Inflation and slow down of GDP growth rates in India - Tracking India Business and Economy news

Weekly reports on Indian economy and business

Inflation is being closely monitored even as bankers warn that higher interest rates could slow down GDP growth rates. Interest in India’s infrastructure projects are at an all time high.

- Chillibreeze Business Research Team

Government Policy & Infrastructure
Economy
SEZs
Agriculture
Sector Specifics
Power
Banking & Finance

Government Policy & Infrastructure

N-deal stand-off: Govt, Left agree to set up mechanism

The government and the Left parties agreed on Monday to formalise a mechanism to address the latter’s objections on the nuclear deal. But the Left’s main demand — not to proceed with the IAEA negotiations — remained unresolved even after a series of high-profile meetings between the two sides.

According to Left leaders, the proposed mechanism, in the form of a committee, will also decide how long the government would stall IAEA negotiations. However, the government has refused to give any time frame for the committee to finish its work.

Sources said a UPA-Left meeting was likely to be held on Wednesday to concretise the mechanism proposal. Prime Minister Manmohan Singh, UPA chairperson Sonia Gandhi and other top coalition leaders were expected to attend the meeting, they added. A larger section of Congress leaders finds the mechanism more of a time-buying arrangement for both sides.

August 28, 2007
Source: Business Standard

Govt plans council to certify valuation professionals

The Ministry of Corporate Affairs is working on a Bill for setting up a Council of Valuation Professionals of India to certify individuals who value business units. The Valuation Bill is likely to come up during the winter session of Parliament.

The Institute of Chartered Accountants of India (ICAI), the Institute of Cost and Works Accountants of India (ICWAI) and the Institute of Company Secretaries of India (ICSI) will be the council’s deemed members. The five other member institutes will be selected on the basis of the training standards set by the council, which will also have five government nominees as members.

Individuals who want to become valuation professionals have to be from one of the council’s member institutes. Professionals already in the business will have to get a certificate by qualifying some tests to be conducted by the council.

The certified valuers will have to pay an annual fee by April 1 every year. Ministry sources said the fee was expected to be decided by the end of the year.

August 28, 2007
Source: Business Standard

New farmer policy likely in current Parliament session

The government is likely to unveil a new national policy for farmers in the current session of Parliament. The new policy will have a special thrust on gender specific needs of women in agriculture. It will also address the issues relating to contract farming. A code of conduct for contract farming is likely to be included in the policy.

A senior official in the Ministry of Agriculture said the policy had been discussed in the Cabinet and would be placed before Parliament.

August 27, 2007
Source: Economic Times

Govt to introduce biometric PAN cards

The government is likely to introduce biometric PAN cards soon to address the problem of duplicate cards. A joint working group in the ministry of finance has given its report after obtaining technical and commercial proposals from leading biometric solutions providers, finance minister P Chidambaram said in the Lok Sabha during Question Hour.

The verification exercise as of August 10, 2007, has been completed in respect of 11,43,919 individuals of which 10,18421 PAN cards have been found to be duplicate and have been deactivated. Mr Chidambaram said biometric solutions were being considered so no one could obtain a duplicate card and no non-existent entity could get it.

August 25, 2007
Source: Economic Times

Tax relief for exporters on anvil

Exporters who have long waited for service tax exemption may be about to get their due. The commerce and finance ministries have reached an agreement on the list of services for which exemption would be available. The finance ministry has to take final decision on the notification, a source said.

The commerce ministry in the annual revision of foreign trade policy in April had announced service tax exemption for services consumed outside the country.

The services identified by the commerce ministry include warehouse charges, courier charges, banking charges, inland haulage charges, registration charges, commission to foreign agents and port charges.

As a precaution against misuse of the incentive, the commerce ministry has laid down that service tax on the identified services would be compensated only to the extent these relate to exports of goods.

August 24, 2007
Source: Economic Times

Economy

Forex reserves dip further

According to latest figures released by the Reserve Bank of India on Friday in its weekly statistical figures, total foreign exchange reserves including gold and SDR dipped $2.5 billion during the week ended August 17 to touch $226.4 billion.

Almost the entire pile up in reserves during the week is on account of a rise in foreign currency assets. The other components of reserves-gold remained unchanged. While SDR rose $1 million, and reserves with the IMF dipped $2 million.

Of late, foreign exchange reserves are rising more due to FDI inflows and ECB inflows rather than FII inflows which is evident from the structural shift in the balance of payments.

