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Economy Round Up – November 12 to November 16, 2012

India Infoline News Service | Mumbai | November 19, 2012 17:50 IST

This has dampened investor sentiment. Doubts are being raised in some quarters about the India growth story going astray. Economies go through ups and downs and downturns do dampen spirits

Top Stories

We cannot do much about the global slowdown: PM

The economy was booming and the mood in Mumbai was exuberant. Double digit growth seemed eminently achievable. FDI and FII flows were rising rapidly. Government revenues were buoyant and the fiscal deficit was shrinking. The sense of optimism was all pervading.  Times have changed since then. Following is an extract of the speech delivered by Prime Minister Manmohan Singh at the ET awards:  Six years ago, I was here in Mumbai at an ET Awards function that celebrated 15 years of reforms. The global economy is under stress. Growth rates have slowed down everywhere. There is considerable uncertainty about the period over which growth will revive in the industrialised world.  The Indian economy has also been affected by these developments. Our exports have shrunk and the fiscal deficit has gone up on account of a variety of factors. Growth decelerated to 6.5 per cent last year and may be only around 6 per cent in the current year. This has dampened investor sentiment. Doubts are being raised in some quarters about the India growth story going astray.  Economies go through ups and downs and downturns do dampen spirits. However such downturns can have value if they make us focus on the weaknesses that are masked when times are good. India’s slowdown is partly because of the global downturn, but it is partly also because of domestic constraints which have arisen. We cannot do much about the global slowdown. Though, I dare say, we can certainly make a difference to the world if we do the right things at home to accelerate our own economic growth.  But we can, and we must, correct our own weaknesses, and create new opportunities for economic growth and employment at home. This is the challenge before us. I assure you this will now remain the focus of our policy in the months ahead...Read More

Revolution of rising expectations a challenge: PM

Governance in cooperative banks lacks professionalism: RBI
The Ministry of Finance on Thursday has asked the Reserve Bank of India (RBI) to finalise guidelines for new bank licences and start accepting applications for the same pending passage of the Banking Laws (Amendment) Bill. Finance Minister P Chidambaram had written to the central bank on Thursday and urged it to finalise the guidelines and start receiving applications for new banking.  The central bank last week said that the final guidelines will be issued and the process of inviting applications for setting up new banks in the private sector will be initiated only after the Banking Regulation Act is amended. In February 2010, the finance ministry had announced that the RBI would consider issuing fresh licences to private players and non-banking financial entities. In August 2010, the RBI released a discussion paper taking into account international practices and experience with private sector banks. The draft guidelines were released in August 2011, specifying the conditions relating to eligible promoters, minimum capital required, criteria for foreign shareholding, business model, desirable corporate structure and governance standards of the applicant group.

FM to meet state CMs, banks: reports

IIP for September contracts 0.4%
The Quick Estimates of Index of Industrial Production (IIP) with base 2004-05 for the month of September 2012 have been released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation. IIP is compiled using data received from 16 source agencies viz. Department of Industrial Policy & Promotion (DIPP); Indian Bureau of Mines; Central Electricity Authority; Joint Plant Committee; Ministry of Petroleum & Natural Gas; Office of Textile Commissioner; Department of Chemicals & Petrochemicals; Directorate of Sugar; Department of Fertilizers; Directorate of Vanaspati, Vegetable Oils & Fats; Tea Board; Office of Jute Commissioner; Office of Coal Controller; Railway Board; Office of Salt Commissioner and Coffee Board. The General Index for the month of September 2012 stands at 163.6, which is 0.4% lower as compared to the level in the month of September 2011. The cumulative growth for the period April-September 2012-13 over the corresponding period of the previous year stands at 0.1%. The Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of September 2012 stand at 114.8, 174.7 and 149.7 respectively, with the corresponding growth rates of 5.5%, (-)1.5% and 3.9% as compared to September 2011 (Statement I).

