India’s December exports rose an annual 6.7 percent to Rs 2,500 crore, while imports for the month rose 19.8 percent to Rs 3,780 billion, leaving a trade deficit of Rs 1,270 billion, the government said on Wednesday.

Exports between April-December rose 25.8 percent to Rs 21,760 billion. Oil imports for the month rose 11.2 percent to Rs 1,030 billion. Figures are rounded off.

Indian exporters enjoyed record growth last fiscal year, but have struggled in recent months in the face of economic turbulence in the European Union, which is India’s biggest trade partner.

Source : http://tiny.cc/llb2o

The Union ministry of food and consumer affairs proposes to insert a new clause in the fresh discussion note for the Cabinet on allowing foreign direct investment (FDI) in multi-brand retail. The Cabinet had decided to allow 51 per cent FDI in multi-brand retail in November, but had put the move in abeyance, owing to political opposition.

In a fresh initiative, the Department of Industrial Policy and Promotion under the ministry of commerce & industry, has again sought comments from the ministries concerned to prepare a new note for the Cabinet. The note would incorporate all clauses the ministries think should be added, after deliberations with all stakeholders concerned.

The ministry of food and consumer affairs has concluded discussions with voluntary consumer groups to formulate views that were left out in the initial draft. Following the discussions, the ministry has decided it should be explicitly stated that any joint venture initiative in multi-brand retail should abide by all laws related to consumer rights and protection, labour laws, and shops and establishment acts under the Union and state governments. These would also have to abide by any new law enforced by the state it operates in. That would be the prerogative of the state, and the Union government would not interfere, sources said.

Under labour laws, the venture would have to specify not more than eight hours of fixed working hours for employees, a compulsory weekly off-day and other employee benefits. All consumer protection guidelines under the Bureau of Indian Standards, like ISI marks, and the Weights and Measures Act also have to be adhered to.

Official sources said under the current rules of the Foreign Investment Promotion Board, any foreign company’s wholly-owned subsidiary or JV had to abide by revenue laws like central excise, state excise and value added tax.

However, the labour laws and consumer protection measures, while implicitly understood to have been applied by state and central governments, are not categorically mentioned.

In its earlier recommendation, the ministry had urged that a retail regulatory authority be set up before opening up the sector FDI. Officials said this was based on inputs from states, which collectively arrived at the consensus that along with a national commission, such an authority should be set up to address the problems of the retail sector.

States have also suggested a National Shopping Mall Regulation Act for the entire sector, to be supervised and implemented by the retail authority. These also felt along with corporate houses, farmer cooperatives or a government body should be part of the joint venture for FDI in retail. This would ease concern of local retailers, sidelining of consumers’ welfare and unemployment, owing to feared predatory pricing by retail giants.

Source : http://tiny.cc/ovhk8

The finance ministry has developed a new sovereign comparative rating method, which would be a part of this year’s Economic Survey.

The index, called the “Comparative Rating Index for Sovereigns” (CRIS), is based on Moody’s ratings and data on the gross domestic product (GDPs) of different nations as given by the International Monetary Fund, said Chief Economic Adviser Kaushik Basu.

The index has been developed keeping in mind the fact that when an investor searches across nations for a place to put money, the relative rating of nations is important. Major credit rating agencies give out sovereign credit rating of each nation as an absolute grade. How other nations fare does not matter in a particular nation’s rating score.

This is a new system for comparing the relative ratings of sovereign debt based on the historical evolution of their ratings over five years and the volume of their economic activity as measured by their GDP (not adjusted for purchasing power parity).

The ministry has ranked 101 economies according to this for the years 2007 to 2011. “The index uses external data on GDP and ratings combined in terms of pure mathematical and statistical methods without interventions or interpretations,” said Basu.

The Moody’s ratings, the ministry has used, are the long-term foreign currency sovereign ratings.

“The Moody’s rating, by this measure, for India in 2007 and 2011 was the same (Baa 3). The CRIS score for these years for India were 66.47 (2007) and 69.83 (2011),” said a ministry release.

