Economy Watch

Economy News

Indian Economy and Policy Watch as on 17 November 2008

Highlights

RBI permits forex swaps for overseas arm of banks

Indo-ASEAN trade pact on track, to be signed on Dec.17

Railway revenue earnings up 15.76% during Apr- Oct `08

Nath appeals industry to retain staff

India, Qatar ink defense, security pacts

Power exchange to fetch fresh investments, says Shinde

Goldman forecasts India`s FY09 growth at 6.7%

Govt. issues oil bonds worth Rs 220 bn

PM rules out instant cut in fuel prices

Excise duty collections decline 8.7% in Oct.`08

CPSEs must park surplus funds with PSBs: FM

India, South Korea to sign FTA deal in December

Spectrum allocation case awaits decision on Dec 10

September IIP nos. shows recovery: Goldman

Deora says fuel price cut will be considered if crude stabilizes

India will return to decent growth: FM

IIP jumps to 4.8% for Sep`08

WB announces USD 100 bn aid to poor nations

BPL families in Maharashtra to get free homes

PM confident about 9% GDP

Animation industry to generate 0.2 mn jobs in 3 yrs: Assocham

Cabinet may urge air ticket sellers to cut transaction fee

German economy falls into recession

India calls for int`l co-op against eco downturn

European economy falls into recession after US

WTO raises concerns on deteriorating trade finance

G-8 should open doors for India & China, says France

Global turmoil to hit economy more in 2009: WEF

Inflation

Inflation made a welcome return to single digit growth at 8.98% after five months on account of lower industrial oil, commodity and food prices.

The wholesale price index (WPI) Inflation, showing some signs of relief, declined to 8.98% for the week ended Nov. 1, 2008, as compared to 10.72% in the week before.

Rs v/s US $

On Nov. 10, 2008 (Monday), The partially convertible rupee settled 0.6% stronger at 47.35/37 a USD than Friday`s close of 47.65/66.

On Nov. 11, 2008 (Tuesday), The partially convertible rupee settled 1.6% below at 48.12/14 against USD than Monday`s close of 47.35/37. On October 27, the rupee had fallen to a record low at 50.29.

On Nov. 12, 2008 (Wednesday), The partially convertible rupee settled at 49.30/32 against USD, 2.4% weaker than Tuesday`s close of 48.12/14. On October 27, it touched a record low of 50.29.

On Nov. 13, 2008 (Thursday), The market was closed on Guru Nanak Jayanti.

Economy & its sectors

RBI permits forex swaps for overseas arm of banks

The Reserve Bank of India (RBI) has announced that the bank would provide foreign exchange (forex) liquidity to Indian public and private sector banks having foreign branches or subsidiaries, through forex swaps of tenors upto 3 months.

This move according to the Bank, is India`s response to the move taken by central banks across the world to ease the liquidity situation through measures such as inter-central bank swap lines, collateralized lending and forex swaps to ease global turmoil and its impact on international money markets.

This facility according to the apex bank, will also be available on request until further notice.

The pricing of swaps will be based on the interest rates in the domestic as well as the overseas markets using the Reserve Bank reference rate for the dollar-rupee exchange rate.

Further, for funding the swaps, banks can also borrow under the liquidity adjustment facility (LAF) for the corresponding tenor at the prevailing repo rate. The RBI has said that it will be prepared to consider any specific relaxation of statutory liquidity ratio (SLR) requirements for this purpose.

Indo-ASEAN trade pact on track, to be signed on Dec.17

India`s pact with the 10-nation Association of Southeast Asian Nations (ASEAN) is well on schedule on December 17 and is unlikely to get affected by the ongoing political problems in Thailand.

``If any country is unable to complete its domestic procedure, it would sign it later. The rest of them will sign on the scheduled date``, a commerce ministry official said.

Due to the political uncertainty, Thailand a member of the ASEAN group has not been able to receive the required Parliamentary approval for the pact. `Thailand will also move further... if their Parliament can`t approve, before the target date, they will tell us. Most likely they will sign,` the official said.

While the deal on the Comprehensive Economic Cooperation Agreement (CECA) was clinched in August, it was left to be signed at the December 17 summit, which is to be attended by prime minister, Manmohan Singh.

Unlike India, where trade agreements do not need Parliamentary approval, ASEAN member-countries require clearance from their Parliaments for the pact that would open the market for goods for 1.5 billion people.

Prolonged negotiations on the CECA were completed in August. Differences revolved on the level of opening the politically-sensitive agricultural commodities like tea, palm oil and pepper.