The cumulative growth in the three sectors during April-September 2012-13 over the corresponding period of 2011-12 has been 0.0%, (-) 0.4% and 4.6% respectively. In terms of industries, twelve (12) out of the twenty two (22) industry groups (as per 2-digit NIC-2004) in the manufacturing sector have shown positive growth during the month of September 2012 as compared to the corresponding month of the previous year (Statement II). The industry group ‘Publishing, printing & reproduction of recorded media’ has shown the highest growth of 16.5%, followed by 14.3% in ‘Wearing apparel; dressing and dyeing of fur’ and 7.5% in ‘Coke, refined petroleum products & nuclear fuel’. On the other hand, the industry group ‘Office, accounting and computing machinery’ has shown a negative growth of 30.7% followed by 23.6% in ‘Tobacco products’ and 19.4% in ‘Electrical machinery & apparatus n.e.c.’...Read More

What is IIP?

Construction sentiment in India continues to remain buoyant: RICS Survey
According to the latest RICS India Construction Market Survey for Q3 2012, workloads in the sector continue to rise despite the slowdown in the wider economy. The survey results indicate that sentiment remains relatively upbeat for both the private housing and private industrial sectors; however sentiment has turned negative for public non-housing segments. Additionally, workloads in energy and oil and gas, edged lower for the second consecutive quarter. Interestingly, the all-important infrastructure sector is continuing to witness growth, albeit at a more modest pace than in the previous quarter of the year. Also, the RICS India Construction Survey which has been designed to capture the sentiment of professionals working in the sector indicates that respondents are fairly upbeat on the prospects of workloads, employment and profit margins in the coming year. In fact, 97% of the respondents anticipate an increase over the next twelve months on workloads, with growth expected to average between 7.5 and 10%. The projected gain in employment in the sector over the same period however, is a little more modest at 2.5 to 5%. Not surprisingly given the strength of workloads in the present quarter and what is expected ahead, shortages of skilled labour continues to be a key factor limiting construction activity in the country at present. Responses to the survey indicate that skills shortages were visible across all fields including quantity surveyors, other construction professionals and also semi-skilled workers such as bricklayers, plasterers, plumbers, carpenters, and electricians. In fact 90% of the respondents, much similar to the Q2 results of the survey indicated that shortage of labour and financial constraints were the most prominent factors limiting construction activity in the country, followed closely by planning and regulatory challenges. Other factors holding up construction activity have been attributed to insufficient demand, weather conditions, shortage of materials and completion issues...Read More

Petrol prices cut by ~Re1/lt
Oil marketing companies have reduced the price of petrol by 95 paise per litre with effect from midnight. Reports stated that Petrol prices were last revised on October 27 when they were raised by 29 paise (to Rs. 68.19 per litre in Delhi) after the government increased the commission paid to petrol pump dealers.
 
Reliance Petro short selling: CIC asks details from SEBI

RIL denies allegations made by IAC

ONGC Videsh to restart crude production: reports

Inflation up a tad at 9.75%
Inflation based on the consumer price index was at tad higher at 9.75% in October as against 9.73% in September. The rise came as prices of sugar, pulses and vegetables gained. Sugar became costlier by 19.61% yoy. Prices of pulses jumped by 14.89% and vegetables became costlier by 10.74%. The Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation releases Consumer Price Indices (CPI) on base 2010=100 for all-India and States/UTs separately for rural, urban and combined every month with effect from January, 2011. Provisional indices for the month of October 2012 and also final indices for September 2012 are being released with this note for all-India and for States/UTs. All India provisional General (all groups), Group and Sub- Group level CPI numbers of October 2012 for rural, urban and combined are given in Annex I. The General Indices for rural, urban and combined are 126.7, 122.6 and 124.9 respectively.