August 25, 2007
Source: Economic Times

'Growth slowdown likely if interest rates remain up'

The country's GDP growth could experience a slowdown if interest rates continued to rise or stayed at the current levels, ICICI Bank chief K V Kamat has said.

He, however, maintained that anecdotally there has been no change in course of the Indian corporates as of now. "We have not seen any projects being pushed from the front burner to the back burner, at least anecdotally," Kamath said.

On the retail front, Kamath observed that while risk remains within mapped areas, the issue was of affordability of mortgage or vehicle loans.

"Customers are now becoming careful in taking a decision on a home loan with 12-13 per cent interest rate or a car loan on 15 per cent interest rate," he said.

August 25, 2007
Source: Economic Times

Inflation goal is 4-4.5% range: Chidambaram

The Finance Minister, Mr P. Chidambaram, on Wednesday assured the Lok Sabha that all fiscal, monetary and supply side measures would be taken to rein in the wholesale price index (WPI) based inflation in the 4-4.5 per cent range.

For fiscal 2007-08, the Reserve Bank of India has pegged the inflation target at 4.5-5 per cent level. Mr Chidambaram highlighted that average inflation in 1979-80 was 17.1 per cent, 11 per cent in 1990-95 and 4.9 per cent in 2000-04.

August 23, 2007
Source: Hindu Businessline

Government to monitor inflation

The government will aim to keep the widely watched wholesale price inflation rate close to 4.0 per cent, Finance Minister Palaniappan Chidambaram told parliament on Wednesday.

India's wholesale price index rose 4.05 per cent in 12 months to August 4, lower than the previous week's 4.45 per cent, according to latest government data.

The minister also said there would be pressure on food prices until the production of wheat, rice and pulses was stepped up.

August 22, 2007
Source: Economic Times

SEZs

Bihar yet to have a SEZ

At a time when the Centre has given final approval to 362 special economic zones that are expected to attract a total investment of Rs 300,000 crore, the country's poorest state - Bihar - is yet to come up with any SEZ proposal.

Bihar has remained an SEZ-free state as Chief Minister Nitish Kumar-led government is believed to have taken a decision to avoid any controversy due to land acquisition. Farmers in several other states such as neighbouring Uttar Pradesh and West Bengal have protested land acquisition for SEZs and other industrial activities.

As per the SEZ Rules, the Board of Approval cannot give formal clearance to any proposal unless the land has been acquired and it has the backing of the state government.

August 28, 2007
Source: Economic Times

Goa should not have more than two SEZs: BJP

BJP has demanded that Goa should not allow more than two Special Economic Zones (SEZs) in the state to arrest the 'demographic invasion.'

"Goa has already notified two SEZs. We don't want more as it will result in forced migration in the state which will stress the infrastructure further," Leader of the Opposition Manohar Parrikar told reporters on Monday.

The official figures revealed that Goa has recognised two SEZs. Seven SEZs, including two which are recognized, are approved by the Centre, while eight more proposals are pending in Delhi which sums to 15 such exclusive zones in the state.

Of the total SEZ proposals, seven are Information Technology or ITES, three bio-tech, one pharma, one research, two gems and jewellery and one food park, Parrikar said.

August 27, 2007
Source: Economic Times

First IT hardware SEZ on anvil in Bengal

If things go smoothly, West Bengal will have the country's first IT hardware special economic zone for which 40 acres of land have already been acquired.

City-based RP Group, a Rs 400 crore company with diversified interests including Chirag brand of computers, has submitted a proposal for the IT SEZ with the state government and waiting for approval from the Centre.

August 26, 2007
Source: Economic Times

Soft landing: States may get to buy land for SEZs

Land acquisition by state governments on behalf of private developers of SEZs, which had been put on hold in April, could just be back.

The Centre is now considering a proposal which will allow states to intervene and acquire land on behalf of SEZ developers to the extent of 50% of the total land (in special cases like backward areas) as long as the developer has managed to get the rest.

The state will, however, need to make a case and convince the Centre that the SEZ is vital for the economic development of the state. Special cases where the state governments could intervene would apply to backward areas where an SEZ could help in creating employment and economic activity. One SEZ on this model has already been proposed in the Mewat area of Haryana which is drought-prone.

August 25, 2007
Source: Economic Times

Agriculture

Bailout plan for farmers with un-harvested cane

After the Maharashtra Government’s decision to pay sugarcane farmers up to Rs 25,000 per hectare for their standing crop that lay uncrushed this season, it is now the Centre’s turn to moot a similar compensation package for all cane-growing States.