While CECA would initially be restricted to goods, negotiations on extending its scope to services and investment would begin in the next phase.

ASEAN has emerged as an important economic partner for India with bilateral trade growing to USD 38 billion in 2007-08. This is set to grow to USD 50 billion by 2010.

ASEAN consists of 10-nation namely; Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Railway revenue earnings up 15.76% during Apr- Oct `08

Indian Railways` total approximate earnings on an originating basis during Apr. 1 – Oct. 31, 2008 witnessed an increase of 15.76% stood at Rs 445.48 billion as against Rs 384.82 billion during the same period last year.

The total goods earnings have gone up from Rs 256.88 billion during April 1 – October 31, 2007 to Rs 301.52 billion during Apr. 1 – Oct. 31 2008, posting an increase of 17.38%.

The total passenger revenue earnings during first seven months of the financial year 2008-09 stood at Rs 125.75 billion as compared to Rs 111.61 billion during the same period last year, witnessing an increase of 12.67%.

The revenue earnings from other coaching amounted to Rs 11.28 billion during April-October 2008 compared to Rs 10.60 billion during the same period last year, an increase of 6.39%.

The total sundry earnings have gone up from Rs 5.73 billion during April-October 2007 to Rs 6.93 billion during April-October 2008, showing an increase of 20.96%.

The total approximate number of passengers booked during April-October 2008 was 4,119.63 million compared to 3,867.08 million during the same period last year, showing an increase of 6.53%.

In the suburban and non-suburban sectors, the number of passengers booked during April-October 2008 was 2193.73 million and 1925.90 million compared to 2117.02 million and 1750.06 million during the same period last year, an increase of 3.62% and 10.05% respectively.

Nath appeals industry to retain staff

Commerce and Industry minister, Kamal Nath has urged India Incorporations not to increase profits by resorting to firing staff, as more and more corporates are resorting to job cuts to deal with the difficult economic environment.

Firms in the automobile, steel and real estate sectors are resorting to lay-offs in the midst of slump in demand.

``Employees on the roll must be retained``, Kamal Nath added.

He did not agree that IT firms like Wipro, Infosys Technologies and Satyam Computer Services could come under pressure to lay off people. However, fresh creation of jobs may be impacted.

``Maybe, they are not going to create the same number of jobs they have been creating. Yes, growth in employment generation will be affected``, he said.

Amid fears of global economic crisis spilling over to India, government had asked the industry leaders to refrain from large-scale layoffs.

Government would have to pump in Rs 250 billion in the next six months into the economy without creating an adverse impact on the fiscal deficit, Nath said.

India, Qatar ink defense, security pacts

Prime minister, Manmohan Singh`s visit to the energy-rich Gulf region resulted into the signing of India – Qatar defence cooperation and security landmark pacts.

The pacts will involve defense and security agreements laying a framework for joint maritime security and sharing of intelligence on threats posed by extremists.

The defense pact lays out a structure for joint maritime security and training as well as exchange of visits.

The security agreement would lay out the framework for sharing of information and data base on threats posed by extremists and other security and legal matters.

Oil & Petroleum minister Murli Deora met deputy prime minister and minister of Energy and Industry, Abdullah bin Hamad al Attiyah to discuss the possibility of importing an additional 2.5 million tons of liquefied natural gas (LNG) to meet growing energy needs back home.

India currently buys 5 million tons a year of LNG from RasGas of Qatar under a long-term contract. The exship price of USD 2.53 per million British thermal units (mmBtu) is considered a ``steal`` in current times when LNG prices are breaching USD 20 per mmBtu.

State-run gas utility GAIL India`s proposal to set up a mega petrochemical plant in joint venture with Reliance Industries also figured during the discussion.

Power exchange to fetch fresh investments, says Shinde

Launch of the country`s second electricity exchange would propel positive signals for fresh investment in the power sector, said power minister, Sushil Kumar Shinde.

Shinde was speaking after inaugurating the Power Exchange India (PXIL), which will be a platform for trading electricity and ensuring adequate price for suppliers.

The first electricity exchange, India Energy Exchange (IEX), which started operations in June this year, is trading around 12,000 mwh everyday. IEX is promoted by Financial Technologies (India) and PTC India.

``The most important aspect of the ``Power Exchange`` is its anonymity and neutrality and the price discovery is not influenced by the identity of buyer and sellers. As new supplies would increase, the price of electricity would start stabilizing``, Shinde said.

PXIL is promoted by the National Stock Exchange (NSE) and National Commodities and Derivatives Exchange.