Provisional annual inflation rate based on all India general CPI (Combined) for October 2012 on point to point basis (October 2012 over October 2011) is 9.75% as compared to 9.73% (final) for the previous month of September 2012. The corresponding provisional inflation rates for rural and urban areas for October 2012 are 9.98% and 9.46% respectively. Inflation rates (final) for rural and urban areas for September 2012 are 9.79% and 9.72% respectively. Inflation for specified categories is indicated at Annex II. State/UT-wise General provisional CPI numbers for rural, urban and combined are at Annex III. Price data are collected from selected towns by the Field Operations Division of NSSO and from selected villages by the Department of Posts. Price data are received through web portals being maintained by the National Informatics Centre. Prices of oils and fats increased by 18.69% in rural areas while it increased by 16.27% in urban areas. Vegetables became costlier by 13.71% yoy in rural areas while in urban areas the increase was 4.16%.
Special Stories

More than 70% of workers lack unemployment protection
More than 70% of workers worldwide have no statutory access to unemployment insurance or any type of unemployment assistance, the International Labour Organization (ILO) said. Unemployment insurance schemes exist in 72 countries out of 198 monitored by the ILO, most of them being middle- and high-income countries. The proportion of unemployed workers without any such income security is even higher (86 per cent) if one includes those who haven’t paid social security contributions long enough to qualify for unemployment benefits, as many unemployment insurance schemes are based on contributions.  "This means that more than 86 per cent of the almost 40 million people who dropped out of the labour market since 2008 found themselves without a regular income from one day to the other," says ILO social protection expert Florence Bonnet.   Young people are particularly affected. If they become unemployed after a short period of having entered the labour market, then they might not have paid into social security long enough to qualify for unemployment benefits.  Only 16 countries provide income support for unemployed young people as first-time jobseekers. Unemployment social security coverage varies widely between world regions. The proportion of unemployed receiving unemployment benefits can be as high as 80 per cent or more in Western Europe, North America, and Central and Eastern Europe, while it can drop to less than 10 per cent in Africa. It is less than 40 per cent in Latin America and the Caribbean, and less than 20 per cent in the Middle East and Asia. In fact, these variations reflect the different shares of employees in formal employment as a proportion of the total employment...Read More

Monster Employment Index India rises 13% YoY

Investments in disaster risk management essential to sustaining growth: ADB
The growing incidence of natural disasters in Asia and the Pacific where four of five cities globally classified as at extreme risk are located threatens to undermine seriously rapid economic progress, calling for a much stronger focus among governments on disaster prevention, says a new study from Independent Evaluation at the Asian Development Bank. The region has borne the brunt of the physical and economic damage of the sharp rise in natural disasters since the 1980s. Its people are four times more likely to be affected by natural disaster than in Africa and 25 times more than in Europe or North America. With 25% of the world’s gross domestic product, the region accounted for 38% of the economic losses due to natural disasters during 1980–2009. The study ADB’s Response to Natural Disasters and Disaster Risks calls for projects and programs to put a far greater emphasis on improving disaster prevention. Much wider recognition is needed of the fact that natural disasters, particularly storms and floods, are becoming endemic and that their increasing frequency and severity can slash economic growth and development. "We have thought for too long that natural disasters come and go, that they are just an interruption to development, and that they can be dealt with after they strike," says the Director General of Independent Evaluation, Vinod Thomas. "However, there is growing international recognition that the incidence and impact of natural disasters are increasing because of persistent poverty, population growth, and climate change."

