Economy Watch

Economy News

Indian Economy Watch as on 15-March-2010.

Inflation

Food inflation dropped to 17.81% towards the end of February, but fuel inflation shot up due to a hike in excise and customs duty in the Budget. Food inflation declined by 0.06 percentage points during the week ended February 27 from 17.87% in the previous week. Though a range of essential items still continue to be expensive, the rate of price rise has been falling for some time now. The declining trend, if sustained, would buttress the government`s confidence that prices will start easing from April onwards.

Rs v/s US $

On Mar. 08, 2010 (Monday), The partially convertible rupee settled 0.2% stronger to stand at 45.53/54 against US dollar than its close of 45.60/61 on Friday. It had an intraday peak of 45.38, its strongest since January 12. On Mar. 09, 2010 (Tuesday), The partially convertible rupee settled 0.2% weaker to stand at 45.62/63 against USD than its Monday`s close of 45.53/54. It had an intraday peak of 45.38 on Monday, its strongest since January 12. On Mar. 10, 2010 (Wednesday), The partially convertible rupee settled at 45.37/38 against greenback than its Tuesday`s close of 45.62/63. It had an intraday peak of 45.34 which was the highest since January 11. On Mar. 11, 2010 (Thursday), The partially convertible rupee settled 0.5% weaker to stand at 45.61/62 against US dollar than its close of 45.375/385 on Wednesday.

Economy & its sectors

Railway revenue earnings up by 8.45%

The total approximate earnings of Indian Railways on originating basis during Apr. 01, 2009 - Feb. 28, 2010 were Rs 778,902.9 million compared to Rs 718,219.7 million during the same period last year, registering an increase of 8.45%. The total goods earnings have gone up from Rs 488,373.2 million during Apr. 01, 2008 - Feb. 28, 2009 to Rs 525,845.7 million during Apr. 01, 2009 - Feb. 28, 2010, an increase of 7.67%. The total passenger revenue earnings during first eleven months of the financial year 2009-10 were Rs 214,001 million compared to Rs 199,225.9 million during the same period last year, registering an increase of 7.42%. The revenue earnings from other coaching amounted to Rs 20,873.5 million during April 2009 – February 2010 compared to Rs 18,020.1 million during the same period last year, an increase of 15.83%. The total approximate numbers of passengers booked during April 2009 - February 2010 were 6,780.87 million compared to 6,485.20 million during the same period last year, showing an increase of 4.56%. In the suburban and non-suburban sectors, the numbers of passengers booked during April 2009 – February 2010 were 3,520.40 million and 3,260.47 million compared to 3,465.88 million and 3,019.32 million during the same period last year, an increase of 1.57% and 7.99% respectively.

Inflation to cool down in 2 months: Montek

The Planning Commission on Monday said food prices will come down in the next two months easing the overall inflation, which is currently at over 8.5%. ``The trend is that food price will come down in the next two months. I am sure that the trend down on food prices will bring down the overall inflation in the next two months,`` Planning Commission Deputy Chairman Montek Singh Ahluwalia said. The wholesale price inflation (WPI) rose to 8.56% in January, the highest in over 13 months, shooting past the RBI`s forecast of 8.5% for this fiscal end. The WPI hike was mainly because of a surge in prices of food items such as sugar, potatoes and pulses. Overall inflation in December was 7.31%. In January, sugar prices rose by 58.96% year-on-year while potatoes turned costlier by 53.39% and pulses by 45.64%. About the government`s borrowings next fiscal, Ahluwalia said, ``If fiscal deficit goes down the govt borrows less that year...means more money is available for private sector.`` Finance Minister Pranab Mukherjee has projected a fiscal deficit of 5.5% (of GDP) in his budget for 2010-11 against the estimates of 6.7% for this financial year.