Power Finance Corporation, Gujarat Urja Vikas Nigam, JSW Energy, GMR Energy and Jindal Power are the other equity partners in PXIL.

Goldman forecasts India`s FY09 growth at 6.7%

Goldman Sachs, a leading economic research firm, has forecasted a lower growth rate for India, referring `larger-than-expected shock` to the financial sector over the last couple of months, and its knock-on effects on both domestic and external demand.

Goldman has lowered its GDP growth numbers for FY09 to 6.7% from 7.5% and for FY10 to 5.8% from 7%.

Goldman believes that there is little fiscal space for additional stimulus in FY10. It also expects growth to trough at a quarterly pace of 5% in the April-June quarter of FY10, before recovering to 6.6% by end-FY10. The slowdown, in its view, is very much cyclical in nature.

Goldman said the gathering financial crisis over the past several weeks has affected India`s financial sector significantly, with both domestic and external liquidity drying up. This has impacted the financing for corporates, loans for households, and trade credit for exporters.

The real economy is already beginning to feel the effects of the liquidity crunch despite the Reserve Bank of India (RBI) and the government`s massive liquidity infusion efforts, it added.

Goldman believes the large global and domestic financial sector shock will continue to slow activity across the board, in capex plans, exports growth, and consumption demand.

This will in turn impact investment and external demands, and slow down consumption. On the production side, a significant slowdown in construction and real estate and in industry is expected.

A large monetary policy stimulus, prospects of a good agricultural crop supporting rural demand, lower commodity prices, and ongoing infrastructure spending would limit further downside to growth.

Govt. issues oil bonds worth Rs 220 bn

The Ministry of Finance announced the issuance of oil bonds worth Rs 220 billion to aid the cash-strapped oil marketing companies to overcome their financial problems.

The ministry said, ``the special bonds are being issued to three oil marketing companies as compensation towards estimated under-recoveries on account of sale of sensitive petroleum products during the current financial year,``.

The oil bonds, which will be issued to state-owned companies -- Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, will carry a coupon rate of 8.20%.

PM rules out instant cut in fuel prices

Prime minister, Manmohan Singh has ruled out an immediate reduction in petrol and diesel prices as he said that the government will wait till public sector oil companies break-even on fuel sales before considering such a move.

International crude oil prices has come down from an all-time high of USD 147 to USD 60 a barrel, but public sector oil companies continue to make losses on sale of diesel, domestic LPG and kerosene.

Though Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) have started making profit on sale of petrol, they lose about Rs 1.55 billion a day on sale of other three products.

``Oil companies have to bear a very heavy burden (and) there are limits to which government can go on subsidizing``, he said.

Government compensates half of the revenue loss on fuel sales through oil bonds and one-third of the losses are borne by cash-rich firms like ONGC.

Yet, IOC posted its largest-ever net loss of Rs 70.47 billion in July-September quarter. BPCL posted a net loss of Rs 26.25 billion in the second quarter on top of Rs 10.67 billion in April-June, while HPCL reported a loss of Rs 8.88 billion in Q1 and another Rs 32.19 billion in Q2.

Oil firms make a profit of Rs 4.12 a litre on petrol but lose Rs 0.96 on every litre of diesel, Rs 22.40 per litre on kerosene and Rs 343.49 per LPG cylinder.

Excise duty collections decline 8.7% in Oct.`08

Excise duty collections have declined by 8.7% in the month October 2008, reflecting the impact of economic slowdown on revenue realization.

Meanwhile, customs duty collections have declined by 0.9% in the month of October 2008.

The excise collection, which took a big hit in October, decreased by 8.7% to Rs 93.99 billion as against Rs 102.93 billion during the same period a year ago.

Similarly, customs duty collections declined by 0.9% to Rs 92.65 billion from Rs 93.53 billion in October 2007.

CPSEs must park surplus funds with PSBs: FM

Finance minister, P Chidambaram today (November 11) met heads of central public sector enterprises (CPSEs) and is believed to have impressed upon them to park surplus funds with public sector banks (PSBs) as per the government directive issued early this year.

The meeting comes amid complaints by PSU banks that CPSEs are not following the finance ministry guideline issued in January asking the public sector undertakings to park at least 60% of their surplus funds with the PSBs.

To earn higher interest rates, CPSEs with surplus cash call for bids from banks for depositing funds. As a result, PSU banks lose out deposits to private sector banks, which bid aggressively by offering higher rate for CPSE funds.