This means, in relative terms, India has become a better investment destination by 5.06 per cent. In addition, India’s rank in terms of CRIS has moved up from 61 to 55.

“If we view the rankings in terms of quintiles (blocks of one-fifth of the distribution) India moves from the fourth quintile to the third, that is, the middle quintile,” said Basu.

As expected, the CRIS score for Greece has dropped sharply from 74.24 in 2007 to 13.97 in 2011, a decline of 81 per cent, and that of Ireland and Portugal dropped by more than 14 per cent.

In terms of CRIS, the US has seen its score rise from 78.20 to 81.81. This is accompanied by a loss of rank from the top of the chart to the 16th position. This shows that CRIS is distinct from a percentile score which is also a relative measure of status.

“The improvement in CRIS scores of nations such as India, China and Indonesia are partly due to the dramatic falls of scores of some European nations leading to a deterioration of the world average by over 4.8 per cent,” Basu said.

China’s index value has increased by 7.3 per cent across the 2007 to 2011 time span. Brazil’s index value increased by 11.8 per cent, Russia’s by 7.5 per cent and South Africa’s by 5.79 per cent in the same period. All the BRIC (Brazil, Russia India and China) nations had improved in rank as well as index value.

The 10 highest increases in the CRIS from 2007 to 2011 were achieved by Paraguay (31.26 per cent), Lebanon (22.71 per cent), Bolivia (21.2 per cent), Uruguay (18.09 per cent), Belize and Nicaragua (both 15.63 per cent), Philippines (14.26 per cent), Indonesia (12.83 per cent), Peru (12.75 per cent) and Ecuador (12.27 per cent).

Source : http://tiny.cc/9s2ja

The safest argument for higher property prices is the corruption factor. The nexus between real estate promoters and politicians is always spoken of when there is talk of unsustainable high property prices.

Politicians invest black money in property and it is in their interests to keep property prices high. Politicians also pressurise bankers to go soft on loan defaults by real estate promoters and that leads to the promoter being able to maintain prices despite a clear lack of demand.

These arguments for property prices staying high and going higher may hold true in the very short term, but in the longer term, it does not hold true.

In fact, the corruption factor has become a selling point for builders, while investors justify paying high prices citing corruption. But buying property based on the corruption factor can only lead to disaster.

Corruption actually kills property prices

Corruption has costs and these costs impact property prices adversely. For example, a bank forced to restructure loans to real estate will cut down its exposure to the sector leading to a lack of bank funding to the sector and high cost of loans for consumers.

Lack of funding to the real estate sector forces builders to resort to the informal markets, where costs are usurious. The builder usually cracks when servicing debt becomes unmanageable. The result is half-way constructed buildings or unsold inventory leading to depressed sentiment in the markets.

The high cost of loans for the consumer leads to postponing of genuine purchases leading to demand coming off. The consumer who is aware of unsold inventory will keep away from making purchases on hopes of builders lowering prices down the line. High supply coupled with falling demand leads to prices coming off down the line.

How real estate stock investors react

Equity investors, in comparison, do not factor in corruption when selling real estate stocks when the going gets tough.

Equity investors look at balance sheet strength, growth potential and return on capital; when all three signs show of stress, they sell the stock. The BSE Realty index is down 88 percent from its high of 13,848 hit in January 2008 and is currently trading at around 1,650.

The sharp fall in the value of realty stocks is in stark contrast to property prices either staying high or going higher.

Equity investors are assigning lower property values to builders, while property investors are assigning higher property values to builders.

Property prices usually follow equity prices on the way down as builders cannot get access to equity capital for leverage and with both sources of funding — equity and debt — cut off, builders will have a tough time staying afloat.

Ultimately, market forces win

The market is a great leveller. Equity markets have levelled the highflying ambitions of realty companies, which built up huge expectations of unfettered growth.

Real estate markets will do the same as the patience of investors (whether it is a politician investing in black money or a speculator seeking to make leveraged gains) wears off on the extension of a return horizon. Investments made with a three-year time frame have now been extended to six years.

The time factor brings down returns and with interest rates high in the system, the opportunity cost becomes higher. The market then follows the supply-demand principle: with supply far higher than demand, there is a fall in prices.