Assam government signs two MoUs with Tata group

Assam government and Tata group of industries today signed two deals here. The first memoranda of understandings (MoU) was signed between Assam Industries and Commerce Department and Tata Housing Development Company (THDCL). The other deal was signed between THDCL and Guwahati Metropolitan Development Authority (GMDA). Assam Industries and Commerce commissioner and secretary Ravi Capoor and THDCL`s Managing Director and CEO Brotin Banerjee signed the MoU on creation of commercial spaces, IT parks and business hubs in the state. GMDA`s CEO Pritam Saikia and THDCL`s Banerjee signed the second deal for building commercial properties in public-private partnership mode in the metropolitan area. The MoUs were signed in the presence of Chief Minister Tarun Gogoi and Tata Sons chairman Ratan Tata and director R K Krishna Kumar.

Oil Min for compensating PSU oil retailers

After Finance Minister Pranab Mukherjee altered duties on auto fuels to raise revenues, the Oil Ministry is pressing for new ways to compensate state-owned retailers for losses they suffer on selling fuel below cost price. Oil Secretary S Sundareshan said maintaining the financial health of retailers IOC, HPCL and BPCL, who currently incur a Rs 1.9 billion loss per day on sale of petrol, diesel, LPG and kerosene below cost, was important to ensure supply lines don`t run dry and investments are made for expansion. ``The challenge before us is that oil marketing companies do not suffer under-recoveries (revenue loss on fuel sales),`` he said. Mukherjee`s move to raise customs and excise duty on auto fuels in the Budget 2010-11 resulted in petrol price going up by Rs 2.71 a litre in Delhi and diesel by Rs 2.55 per litre, leaving little scope for a price hike that could cut losses. Indian Oil, Bharat Petroleum and Hindustan Petroleum lose Rs 4.97 a litre on petrol, Rs 3.27 per litre on diesel, Rs 16.91 a litre on kerosene and Rs 267.39 per LPG cylinder. ``There is a need for realistic pricing of petroleum products (so that) the companies do not suffer under recoveries,` he said. ``It will be impossible for the companies to fund expansion projects (needed to meet growing demand in the country),`` he added.

NTPC trebles natural gas procurement from RIL

State-owned power utility NTPC has tripled the volume of natural gas it buys from Reliance Industries at the government-approved price of USD 4.2 per mmBtu, to 1.81 million standard cubic meters a day. NTPC, which till last month was taking 0.61 mmscmd from RIL`s eastern offshore KG-D6 field, has begun drawing an additional 1.2 mmscmd of gas to boost power generation, sources in know said. In October, the government had allocated an additional 3.85 mmscmd gas to NTPC. Since NTPC did not want to use the KG-D6 gas at its Kawas and Gandhar power plants in Gujarat that are connected with pipelines ferrying KG-D6 gas from the Andhra coast, a complex swap arrangement was worked out with state-owned gas utility GAIL India. Under this arrangement, GAIL diverted gas from other sources to NTPC plants and supplied RIL gas to its existing customers. Shares of the company gained Rs 2.55, or 1.27%, to settle at Rs 202.75. The total volume of shares traded was 344,369 at the BSE (Thursday).

Hero Honda looking for site to erect fourth plant

Country`s largest two wheeler maker Hero Honda today said it is conducting a feasibility study in 10 states to find the best suitable location for its fourth manufacturing facility and the decision will be taken in the next six months. ``There would be at least 10 states we would be looking at, at this moment. We are looking at the whole country as a clean slate,` Hero Honda Managing Director Pawan Munjal told reporters on the sidelines of Hero Groups Mindmine Summit here. When asked about his meeting with the Karnataka Chief Minister for setting up the plant in the state, he said, `Yes we met the Karnataka Chief Minister...I thought they were very open for us to go to the state. It was just a request from the Chief Minister to have breakfast with him, so we did. Shares of the company declined Rs 22.9, or 1.19%, to trade at Rs 1,907.00. The total volume of shares traded was 48,493 at the BSE (2.50 p.m., Thursday).