In its review of ADB’s disaster-related projects and programs, the study notes that disaster prevention accounted for one-third of investment, compared with two-thirds spent on disaster recovery. Yet, by some measures, one dollar invested today in reducing disaster risk saves at least four dollars in future relief and rehabilitation costs. The independent evaluation study finds that ADB’s disaster-recovery projects have been much more successful than ADB-supported projects overall. But many of them had the limited objective of restoring particular types of infrastructure, rather than rehabilitating livelihoods, or increasing disaster resilience. So far, very few countries have focused on the disaster risks in their economic development plans. Member country governments and ADB must do more to highlight the need for investment in disaster prevention, not just in infrastructure, but also in relation to social development. During 1995–2011, ADB provided funding of $10.37 billion for 264 natural disaster interventions, including 104 loans for $8.55 billion. A special review of ADB’s disaster response programs in Bangladesh, Indonesia, and Pakistan finds several areas where ADB and the rest of the development community could improve both disaster response and preparation. In Bangladesh, for example, ADB has been efficient at renovating damaged roads and bridges. But it can support the proactive and successful disaster management programs the government has implemented. These programs have dramatically lowered deaths in this disaster-prone delta-region caused by regular, powerful cyclones. In a storm in 1997, for example, 111 were killed in contrast with 300,000 people in a similar storm in 1970...Read More

Mumbai, Chennai among highest climate change risks: Maplecroft
Multinational companies operating in the Asian growth economies will be exposed to spiralling environmental risks over the coming decades, according to Maplecroft’s 5th annual Climate Change and Environmental Risk Atlas, which identifies Dhaka, Manila, Bangkok, Yangon, Jakarta, Ho Chi Minh City, Kolkata Mumbai and Chennai as the ten cities facing the most risk from the onset of climate change. Maplecroft’s Climate Change Vulnerability Index (CCVI), which forms a central pillar of the Atlas, classifies seven cities as ‘extreme risk,’ out of a list of 50 that were chosen for their current and future importance to global business. Dhaka, Bangladesh, (ranked 1st), Manila, the Philippines (2), Bangkok, Thailand (3), Yangon, Myanmar (4), Jakarta, Indonesia (5), Ho Chi Minh City, Viet Nam (6) and Kolkata, India (7) emerged as the most at risk from the changing temperatures and weather systems that are forecast to take hold in the coming years. The Indian cities of Mumbai (8) and Chennai (9), along with Lagos (10) in Nigeria complete the ten cities most at risk. The CCVI has been developed by Maplecroft to identify risks to populations, company operations, supply chains and investments in 197countries down to a level of 25km². It evaluates exposure to climate related natural hazards; the sensitivity of populations; development; natural resources; agricultural dependency; research and development; government effectiveness and education levels.

Asian growth economies posing long-term risks to business
With strong economic growth of above 5% forecast for countries such as the Philippines, Viet Nam, Indonesia and India in the next few years, the relevance of climate change to populations and business in the major commercial centres should not be underplayed, states Maplecroft in its analysis...Read More

Migraines suffered women want a better understanding of migraine triggers: Survey

New study finds alpha linolenic acid offer protective effects on cardiovascular diseases

INDIA INC. REPORT CARD

DLF Q2 cons net profit at Rs1.39bn
DLF Limited, India’s largest real estate company, recorded consolidated revenues of Rs 2,157 crore for the quarter ended September 30, 2012, a decrease of 7% from Rs 2329 crore in Q1 FY13. EBIDTA stood at Rs 864 crore, a decrease of 28% as compared to Rs 1198 crore in Q1FY13. Net profit is Rs 139 crore, as compared to Rs 293 crore in Q1FY13. The non-annualised EPS for the quarter was Rs 0.81. The Company has made significant strides in achieving its business objectives built around net debt reduction, delivery of all past committed volumes and enhancing product mix through launches of higher margin products. In order to achieve this, the Company has completely re-tooled its business model and putting in place the ‘best in class’ project management and construction agencies. The large rental portfolio of the company continues to perform well with better rental realizations. However the leasing volumes remains muted due to overall economic conditions. The closing of the Jawala transaction (sale of NTC Mills land, Mumbai) represents a major milestone in the Company’s debt reduction objective and will be fully reflected in the Q3 of the current fiscal year. The Company continues to make steady progress on the balance divestments which include Aman Resorts and Wind businesses and is very confident of their closure within the FY13 and achieve net debt reduction to Rs. 18,500 cr.