Source : http://tiny.cc/uld1z

With the expectation of a cut in key policy rates, falling inflation and the chances of open market operations every week, Nomura India rates strategist, Vivek Rajpal predicts that rates are likely to consolidate around 7.45-8 percent.

In an exclusive interview to CNBC TV18 he said that the government needs more money and will conduct more open market operations (OMO). “Expect another Rs 50,000 crore to be purchased by March,” he said. For this, the government will have to conduct Open Market Operations of atleast Rs 80,00 crore every week.

At the moment, the banking system has rupee liquidity deficit of around Rs 120,000 crore and a currency leakage of around Rs 2 crore is expected within the next two weeks, Rajpal said, adding, that the liquidity deficit will stand at Rs 1,40,000 crore if there is no liquidity infusion.

Source : http://tiny.cc/13v2d

The role of Finance Minister Pranab Mukherjee just gets tougher and tougher. Not only does he have to manage an ever-increasing fiscal deficit, he must now play Godfather for some state-level budgets as well.

If a report by Business Standard today is anything to go by, it seems he will not only have to find creative ways to fund the growing deficit, but also meet the demand of the UPA’s premium ally, Trinamool Congress, to bail out financially-ailing West Bengal.

“West Bengal is reeling under Rs 15,093 crore of interest payments and Rs 6,900 crore of prepayments for 2011-12,” the newspaper said. Add to that a total debt of Rs 2 lakh crore and things look ready to implode.

West Bengal, unfortunately, won’t be the only state making demands on the Union Budget. Financial packages will also have to be worked out for other troubled states like Punjab and Kerela.

Pranab-da’s task will be to find out how to satisfy them all without stretching the fiscal deficit too much. Sounds like mission impossible — without Tom Cruise.

Most analysts, in fact, are hoping for some sort of fiscal consolidation in the Budget this year.

Top banker Uday Kotak, in an interview  to PTI, said, “Around the world, what we are seeing is an easing monetary policy and a move toward tighter fiscal policy. But, in India, we had a tighter monetary policy and an easier fiscal policy. It’s time for us to change that equation.”

In the recent monetary policy review, Subbarao also made it clear that the Reserve Bank would not ease interest rates until the government effectively managed its fiscal gap.

In an interview to CNBC TV18 recently, Deputy Chairman of the Planning Commission Montek Singh Ahluwalia said the primary objective of the budget will be to contain fiscal deficit and lower subsidies, although that might not be easy.

Source : http://tiny.cc/xyw6j

The Karnataka government’s financial status has remained sound during the present fiscal following higher collection of revenue receipts and taxes, governor H R Bhardwaj said on Monday.

In his address to the joint session of the state legislature, Bhardwaj informed the members that revenue growth was 20 per cent, coupled with over 15 per cent growth in plan expenditure this year.

“The state has also continuously maintained a revenue surplus in the last four years. The borrowings of the state are within the permissible fiscal prudence norms. My government is confident of achieving the approved Plan size for 2011-12 in full measure,” he said.

Though he did not mention the exact revenue figures in his speech, the government website shows that the total revenue receipts rose 21.3 per cent to Rs 47,318 crore for the first nine months of the fiscal ended December 2011 compared to Rs 38,994 crore in the year ago period.

The state’s own tax revenues were up by 21.4 per cent to Rs 33,032 crore for the nine months ended December 2011 compared to the corresponding period last year. Own taxes include commercial taxes, excise, motor vehicle tax and stamps and registration.

The year on year growth in plan expenditure was 15.3 per cent at Rs 16,755 crore as on December 2011. This is 48.4 per cent of the budget estimates of Rs 34,644 crore.

“The slowdown of global economy and the moderation of growth of the country as a whole, this year has thrown up challenges to the state economy. Even in such a scenario, Karnataka state has managed to maintain a very healthy tax revenue growth,” Bhardwaj said.