A proposal is under consideration to provide Rs 25,000 per hectare from the Central kitty to growers whose cane could not be lifted by mills due to the unprecedented sugar glut. This would be given subject to the States making matching contribution, as Maharashtra has already done.

August 26, 2007
Source: Hindu Businessline

JK Agri’s new Bt cotton version likely by 2010

JK Agri Genetics Ltd says it would be in a position to commercially launch an improved version of its Bt cotton, containing a stacked combination of cry1Ac and cry1EC genes, by 2010.

The new ‘event’ has already been approved for multi location research trials (MLRT) at 16 locations in Maharashtra, Madhya Pradesh, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu during the current kharif season.

According to industry estimates, the total sale of Bt cotton hybrid seeds will go up from around 92 lakh packets in 2006 to over 150 lakh packets or Rs 1,120 crore plus this year.

August 23, 2007
Source: Hindu Businessline

Bt seed market to top Rs 1,000 cr

In 2006, an estimated 38 lakh hectares (lh) were covered under Bt cotton — out of the country’s total cotton area of 91.30 lh, including some 63 lh under hybrids and the rest under various desi and American varieties.

According to the Union Agriculture Ministry, cotton acreage this year has touched 87.45 lh as on August 17, of which Bt hybrids account for 53.32 lh.

Since farmers plant one packet (containing 450 grams of seed) for every acre and assuming an average rate of Rs 750, the size of the domestic Bt seed market would be roughly Rs 1,020 crore. Not bad for a technology that was commercialised first here in 2002, when it covered a mere 50,000 hectares.

August 22, 2007
Source: Hindu Businessline

Sector Specifics

Oil & Energy

eGoM fails to decide on RIL gas pricing

The meeting of the empowered group of ministers (eGoM) on pricing of gas from Reliance Industries’ D6 block in the Krishna-Godavari basin has proved inconclusive. The petroleum ministry today presented its views to the group, which will now meet tomorrow.

“The meeting was inconclusive. We will now meet at 6 pm tomorrow,” said Petroleum Minister Murli Deora, who is part of the group, headed by External Affairs Minister Pranab Mukherjee. He added a decision would be reached soon. Besides Mukherjee and Deora, the EGoM comprises Finance Minister P Chidambaram, Power Minister Sushil Kumar Shinde, Fertiliser Minister Ram Vilas Paswan, Law Minister HR Bhardwaj, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Corporate Affairs Minister Prem Chand Gupta.

August 28, 2007
Source: Business Standard

GAIL to infuse Rs 475 cr more in Dabhol project

GAIL (India) Ltd will infuse an additional Rs 475 crore in Ratnagiri Gas and Power Pvt Ltd (RGPPL), the erstwhile Dabhol project, to help complete the project. RGPPL needs Rs 1,200 crore to complete the project. GAIL board, which met on Tuesday, approved the proposal to infuse additional funds in the project.

Currently, GAIL holds 28.33 per cent in the project. Apart from GAIL the other stakeholders NTPC and MSEB were also asked by the Government to infuse additional funds in proportion to their equity structure in the project.

August 23, 2007
Source: Business Standard

Solar energy to 25,000 villages by 2012: Muttemwar

With an aim to supply power to every nook and corner of the country, the government is contemplating to provide solar energy to 25,000 unelectrified villages by 2012.

"There are 25,000 villages in the country where due to technical reasons regular electricity could not be provided. So, we are planning to connect them with solar and bio-energy," Union Minister for New and Renewable Energy Vilas Muttemwar said addressing a function here. Acknowledging that 56 per cent villages have no power connection, he said though the country needed 3 lakh MW power, the present production is just 1.35 lakh MW.

August 22, 2007
Source: Economic Times

Power

'Urjanchal' has high energy growth plans

Tucked in the border between Uttar Pradesh and Madhya Pradesh is a region that is aptly referred to as “urjanchal” or the energy hub of the country. It is home to almost a tenth of the country’s installed power generation capacity and is in the process of doubling it.

There are five thermal power plants in the region totalling over 11,000 mw. Another five plants are in the pipeline and among them is the 4,000 mw ultra mega power plant being built by Reliance Power Limited (RPL) — an Anil Dhirubhai Ambani group company— that would be India’s biggest thermal power plant. 

An abundance of coal and water — the two key inputs for thermal power plants — makes it a natural choice of location for power producers. While coal fields are spread over more than 2,202 square km, the Rihand and Sone rivers ensure a continuous supply of water.