India, South Korea to sign FTA deal in December

India is closer to signing a free trade agreement (FTA) with South Korea, giving the country an opportunity to aggressively engage within Asia when the US and European economies are in turmoil.

``The deal is done and the agreement will be signed by December``, a senior commerce ministry official said.

While India does not need a Parliamentary approval for a trade pact, South Korea would need a green signal from its National Assembly.

The India-South Korea FTA would end duty barriers for over USD 11.2 billion bilateral trade.

Over 90% of the items under trade would be covered in the agreement, which is likely to come into effect in 2009.

India`s engagement within Asia is set to grow with the help of the trade-opening agreements reaching final stages with ASEAN.

Besides an umbrella pact with the 10-nation bloc, ASEAN, there would be individual deals with several member countries like Indonesia and Malaysia.

While negotiations with Japan have also reached advanced stage, India is hard-selling its USD 70 billion pharmaceutical industry in the agreement.

``By 2010, excepting China we will be seriously engaged with east and north-east Asia``, the official said.

India, growing by over 8% for the last four years, is also negotiating FTAs with European Union while preliminary studies have been initiated for sharing market with Australia and New Zealand.

The country has so far signed five FTAs and five preferential trade agreements.

Export to these countries account for 10% of the total outbound shipments. Twelve more are under negotiation.

Spectrum allocation case awaits decision on Dec 10

The Delhi High Court (HC) has called for Centre`s response on the petition challenging the first come-first serve procedure adopted in spectrum allocation.

A bench comprising Chief Justice A P Shah and Justice S Muralidhar asked the government to file its response within three weeks and posted the matter to December 10 for hearing.

The petition had challenged the Centre`s policy of allocating 2G spectrum and alleged it had caused a loss of crores of rupees to the exchequer.

The public interest litigation (PIL) assumed that the procedure followed by the government was nontransparent, and was intended for the benefit of some private players in the telecom industry.

``The telecom ministry`s deliberate inaction on the recommendations of the finance ministry, Prime Minister`s Office and Telecom Regulatory Authority of India (TRAI) has benefited private parties at the expense of public exchequer``, said individual petitioner Arvind Gupta.

He also referred to an earlier judgement of the High Court delivered in 1993 by which the court had said that `first come first serve` policy is unreasonable and unfair.

`The basis of first come-first serve for allotment of time slots on satellite channels is arbitrary. It is unreasonable, unjust and unfair,` Gupta said quoting the High Court judgement.

He questioned the government`s intention of not following a competitive bidding procedure.

The proximity of real estate developers to corridors of the department of telecom has enabled even real estate developers to overnight turn into telecom entrepreneurs.

Indian real estate developers and infrastructure promoters have also become Indian telecom players, Gupta alleged in his petition.

September IIP nos. shows recovery: Goldman

Goldman Sachs, a leading economic research firm, in its latest report on September Index for Industrial Production (IIP) numbers said that the September IIP growth recovered to 4.8% year on year (y-o-y), from the historic low of 1.4% y-o-y in August.

It was higher than the consensus forecast of 4.1% y-o-y and largely in line with Goldman`s expectation of 5% y-o-y.

The monthly momentum rose by 1.2% m-o-m in September versus a 3.2% m-o-m fall in August.

For the April-September months, IIP grew 4.9% y-o-y versus 9.5% y-o-y in the same period last year.

Growth in capital goods rebounded to 18.8% from August`s low of 0.9% y-o-y and 9.2% y-o-y in the first five months of the year. The capital goods monthly momentum rose to 6.6% m-o-m compared to an average 0.2% mo- m fall in the April-August months.

Growth in consumer goods softened to 5.6% y-o-y from 6.6% y-o-y in August, as non-durables slowed sharply, although durables held up well.

August`s record-low IIP number was an exaggeration and although September`s print marked some improvement, it continued the slowing trend we have been seeing in the last few months, the report said.

Recent activity data on exports, non-oil imports, excise duty collections and the Purchasing Managers Index, have been much weaker than expected, it added.

Goldman thinks the large negative global and domestic financial sector shocks will continue to slow activity across the board in capex plans, exports growth, and consumption demand.

Goldman have revised India`s GDP growth number for FY 09 to 6.7% from 7.5% and for FY 10 to 5.8% from 7.0%. It expect industry to grow by 4.0% y-o-y in FY09 from 8.1% y-o-y in FY 08.

Deora says fuel price cut will be considered if crude stabilizes

Murli Deora, oil & petroleum minister, said that the government will consider a cut in fuel prices if crude oil prices stabilize at levels where losses of oil companies are lower.