He said Karnataka was not fortunate enough to get adequate rain during the kharif season of 2011 and witnessed conditions of drought in September 2011. The highest deficiency of up to 24 per cent of r ainfall in the month of September was the worst ever in the last 40 years. This has affected large tracts of land leading to low crop yields. The state was however quick to respond to this situation and declared 99 taluks of 23 districts as “drought affected” and took immediate measures, he said.

The State has also submitted a memorandum to the government of India seeking central assistance of Rs 723 crore, he said.

Referring to the successful conduct of global investors meet in 2010 and global agri business investment meet in December 2011, the governor said, “My government is planning to hold the next global investors meet on June 7 and 8, 2012. The aim is to generate one million jobs by attracting large scale investments across various sectors and to improve the state’s GDP level.”

He said Karnataka has initiated different measures to conserve natural resources and its sustainable development. “In order to curb illegal mining and transportation of iron ore, my government has framed separate rules. To prevent illegal sand mining, the New Sand Policy 2011 has been implemented. E-Permit system has been implemented for the first time for all major minerals in the state,” he added.

Source : http://tiny.cc/hs06v

The road from Moreh, a town on the Manipur-Myanmar border, to Imphal was used by the Japanese army in 1944 to come right inside the heart of British India’s north-east, even challenging the might of the empire.

For decades thereafter, the Imphal-Moreh road as well as other border roads in Arunachal Pradesh and Nagaland were pretty much left to their own fate, as India deliberately ignored the development of border infrastructure, fearful of easing an enemy’s passage inside the country once it had broken through the frontier.

But as India revamps its mindset on border areas and begins to look at neighbouring states — such as Myanmar and Bangladesh — as part of a contiguous hinterland that must also participate in India’s economic growth, the first glimmer of a shift in South-East Asia’s balance of power is becoming slowly apparent.

Take the stream of visitors making their way to Delhi recently, in the run-up to India’s commemoration in December 2012 of its “Look-East policy” and its 20-year-old partnership with the Association of South-East Asian Nations (Asean).

Vietnamese president Truong Tan Sang’s official visit last October was quickly followed by Myanmarese president Thein Sein, also in October. Last week, just as Thai Prime Minister Yingluck Shinawatra, 44, arrived in the capital to attend the Republic Day parade, the first woman head of government in several decades, Myanmar foreign minister Maung Lwin was departing Delhi’s shores.

Interestingly, 2010’s chief guest at the Republic Day ceremonies was South Korean president Lee Myung-bak, while last year’s chief guest was Indonesian president Susilo Yudhoyono, the latter a key member of Asean.

Yingluck, whose closeness to her brother and former Thai prime minister Thaksin Shinawatra is an open secret, is a businesswoman, as well as married to one. She is expected to follow in Thaksin’s footsteps, which is to promote a CEO-like approach to governance, even though Thaksin, still a billionaire, remains in exile in London and Dubai.

That school of thought clearly struck a chord in Delhi last week, through the official dialogue as well as at her meeting with the industry associations. Annual India-Thailand trade currently touches $7.5 billion, but with Yingluck proposing greater Thai investment in India — in the hotel industry, in the food-and-vegetable cold chain — chances are that both countries will double their target by 2015.

Still, it was Yingluck’s offer to India to invest in an Italian-Thai joint venture that is seeking to build a world-class port and attendant infrastructure in the Dawei special industrial zone on Myanmar’s south-western coast, that has stirred the tea leaves in the region.

Dawei’s geographical location — on the isthmus that separates the Andaman Sea from the Gulf of Thailand — is so compelling that it has the potential to completely transform India’s relationship with Asean as well as East Asia.

Both Chennai and Kolkata are just across the Bay of Bengal, and both countries are already talking in terms of ramping up connectivity across this large lake by introducing ferries to Yangon, as well as Dawei.

As Myanmar emerges from its self-imposed isolation and reaches out to the world, and the world returns the compliment, Dawei could soon become a major stop on the maps of merchant ships.

US Secretary of State Hillary Clinton’s recent visit to Yangon and her announcement that the US would soon revoke sanctions on Myanmar (this is expected to happen once democratic leader Aung San Suu Kyi participates in the April elections) is both a reaffirmation of the democratic spirit in Myanmar — as well as the US return to challenging China’s rising power in Asia.

