them prone to security threats."

The CCTV camera industry is going to emerge as a huge market in the next few years in wake of rising demands from sectors like hospitality industry, services, healthcare, retail and transportation.

The ease to inter-connect all monitoring systems, traffic systems, various market places with police stations and defence headquarters in the real time make the CCTV surveillance a prominent and feasible security solution.

Currently, parts of northern India account for maximum number of security installations, followed by west, south and east India.

Deployment of CCTVs significantly help in carrying out post-attack investigation, besides, continuous monitoring of the video surveillance system also plays a vital role in combating security breaches and terror threats at sensitive places like railway stations, airports, hospitals and busy market places.

"Public private partnerships (PPP) is a feasible solution to develop homeland security solutions to ensure safe, secure and smart cities, ports and highways," said Mr Rawat.

Bosch, Reliance-Siemens, GE, Honeywell, Samsung, Sharp, Vicon, CISCO, D-Link, Sony, Axis, Verint, DVTel, Ingersoll-Rand, Tyco, Zicom are certain leading companies involved in manufacturing equipment for the security industry.

Thesynergyonline Economics Bureau

NEW DELHI, FEBRUARY 18 :
YEAR 2011 was a missed opportunity, with trends in GDP (%) domestic policy paralysis coupled with a slowing global environment resulting in growth expectations for India coming off from 9 percent levels to 7 percent with doubts on whether even a 7 percent number can hold.

Measures to reverse this include incentivizing investments, attracting FX flows, addressing structural issues on inflation, executing proposed fiscal reform, re-vamping the current model of governance, and battling corruption.

Fortunately there are rays of light both on incentivising investments as well as attracting capital flows .

Trends in investment growth have trends in gross fixed-capital formation (%y-o-y ) been lacklustre with growth slipping from 17 percent y-o-y in FY04-08 to just 5 percent in FY12E.

This is a result of an amalgamation of factors: lack of sufficient coal/gas; high interest rates; land acquisition/environmental clearance concerns; lack of major government project announcements.

The recent appointment of a committee of secretaries to fast-track investments, is a positive development.

Key proposals include allowing: Fast track clearances for power and coal projects; 25 percent expansion in coal production of existing mines without fresh clearance; Coal India being instructed to sign fuel supply agreements with power plants that they have implement PPA's Investments.

Investment growth may recover marginally with adequate policy measures. Consumption trends have stayed relatively stable in the 6-8 percent y-o-y range, despite monetary tightening with growth supported by rising income, the use of gold as collateral and upcoming state elections . However, there are growing worries that growth could slow, particularly on the rural side.

Factors that could hurt rural spending include incremental outlay on NREGA would be limited to wage indexation ,the tapering out of the effects of the farm loan waiver scheme. and moderation in minimum support prices v/s past.

But populism could still prevail. Post the upcoming state elections, parties are likely to gear up for the 2014 polls. While these have a negative impact on the fisc, they have a positive impact on the vote bank.

Over the past year it has become widely acknowledged that the government has fallen severely short of expectations on the reform agenda.

The next month is crucial, with two key events likely to play a key role in determining the direction of the economy and markets in 2012: Upcoming State Elections – 5 major states – UP, Punjab, Uttarakhand, Manipur, and Goa – will be going to polls starting early next month. The outcome, particularly in UP, will likely have an important bearing on the structure of the government at the Centre and implications for the reform agenda.

The Union Budget, slated to be announced in mid-March, will be closely watched for forward looking statements.

The focus is expected to be on fiscal consolidation, infra development and agriculture.

Upcoming elections in 5 key states will play a major role in determining the incumbent UPA's performance in parliamentary elections in 2014. Two states each are ruled by Congress and NDA while BSP commands UP.

Key to watch is UP which has 80 seats where the results will play an important role in shaping policy decisions – the Congress performing well would cement its position at the Centre.

Reforms on the back burner due to some of the allies include: FDI in retail; Pensions; Fuel and Fertiliser Subsidies.