``Prime Minister has said we cannot reduce prices now because the oil companies are losing heavily``, Deora said.

On his way back from his maiden three-day visit to the Gulf, Prime Minister Manmohan Singh had yesterday said that the government will wait till public sector oil companies break-even on fuel sales before considering slashing fuel prices.

International crude oil prices have slid from an all-time high of USD 147 to USD 60 a barrel, but public sector oil companies continue to make losses on sale of diesel, domestic LPG and kerosene.

Oil firms make a profit of Rs 4.12 a litre on petrol but lose Rs 0.96 on every litre of diesel, Rs 22.40 per litre on kerosene and Rs 343.49 per LPG cylinder.

State-run refiner IOC posted its largest-ever net loss of Rs 70.47 billion in July-September quarter. BPCL posted a net loss of Rs 26.25 billion in the second quarter on top of Rs 10.67 billion in April-June, while HPCL reported a loss of Rs 8.88 billion in Q1 and another Rs 32.19 billion in Q2.

India will return to decent growth: FM

The current global economic downturn will impact India to some extent said finance minister P Chidambaram but he has expressed confidence that the country will still return to a `decent growth`.

``We can`t measure the impact. We have said we will be indirectly impacted. There will be impact to some extent on our growth, our exports and it will also impact the currency flows, which it has already``, he said.

``But we are confident that given the underlying strengths of Indian economy we can weather the crisis and still return a decent growth in 2008-09. Even the IMF last week`s assessment places India`s growth rate in current fiscal at 7.8%``, he added.

``We will still return a decent growth rate. We will suffer an indirect impact``, he said.

IIP jumps to 4.8% for Sep`08

Showing some signs of recovery from the earlier trends, index for industrial production (IIP) witnessed a growth of 4.8% in the month of September 2008 from a dismal 1.42% (revised) in the previous month.

Finance minister, P. Chidambaram on IIP estimates said that ``After the poor results reported for the month of August 2008, the quick estimates of Index of Industrial Production (IIP) for the month of September 2008 are more encouraging``.

It was, however, still behind the 7% growth recorded in September last year.

For the first six months of the current fiscal, industrial growth, as measured by Index of Industrial Production (IIP), stood at 4.9% compared to 9.5% a year ago.

Manufacturing, which contributes around 80% in the index, grew by 4.8% in September from 7.4% a year ago, while electricity generation grew by 4.4%, more or less same at 4.5%.

Mining output, however, rose by 5.7% from 4.9% in September 2007.

For the first half, manufacturing grew by almost half at 5.2% from 10% a year ago, while electricity was drastically down to 2.5% from 7.7% and mining to 3.8% from 4.9%.

WB announces USD 100 bn aid to poor nations

The World Bank (WB) will substantially increase financial support to developing nations in its bid to ease the impact of the global financial turmoil on these nations.

Ahead of the summit of the Group of Twenty (G-20) on November 15 to address the financial and economic crisis, WB said that it could make new commitments of up to USD 100 billion over the next three years.

WB said that the increase in financial support will protect the poorest and most vulnerable from harm, support countries facing big budget short-falls and help sustain long- term investments upon which recovery and long-term development will depend.

Lending could go up to almost triple to over USD 35 billion this year, compared with USD 13.5 billion last year, WB added.

WB is also stepping up support to the private sector through the launch or expansion of four initiatives by the International Finance Corporation (IFC), its private sector arm, with new facilities of about USD 30 billion over the next three years.

The World Bank is also working to speed up grants and long-term, interest-free loans to the world`s 78 poorest countries, 39 of which are in Africa.

The bank lowered its growth forecast for developing country economies to 4.5% for 2009, compared to a previous projection of 6.4%, due to a combination of financial turmoil, slower exports and weaker commodity prices.

WB expects high income country economies to contract by 0.1% next year and despite all the efforts being put in by the world economies only 1% growth is being estimated.

BPL families in Maharashtra to get free homes

Maharashtra Cabinet has decided to provide as many as 800,000 free homes across the state, except the greater Mumbai region to those living below poverty line (BPL).

Earlier, the government used to charge a nominal fee from the beneficiaries, under its scheme Indira Niwas Yojana to provide free homes for families living below poverty line.

The new scheme, which will provide free homes for families living below poverty line, would benefit thousand of families living under acute poverty in the state. However, coming in an election year, the move is more seen as an election gimmick.