In Clinton’s wake, from Pakistan to France, the world is beating a path to Myanmar’s door. Pakistani president Asif Ali Zardari has been the most recent visitor, but dignitaries from France, UK and Australia have travelled both to its interior capital, Naypydaw, as well as paid obeisance to Suu Kyi in Yangon. Interestingly, Myanmar’s parliamentary speaker, Shwe Mann, told his Indian counterpart, Lok Sabha Speaker, Meira Kumar, as well as Indian officials during his visit here in December, that “India’s model of inclusiveness was a model for Myanmar.”

Myanmar’s foreign minister, Maung Lwin, reiterated the message last week, giving Prime Minister Manmohan Singh a detailed account of Myanmar’s “planned and orderly commitment to reform,” both economic and political. Agreements with several dissident ethnic groups have been reached, he said, and discussions with those holding out, such as the Kachins, remain on the cards.

India’s trade and economic figures with Myanmar, at $1.25 billion, are low, especially when compared to Myanmar’s trade relationship with China, touching $4 billion. Myanmar exports natural resources, such as timber, and agricultural products such as kidney beans or ‘rajma’, to India, while India exports machinery, industrial equipment, pharmaceuticals and consumer goods.

Nevertheless, Delhi remains heartened by the fact that only days before Thein Sein came to India last October — he began his visit by paying his respects to Buddha’s shrine in Bodh Gaya — the Myanmarese cancelled a $3.6-billion dam that China was building in their country.

Thailand’s proximity means it is a natural player in Myanmar. Besides the Dawei investment, the Chinese news agency Xinhua reported last week quoting the New Light of Myanmar, four foreign companies were forming a joint venture with three domestic companies to run a special economic zone in Pathein, in the Ayeyawady region, also in south-western Myanmar. Two of the four foreign companies are from Thailand, one from Hong Kong and the fourth from Indonesia.

Indian officials point out that strategic interest in Myanmar, as well as in the greater Asean region, can only be complemented by “greater Indian business interest. Indian companies should take advantage of the fact that India refused to kowtow to US pressure and withdraw from Myanmar. Now as Myanmar opens up, they have to be first off the mark,” one official told Business Standard.

Essar and ONGC Videsh are making money from their 20 per cent stake in an oil block off the Rakhine coast, officials point out, while a detailed project report on building a 1,200-Mw project on the Chhindwin river is almost ready.

Officials say they hope the private sector will make use of India’s $500-million credit announced during Thein Sein’s visit to improve ties with Myanmar.

Delhi’s intention to expand its presence in the region is at last showing on the ground. Finally, 132 km of a beautiful, road from Moreh, the Manipuri border town, and across the border to Mandalay, as well as the last 165-km stretch to Mandalay has been built.

With the Thais also building their share of the stretch from Myanmar, the trilateral highway between India, Myanmar and Thailand could soon put India’s neglected north-east in the heart of Asean’s action.

Source : http://tiny.cc/hr6mg

Vikram Pandit, the high-profile chief executive officer of Citigroup, thinks that India does not need to get defensive about its slowing economic growth.

“Seven percent growth is nothing to apologise for,” the New York-based Pandit, who has been head of the US-headquartered financial group since late 2007, told The Economic Times in an interview at the World Economic Forum in Davos, Switzerland.

Of late, several businessmen and market experts, Indian and foreign, have been echoing the same sentiment. “India should be feeling good about achieving 7 percent growth,” is the common chant.

Seriously? To be honest, that sounds like a load of bull, because that kind of self-pat on the back could be harmful for growth in the long run.

How? In two ways: one, it makes us believe nothing is really wrong  with the economy even as we sub-consciously lower our expectations on growth and two, it leads to a diminishing sense of urgency on the part of the government to get its act together to boost the economy, because no one really expects any better.

To be fair, in a world where economic contraction seems to be the norm for several countries, 7 percent might seem like heady growth. But it is still a big disappointment for an economy once tipped to bound ahead in double-digits.