Air India, Indian Airlines merger causes wastage of public money: Deo

A parliamentary panel has called for fixing the responsibility for the improper merger of the Air India and Indian Airlines. The panel says this adversely affected impact on financial viability of the public carrier. Briefing reporters, Chairman of the Public Undertakings committee V Kishore Chandra Deo said that the merger of the two public sector airlines was an ill conceived and erroneous decision and has caused wastage of public money. The report of the committee was tabled in Parliament today. Giving recommendations for making Air India commercially viable, the panel has recommended strict compliance to define performance benchmarks for a phased capital infusion. The report recommends creation of a separate and professional business unit expediting the repair and overhaul process in the aviation industry apart from increasing utilization of air crafts to bring it to average of 16 hours a day per air craft. Deo added that capital infusion in the ailing public airline is imperative to make the company credit worthy.

India`s forex reserves slightly up by USD 74 mn

India`s forex reserves increased by USD 74 million to stand at USD 278,431 million as on Mar. 5, 2010, mainly on account of rise in foreign currency assets. As per the weekly statistical supplement of the Reserve Bank of India (RBI) released on Mar. 12, 2010, foreign currency assets increased by USD 81 million to stand at USD 254,072 million. During the same period, the reserve position in the International Monetary Fund (IMF) decreased marginally USD 1 million to stand at USD 1,392 million. Special Drawing Rights (SDRs) decreased by USD 6 million to stand at USD 5,047 million. Gold reserves remained steady at USD 17,920 million. 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.

Stock Markets

Sensex climbs over 1% for fifth consecutive week

The Indian markets settled with yet another week of gains with the Sensex rising 1.01% in the last five consecutive sessions. Consistent inflows from foreign institutional investors and buying in large-cap companies by index funds supported the upmove. Small and mid-cap companies underperformed the index heavyweights. The 30 share index, Sensex climbed 172.13 points, or 1.01%, to 17,166.62 in the week ended Mar. 12, 2010. On the other hand, the broad based NSE Nifty rose 48 points, or 0.94%, to 5,137 in the same period. Mid-cap stocks declined 34.63 points, or 0.51%, to 6,700.85 in the week. While small-cap shares dropped 67.13 points, or 0.79%, to 8,432.50 during the week. Major gainers over the week in the sectoral indices were IT gained 2.10%, TECk 1.19%, Oil & Gas rose 0.61%, FMCG climbed 0.42%, and BSE Conusmer Durables went up 0.37%. PSU dropped 2.70%, Realty fell 2.09%, Metal lost 1.64%, Power declined 1.20%, and Capital Goods went down 0.73% among major losers in the sectoral indices over the week. Major gainers in 30-share index were Mahindra & Mahindra (5.67%), ITC (5.66%), Housing Development Finance Corporation (5.09%), Tata Consultancy Services (4.54%), and ICICI Bank (3.89%) over the week. On the other hand Hindustan Unilever (9.50%), Reliance Communications (4.60%), Tata Motors (4.25%), Reliance Infrastructure (3.56%), and NTPC (2.77%) were the biggest losers in the Sensex over the week.

Economy News

Food inflation dropped to 17.81% towards the end of February, but fuel inflation shot up due to a hike in excise and customs duty in the Budget. Food inflation declined by 0.06 percentage points during the week ended February 27 from 17.87% in the previous week. Industrial production grew by a robust 16.7% in January compared to just 1% in the same month a year ago, led by a good show from the manufacturing sector. Manufacturing, which has around 80% weight in the index of industrial production (IIP) - a measure of factory output in the country - rose by 17.9% during the month against 1% a year ago.

Corporate News

Fortis Healthcare will acquire nearly 23.9% strategic stake in Singapore-based healthcare group, Parkway Holdings from TPG Capital (formerly Texas Pacific Group), in an off-market deal, estimated to be around USD 685.3 million. Parkway, one of Asia`s premium healthcare provider is listed on the Singapore Stock Exchange, and has a market capitalization of USD 2.4 billion. McNally Bharat Engineering Company engaged in providing turnkey engineering solutions, has received an order worth Rs 2.45 billion. The order work includes design, engineering, supply of equipment, civil work, structural work, erection and commissioning etc for the interplant transportation facilities for Rourkela steel plant of Steel Authority of India. The contractual period of completion of the order is 22 months.