Dell, Henkel, Adhunik Metalik, DLF, Hindustan Tin Works, Gayatri Projects, Wockhardt, Sinclairs Hotels, Damco, Air Arabia, GMR Infra, Orient Green Power, Pipavav Defence, Spicejet , Rajesh Exports, Shri Lakshmi Cotsyn, Opto Circuits, Vodafone India, Cox & Kings

Domestic Stories

Biocon enters into agreement with Bristol-Myers Squibb 
Biocon has entered into an option agreement with Bristol-Myers Squibb Company for Biocon’s IN-105, a prandial oral insulin product candidate. Under the terms of the agreement, Bristol-Myers Squibb will have the right to exercise an option to obtain an exclusive worldwide license to the program. Biocon will conduct clinical studies to further characterize IN-105’s clinical profile according to a pre-agreed development program up to the completion of Phase II. If Bristol-Myers Squibb exercises its option to license IN-105 following the successful completion of the Phase II trial, Bristol-Myers Squibb will assume full responsibility for the development program, including all development and commercialization activities outside India. Biocon will receive a license fee in addition to potential regulatory and commercial milestone payments and royalties on commercial sales of IN-105 outside India. Biocon will retain exclusive rights to IN-105 in India. Ms. Kiran Mazumdar-Shaw, MD and Chairman of Biocon, said: "This agreement is one huge step closer to realizing the dream of bringing oral insulin to market. We are excited to extend the excellent relationship we already enjoy with Bristol-Myers Squibb, and look forward to working closely with them to make this a reality." Diabetes is a chronic disease that affects about 350 million people worldwide. Long-term complications of diabetes include cardiovascular complications, peripheral vascular disease (leading to and including amputation), kidney failure, and other chronic diseases. It is estimated that the direct and indirect costs of diabetes to the overall healthcare system amount to over $650 billion worldwide.

Early marriage remains a challenge for many PPD countries: Ghulam Nabi Azad
Partners in Population and Development (PPD) is an intergovernmental initiative created specifically for the purpose of expanding and improving South-to-South collaboration in the fields of reproductive health, population, and development. PPD was launched at the 1994 International Conference on Population and Development (ICPD), when ten developing countries from Asia, Africa and Latin America formed an intergovernmental alliance to help implement the Cairo Program of Action (POA). PPD has presently 25 members countries committed to the implementation of the ICPD Programme of Action, willing to provide political, technical and financial support to South-South Cooperation. While there were only 10 developing countries at the time of formation of the Organization in 1994, over the years PPD’s membership has increased to 25 developing countries across Asia, Middle East and North Africa, Sub-Saharan Africa and Latin America covering more than 57% of total world population. The PPD member countries are: Bangladesh, China, India, Indonesia, Pakistan, Thailand, Viet Nam, Colombia, Mexico, Egypt, Morocco, Tunisia, Yemen, Jordan, Ethiopia, The Gambia, Ghana, Kenya, Mali, Uganda, Benin, Senegal, Zimbabwe, South Africa and Nigeria. PPD is currently chaired by Shri Ghulam Nabi Azad, Minister of Health and Family Welfare, Government of India, who has been unanimously elected to the post in the 16th Annual Board Meeting of PPD held in Pretoria, South Africa in 2011. Shri Ghulam Nabi Azad, Minister of Health and Family Welfare, Government of India, who is currently on an official tour to Bangladesh capital Dhaka, today participated in the opening session of the two-day International Conference on "Evidence for Action: South-South Collaboration for ICPD beyond 2014", organized jointly by Partners in Population and Development (PPD) and the Government of People’s Republic of Bangladesh...Read More

India’s exports during Oct '12 at US$ 23.24bn

Exports (including re-exports)
India’s exports during October, 2012 were valued at US$23246.91mn (Rs. 123264.20 crore) which was 1.63% lower in Dollar terms (5.89% higher in Rupee terms) than the level of US$23632.02mn (Rs. 116406.37 crore) during October, 2011. Cumulative value of exports for the period April-October 2012 -13 was US$166922.57 mn (Rs 908340.19 crore) as against US$177915.69mn (Rs 814708.35 crore) registering a negative growth of 6.18% in Dollar terms and growth of 11.49% in Rupee terms over the same period last year.