At the moment, growth projections have been lowered not just for this year ending March 2012, but also for the whole of next year. Economists at many top brokerages don’t expect the Indian economy to expand by more than 7.5 percent even in the financial year ending March 2013.

The government, so far, has done little more than talk up the economy. Weakened by a string of corruption scandals,  it seems to have no stomach for introducing large-scale economic reforms.

This, despite the fact that sectors across the board have slowed to a crawl. Infrastructure development, in particular, has practically stalled because of high borrowing costs and a host of regulatory hurdles.

Investments proposals hit a five-year low recently. As A Subba Rao, chief financial officer of the GMR group, warned, “If investment-led growth does not happen, we will manage to have a GDP of around 6.5 percent over the next 3-5 years.”

In addition, sectors ranging from aviation and power to coal and energy are in a shambles because of skewed policies that have made the operating environment tough and tipped more than one company into financial crisis.

The fiscal position of the government also continues to deteriorate by the day, even as it contemplates a bout of populist measures like the Food Security Bill, which threatens to push inflation into a permanently higher orbit and prevent the central bank from lowering rates to lift the economy’s growth rate.

In short, a large part of the slowing growth can be blamed on internal problems, or more precisely, inactivity on the part of the government. An interest rate cut (expected in coming months) by the Reserve Bank of India might ease sentiment but it’s not the cure-all for all the problems being faced by the economy.

Several brokerages have noted that fact, including CLSA, which, in a note last month, pointed out that while a lot of India’s problems were self-inflicted, government officials seemed content to blame external factors such as the eurozone crisis for its predicament.

In fact, it’s a miracle that the economy is growing at all given how much the government has gone out of its way to stifle it.

Let’s not get used to that. Patting India on the back for 7 percent growth will only give the government more reason to do nothing.

And then, before you know it, we’ll start believing 5 percent growth is nothing to feel deflated about.

Source : http://tiny.cc/g87yo

The government today revised the economic growth rate for 2010-11 financial year slightly down to 8.4 percent from the earlier estimate of 8.5 percent.

“The Gross Domestic Product (GDP) at factor cost at constant prices in 2010-11 has registered a growth of 8.4 per cent over the previous year,” the Quick Estimates of economic growth released by the Ministry of Statistics and Programme Implementation said.

“The major source of growth in the GDP has been from the services sector which has grown at the rate of 9.3 percent. The agriculture sector growth has also been impressive at 7 percent during the year 2010-11,” it said.

The growth of secondary sector, which includes manufacturing and construction sector, stood at 7.2 percent in 2010-11. In addition, the GDP growth estimate for FY09-10 has been revised upward to 8.4 percent from the previous estimate of 8 percent.

Agriculture sector growth recorded 7 per cent growth in 2010-11 as against a mere 1 per cent in 2009-10, the data showed. Finance, insurance, real estate and business services expanded by 10.4 percent in 2010-11 against a growth rate of 9.4 percent in the previous fiscal.

Earlier this month, the Reserve Bank had lowered its GDP growth forecast for the current fiscal to 7 per cent, from the earlier estimate of 7.6, due to global economic slowdown, high domestic interest rates and other factors. Trade, hotels and restaurants expanded by 9 percent in 2010-11 against a growth rate of 7.8 percent in 2009-10, the Quick Estimates released by MOSPI Minister Srikant Jena said.

Construction sector grew by 8 percent during the year under review against 7 per cent in the previous fiscal. The mining and quarrying sectors registered 5 percent growth in FY’11, against 6.3 per cent expansion in the previous fiscal. Manufacturing grew by 7.6 percent in 2010-11 compared to a growth of 9.7 percent in 2009-10.

Furthermore, electricity, gas and water production recorded 3 per cent growth in FY’11, compared to 6.3 per cent expansion in FY’10. As per the Quick Estimates, the transport, storage and communication sector expanded by 14.7 per cent in 2010-11. The sector had grown by 14.8 per cent in the previous fiscal.

The GDP at constant prices at market prices during the year 2010-11 has grown at 9.6 per cent, as per the data.

Source : http://tiny.cc/nexf2