PM confident about 9% GDP

Prime minister, Manmohan Singh is quite confident that the India will return to 9% growth route due to its inherent strength characterized by large size of markets, diversified industrial base and a dynamic private sector.

The long term outlook of Indian economy will remain strong and robust, he added.

Referring to the current global financial crisis, PM said that it presents a rare window for India and Qatar.

The investment requirements of a large emerging economy like India and a large financial surplus of an energy rich economy like Qatar can be married together to create a win-win situation, he pointed out.

Indian companies are also increasingly looking to invest in Qatar in the sectors like energy, construction, and finance and information technology, he added further.

He also assured the expatriate community that government will take all necessary measures to facilitate their remittances as India`s financing requirement for the infrastructure sector alone is estimated at USD 500 billion.

Earlier prime minister met the Emir of Qatar Sheikh Hamad bin Khalifa al Thani where he discussed bilateral, regional and global issues of mutual concern.

Animation industry to generate 0.2 mn jobs in 3 yrs: Assocham

Setting up of animation parks with studios for animation movie making can generate employment opportunities to the extent of minimum 0.2 million skilled animators in the next three years, said Assocham.

Currently, the Indian animation industry employs anything between 9,000 and 15,000 animators and needs 30,000 manpower immediately.

India would need skilled professionals like creative animator, conceptualiser, visualiser, 3D modeller, character designer, digital effects artist etc, who can handle multimedia software such as 3D Studio Max, Maya and Tictactoon.

These parks would also help Indian animation industry market size to reach over USD 1 billion by 2010, with a compounded annual growth rate (CAGR) of 30%.

In 2007, the animation industry market size was estimated at USD 450 million, Assocham said.

Despite the lowest cost of animation film production in India compared to countries like the US, Canada, Korea, Taiwan and the Philippines, Indian companies get lesser work, said Jindal, Assocham president.

Production cost of a half-an-hour animated movie costs around USD 60-70,000, while in the US, it is around USD 250,000-300,000.

Assocham has further pointed out that the Indian government can also help the animation industry by providing them with funding, guidance on manpower development and recognizing the animation courses.

By recognizing these courses, the government would help students and youths conveniently get the bank loans which are missing at present.

It further said the corporates that intended to set up the suggested parks, should be given a minimum of 10 years` tax holiday as well as land allocations at concessional rates.

Cabinet may urge air ticket sellers to cut transaction fee

The government is likely to ask sellers of airline ticket (airlines or agents) to either lower transaction fee drastically or do away with it completely taking a strong view of the bulky transaction fee being charged by airlines and travel agents on air tickets.

The fee came into effect after airlines decided to implement `zero commission` norms for travel agents from November 1, making air travel costlier.

Since then, the seller of a ticket, either the airline or the agent, have started deducting an additional amount of Rs 350 to Rs 500 on Economy and Business Class tickets on domestic sector and between Rs 1,200 and Rs 10,000 on the international tickets, depending on the distance flown.

There was no justification to charge such high transaction fees over and above the ticket price, which already included high fuel surcharges and congestion charges, among others, official sources said. These charges were charged following massive hikes in the prices of jet fuel.

While several international carriers had lowered fuel surcharges, the Indian carriers were yet do so, they said.

However, the sources acknowledged pressure on Indian carriers, which together accounted for one-third of the global collective industry loss of USD 5.2 billion this year.

The Indian aviation industry is likely to suffer a total estimated loss of USD 1.5 billion this year.

The airlines had informed the travel agents about the `zero commission` decision in June this year, following which a series of meetings took place between them. The `zero commission` concept was mooted by International Air Transport Association (IATA), the global umbrella body of airlines.

The date from which the transaction fee was to come into effect was fixed for October 1 and later extended by a month.

German economy falls into recession

The world`s third largest economy, the German economy is now in recession mainly due to falling exports.

The German economy shrank by half a percent in July, August and September, which was the second straight quarter of decline.

Meanwhile, world markets were mixed on Thursday (November 13) amid worsening US unemployment scenario.

The US unemployment rate has risen a full percentage point in the last year and currently stands at 6.5%.

Most economists expect the rate to go much higher in coming months, a belief that has been strengthened by the latest figures from the Labor Department.

India calls for int`l co-op against eco downturn

At the 28th edition of India International Trade Fair in New Delhi, the vice president Mohd Hamid Ansari advocated that greater economic integration is essential among the South Asian countries to sustain the tempo of growth.

New Delhi has called for intensified cooperation between India and the developing nations particularly among the SAARC and ASEAN to minimize the fallout of global economic turn down.