State elections results could play an important role in policy decisions,

Although India saw significant fiscal consolidation in FY02-08 under the Fiscal Responsibility and Budget Management Act (FRBM), progress was reversed in FY09, with the combined fiscal deficit, which had consolidated to 4.1percent of GDP in FY08 more than doubling to 9.5 percent in FY10.

With expenditures trending higher and revenues running below budget estimates, fiscal slippages are wellpriced in for FY12. This is due to: Lower Tax Revenues; Expenditure Overshoot; Lower Divestment Proceeds; and Higher Subsidies largely on account of fuel.

This could take the deficit to 6.2 percent of GDP v/s budget estimates of 4.6 percent.However, offsetting measures such as partially deferring oil subsidies, could result in the deficit coming in at 5.6 percent - 5.8 percent of GDP.

Two risks on the fiscal front in the coming year include losses of state electricity boards. Total losses amounted to ~ Rs 700 billion in FY11 from Rs267bn in FY07 with five key states ( Rajasthan, Tamil Nadu, UP, MP, and Bihar) accounting for 70 percent of losses.

According to Fitch, state support to power utilities has averaged 1 percent of GDP, comprising mainly of subsidies/subventions and guarantees.

Touted as the next sweeping reform and possibly a key election plank for the Congress, the 'Right to Food' Act Act aims at providing legal entitlement of food grains (rice, wheat and coarse grains) to 75 percent of the rural and 50 percent of the urban population. However, additional expenditure on food subsidies would be a minimum of Rs350 billion. And there is no respite likely in FY13 as pressure points emergem.

The FY13 Budget, scheduled to be announced on March 16 will be closely watched for forward-looking statements on various pending bills,and steps towards fiscal consolidation.

Revenue Measures – Focus on Boosting Revenues. Steps could include: Indirect tax reforms that align with the introduction of the GST such as increasing excise
duties/introducing a negative list for services. On direct taxes, one could expect some clarity on the timeline for implementation of the DTC.

Steps to curb subsidies would be key. Key would be if the increase in food subsidy is offset by lower fuel/fertilser subsidies.

On the structural front, measures are likely to to focus on infrastructure development and the social/agri space.

Given the current focus on sovereign debt concerns; India is on the radar due to its high current a/c and fiscal deficits, and high debt position. India's total debt/GDP stood at 133 percent. Growth and interest rate dynamics have resulted in public debt/GDP ratios coming off from 84 percent levels in FY05 to 69.4 percent levels currently.

Moreover, a key point to note is that the debt is largely domestic and India has a captive market for govt bonds.

In a bid to attract inflows the RBI has been relaxing its restrictions on pricing andthe quantum of inflows.

Further measures could include opening FDI to more sectors, the possibility of a dollar bond issue (similar to the RIB and IMD issuances), measures to bring in accounted money parked overseas, dollar swap-lines, and gold imports coming under scrutiny.In a bid to contain the import bill and stem rupee depreciation, the government has raised the import duty on gold to 2 percent value from Rs300/10g earlier; and on silver to 6 percent of the value from Rs1500/kg earlier.

While the overall debt-GDP ratio has seen a decline and forex reserves at ~92 percent of total external debt.

The deceleration in growth coupled with a moderation in sequential inflation will likely result in the RBI easing by 100bps in 2012. However, the RBI has said the timing and quantum would be contingent on policy measures to induce investments, and steps towards fiscal consolidation.

Given the tight liquidity conditions we expect to see continued recourse to OMOs and further CRR cuts.

Given India's high financing needs; structurally high savings have supported investment growth in the past.

Going forward measures must be taken to reverse the deceleration in savings to avoid a further increase in the current a/c deficit.

Global Financial Integrity estimates the present value of total illicit flows at US$640bn, while a BJP Taskforce report in 2009 puts the quantum anywhere between US$0.5-1.4trn.

These flows are typically the result of tax evasion, corruption, bribery, kickbacks, and terrorist activities.

Unlike elections in the other states which are a bi-polar contest; dynamics in UP are much more complex since there are four major contenders- BSP, SP, Congress and BJP.