The country’s largest power generator, government-controlled NTPC, has three thermal power plants that get water from the Rihand reservoir. Besides these, there is a 900 Mw captive plant of Hindalco at Renusagar and 3,180 Mw plants at Anpara and Obra.

Plants in the pipeline include Essar (2,000 Mw), Lanco (1,000 Mw), the Jaypee Group (1,000 Mw) and the US-based ISN (2,000 Mw).

The success of “Urjanchal” is encouraging plans to create similar power zones in Orissa, Chhattisgarh and Jharkhand, areas that are rich in coal reserves and water bodies.

August 28, 2007
Source: Business Standard

Ultra mega power plans to speed up

It would be mandatory for companies executing ultra mega power projects (UMPP) to commission a minimum one unit (about 660 mw) in the 11th Plan (2007-12).

The government is considering a mechanism to catch up with the lost time on account of delays in awarding the controversial Sasan project. The proposal would be applicable to all nine UMPPs.

For the two projects, Mundra and Sasan, where bidding process has already been completed, the successful bidders have been asked to complete one unit of 660 mw by 2012. The move is aimed at augmenting government efforts to achieve the targeted addition of 78,577 mw of additional capacity during the 11th Plan..

August 23, 2007
Source: Economic Times

Centre's nod to 21 MW unit of Baramura power project

The Centre on Wednesday approved the setting up a 21 MW gas-based unit of Baramura power project in Tripura, at an estimated cost of Rs 81.20 crore. The project which comes under North Eastern Council (NEC) plan, is estimated to cost Rs 81.20 crore, a PIB release said here today.

The project will be implemented by the Tripura State Electricity Corporation Ltd (TSECL). While NEC would release 90 per cent of the total project cost in phases as grant-in-aid, the Tripura government would provide the remaining fund as loan from its own resources.

Manipur and Mizoram would also benefit from the project that would be implemented during the Eleventh Five-Year Plan.

August 22, 2007
Source: Economic Times

Cement

Cement shortage tops high prices

Weeks after the Centre tussled with companies to lower prices, a runaway demand is causing acute shortage of the commodity across the country. Despite an average 10% rise in cement prices in the last four months, builders are faced with shortage of cement leading to delay in construction projects. The shortage is also fuelling a cost overrun.

TOI spoke to a cross section of construction companies. All of them, concurred with one point: ‘‘We are willing to pay the price cement companies want, but we should get the quantities that we want. Unfortunately we are not getting it. And a cartel is in play.”

August 22, 2007
Source: Times of India

Banking & Finance

Many Indians use cell-banking services

Indians are most likely to know their exact bank balance. At the same time, Indians are also the highest users of balance enquiry services by mobile phones and check their bank balance only when they need to, found an Asia-Pacific wide survey commissioned by mobile service vendor Sybase 365.

Among Indians, 49% of respondents to the survey claim to actively use their mobiles to check their bank balance, well above corresponding figures of 13% for Australia and 9% for China. The Indian respondents were also highly informed about the mobile-banking services being offered; 81% of the respondents gave a positive response to it. This was well above stats for not only other Asian countries, but also European countries where the average was about 65%, according to Dairymaid Mallon, senior manger, product marketing, Sybase 365.

The findings of the survey, which were also presented to various banks, show a huge scope for mobile banking in the country. 36% Indian respondents admitted that they would consider switching to a bank that was offering free mobile-banking services.

However, if the customers were to be charged for services, they would more readily pay for services like potentially fraud-related transactions and the ability to freeze lost cards via the mobile. Only 27% of the respondents said they would willingly pay for account balance enquiries and only 5% for other information related requests.

August 23, 2007
Source: Economic Times

BoI redesigns retail products to woo customers

The Bank of India (BoI) has redesigned its individual deposits and loan products to attract low-cost deposits and more customers. On Tuesday, the bank announced plans to provide free insurance cover on deposits which have a minimum base of Rs 1 lakh and cheaper insurance cover on education loans.

The bank will launch wealth management services in the next three months. The bank is also taking a closer look at its credit card business.

The bank has also restructured its business model by segmenting its 2,734 branches in four categories — resources centre, profit centre, priority sector and general banking centre. The resource centre will have 522 branches under its fold which are mainly located in residential areas and will focus on mobilising low-cost deposits.

There will be 310 profit centres which will focus on credit and branches will include those located in commercial area. The priority sector will focus on SME and agri business and branches would be located in rural area, while general banking branches will do all business on a standalone basis.

August 22, 2007
Source: Economic Times