The twin themes of this years` trade fair are infrastructure and women`s empowerment.

While Pakistan is the partner country, ASEAN countries have been selected as the focus region.

Over 7,000 companies from India along with as many as 38 countries will participate in the event displaying their products and services. Around 100 companies from Pakistan have put various products like textiles, handicraft, food products and small machinery items on display.

Among the ASEAN countries, six nations including Indonesia, Thailand, Vietnam, Myanmar, Philippines and Singapore are also showcasing their products in the fair.

European economy falls into recession after US

Following the footprints of US economy, Europe`s economy fell into its first recession in 15 years in the third quarter, paving the way for deeper cuts to interest rates and taxes amid the worst financial crisis since the great depression.

Gross domestic product (GDP) in the 15 euro nations contracted 0.2% from the previous three months, when it also contracted 0.2%.

The two quarters of contraction - the result of this year`s soars in the cost of credit, the euro and oil prices - mark the first recession since the single currency was introduced almost a decade ago.

With the U.S. and Asian economies also struggling, leaders from the world`s largest nations meet in Washington today to discuss ways to limit the impact of the slump.

The world`s third largest economy, the German economy is now in recession mainly due to falling exports.

The German economy shrank by half a percent in July, August and September, which was the second straight quarter of decline.

Ireland and Italy have also slipped into recession this year, while Spain`s economy contracted in the third quarter for the first time in 15 years. Growth in the Netherlands and Portugal stagnated.

However, French GDP unexpectedly expanded 0.1% from the second quarter, when it shrank 0.3%.

Europe`s downturn surprised economists who in July saw just a 35% chance of a recession occurring in 2008.

The European Commission began the year predicting growth of 1.5% in 2009, only to cut its forecast to just 0.1% as the financial crisis escalated.

The U.S. economy, the world`s largest, contracted 0.1% in the third quarter, after a fiscal stimulus package boosted it by 0.7% in the previous three months. The U.K. economy shrank 0.5%, marking the first decline in 16 years.

WTO raises concerns on deteriorating trade finance

World Trade Organisation (WTO) Director-General Pascal Lamy on Thursday, November 13 said that the financial crisis was deteriorating the financing of global commerce which had already worsened over the past six months particularly since September 2008.

He also warned that the situation was likely to deteriorate further and estimated the shortfall in cash to finance world trade at about USD 25 billion.

Armando Mariante Carvalho of the Brazilian national development bank addressed the trade finance problems to be quite severe.

Raising a warning alarm he said, `` Nobody knows how deep and how long this crisis will be, and how 2009 will be affected and how the trade flow will be affected.``

G-8 should open doors for India & China, says France

France has said that G-8 should open the doors for emerging economies like India and China as major global issues cannot be addressed effectively without the cooperation of emerging economies like them.

The Group G-8 of the world`s top industrialized countries must be expanded to include India, China, South Africa, Mexico, Brazil, Saudi Arabia and other powerful economies, said French ambassador, Jerome Bonnafont to India.

The issues like financial meltdown, climate change and trade matters cannot be resolved, until the emerging economies are urgently brought on the high table on an equal footing, he added.

This is a strong conviction of France that India and Europe must work together hand-in-hand with other major economic powers.

Global turmoil to hit economy more in 2009: WEF

The global downturn will pressurize the Indian economy more next year and the government has to speed up reforms and boost investment to sustain high growth rates.

The report jointly prepared by World Economic Forum (WEF) and Confederation of Indian Industry (CII) said India could see a sharp outflow of capital, and a fall in share and asset prices due to the global financial crisis.

``India`s dependence on capital flows to finance its current account deficit is a macroeconomic risk and the global crisis could generate a sharp increase in capital outflows and a reduction in the availability of finance``, WEF said.

The global credit crisis has distressed Indian markets as foreign investors sold shares worth more than USD 12.5 billion so far this year while the rupee plunged by more than 20%.

``It (global crisis) could also weaken the balance sheets of the financial institutions, cause a further fall in share and asset prices, and challenge the macroeconomic situation due to shrinking global growth``, WEF added.

Indian policymakers expect a moderation in economic growth to less than 8% in the year to March 2009, compared with 9% recorded in 2007/08 fiscal year.

External sector

Forex reserves down by USD 1,519 mn

Forex reserves slumped by USD 1,519 million to touch USD 251,364 million as on Nov. 7, 2008, mainly due to a sharp decline in foreign currency and assets collections on a weekly basis.

As per the weekly statistical supplement of the Reserve Bank of India (RBI) released on Nov. 14, 2008, foreign currency assets decreased by USD 1,518 million to USD 242,527 million.

During the same period, the reserve position in the International Monetary Fund (IMF) declined by USD 1 million at USD 446 million, while gold reserves remained steady at USD 8,382.

Foreign currency assets expressed in USD include the effect of appreciation or depreciation on non-US currencies (such as Euro, Sterling and Yen) held in reserves.

Money & Banking

Call rates decline during the week

Overnight call rates witnessed a decline during the week ended November 14 on account of lower demand from the banks and improved liquidity conditions also kept call rates at lower levels.

At the beginning of the week, overnight call rates declined within the range of 4 - 6.30% with Weighted Average Rate (WAR) at 5.88%.

Thereafter, call rates rose within the range of 4.20-8.00% with WAR at 7.81%.

However, during the mid-week call rates declined within the range of 4.65-8.00% with WAR at 7.68%.

Thereafter, call rates declined within the range of 4.60-7.50% with WAR at 7.41%.

Finally, at the last day of the week, call rates remained within the range of 4.65-7.50% with WAR at 7.43%.

Note: On Thursday, November 13 the market was shut on account of local holiday.

Rupee plummets 2.85% for the week ended Nov 14

The Indian rupee plummeted 2.85% to close at 49.01 against the dollar in the week ended Nov. 14, 2008 as compared to the last week`s closing of Rs 47.65 (Friday, November 7), on concerns that the foreign investors will continue to sell their assets from local equities.

Rupee, appreciated marginally at the beginning of the week, thereafter, in the mid week it depreciated to its lowest since November 4. However, at the end of the week, it bounced back from its early losses.

At the beginning of the week, the partially convertible rupee appreciated as positive local equities improved hopes for fresh capital inflows, but dollar demand from importers and oil corporates have restricted further gains. Rupee settled 0.6% stronger at 47.35/37 a USD.

Thereafter, rupee appreciated as positive local equities improved hopes for fresh capital inflows, but dollar demand from importers and oil corporates have restricted further gains. Rupee settled 0.6% stronger at 47.35/37 a USD than Friday`s close of 47.65/66.

However, in the mid-week, rupee depreciated to its biggest single-day fall in more than 12 years on Wednesday, November 12 hit by increasing outflows from the local equities and heavy dollar demand from staterun banks to meet commercial operations. Rupee settled at 49.30/32 against USD, 2.4% weaker than Tuesday`s close.

Finally, at the end of the week, i.e. on Friday, November 14 rupee bounced back from two-week lows hit early on as exporters cashed in on the currency`s recent weakness and sold dollars while lower crude prices boosted sentiment. The partially convertible rupee settled at 49.01/03 a dollar. It had an intraday low of 49.49, which was its weakest since October 31.

Note: On Thursday, November 13, the forex market was closed on account of local holiday.

Stock Markets

Sensex plummets 578.87 pts during the week

Indian Equity market which showed hopes on the opening day, slowly portrayed their negative side and turned volatile at the end of the week on fears of economic slow down.

The 30 share index, Sensex plunged 578.87 points, or 5.81%, to 9,385.42 in the week ended Nov. 14, 2008. On the other hand, the broad based NSE Nifty plunged 162.65 points, or 5.47%, to 2,810.35 in the same period.

The Chinese government`s USD 586 billion revival package announcement on Sunday, November 9 which showed hopes on Monday, November 10, failed to sustain the same sentiment throughout the week.

Profit booking was witnessed towards the closing sessions of the week. BSE Metal index which was amongst the gainers on Monday was the most badly hit sector towards the end of the week.

Markets were closed on Thursday, November 13 on account of Guru Nanak Jayanti.

Mid-cap index plunged 139.3 points, or 4.15%, to 3,216.08 in the week, while small-cap index lost 135.05 points, or 3.46%, to 3,765.05 during the week.

Amongst the sectoral indices Realty dropped 14.14%, Capital Goods fell 8.96%, Auto lost 8.34%, BSE Conusmer Durables declined 7.37% and Power went down 6.04% over the week.

Major gainers in 30-share index were Tata Power Company (1.23%), Tata Consultancy Services (0.92%), and Bharti Airtel (0.02%) over the week.

On the other hand Jaiprakash Associates (16.19%), DLF (14.24%), Tata Motors (12.55%), ACC (12.55%), Mahindra & Mahindra (11.16%), and Maruti Suzuki India (10.21%) were the biggest losers in the Sensex over the week.