Imports
India’s imports during October, 2012 were valued at US$44208.35mn (Rs.234409.93 crore) representing a growth of 7.37% in Dollar terms and 15.58% in Rupee terms over the level of imports valued at US$41175.06mn ( Rs. 202819.70 crore) in October, 2011. Cumulative value of imports for the period April-October, 2012-13 was US 277135.48mn (Rs. 1507202.58 crore) as against US$284721.27mn (Rs. 1304631.60 crore) registering a negative growth of 2.66% in Dollar terms and growth of 15.53% in Rupee terms over the same period last year.

Crude Oil and Non-Oil Imports:
Oil imports during October, 2012 were valued at US$14785.3mn which was 31.61 % higher than oil imports valued at US$ 11234.3mn in the corresponding period last year. Oil imports during April-October, 2012-13 were valued at US$ 95569.0mn which was 9.99% higher than the oil imports of US$86887.7mn in the corresponding period last year. Non-oil imports during October, 2012 were estimated at US$29423.1mn which was 1.73% lower than non-oil imports of US$29940.8mn in October, 2011. Non-oil imports during April - October, 2012-13 were valued at US$ 181566.5mn which was 8.22% lower than the level of such imports valued at US$ 197833.6mn in April - October, 2011-12...Read More

India’s Foreign Trade: October, 2012

Outlook of India Economy "Cautiously Optimistic": CII Voice of CFO Survey
Voice of Indian CFO Survey is an initiative undertaken by Confederation of Indian Industry's CFO Forum, with the support of McKinsey & Co. The survey provided an insight into the thinking & current beliefs of the leading CFOs of India Inc about various global and Indian economic issues, regulatory environment and about their own business in general. 32 CFOs from leading Indian companies across sectors including Manufacturing, IT services, Consultancy and Financial Services participated in the survey.

Key insights of Survey includes:
Global growth rate expected to be flat; concern over impact of key global events on the Indian economy

  • Over 50% believe that the global growth rate will remain flat in the coming year
  • The Euro Crisis, followed by slowdown in the US and increasing oil prices are expected to have the biggest impact on the Indian economy
Outlook of the Indian economy remains ‘cautiously optimistic’. Increased FDI, reduced fiscal deficit and enabling corporate growth seen as key enablers to fuel economic growth
  • 67% believe that India’s GDP growth in the coming year will be less than 6%
  • 86% expect the INR / USD to be in the range of 50-55 in 2013
  • >50% expect inflation to remain in the 6-8% range in 2013
  • Encouraging FDI, controlling fiscal deficit, increasing focus on business growth by providing better infrastructure and simpler policies stated as measures to improve economy
Positive response to most recent policy changes although corruption and bureaucracy remains a big concern
  • 100% believe GST, New Companies Act are steps in the right direction and would have a medium to high impact on their business. Concerned about speed of implementation
  • 52% believe GAAR is a step in the wrong direction and that it may have an adverse impact on business sentiment
  • FDI attractiveness and stability of economic and fiscal policies expected to be better in the coming year; corruption and bureaucracy a bigger concern
Despite slowdown in growth, majority of the CFOs are confident of beating last year's performance
  • 81% expect their company's top line growth to be same or better than last year; 69% expect same for the PAT growth
  • Slowdown in growth cited as one of the biggest challenges faced by corporate India
  • Cost reduction and introducing new products and services identified as top priorities for the coming year
  • Moody's affirms Baa2 to ICICI Bank's proposed tap of CNH senior notes
  • RBI asks banks to introduce home loans with lower EMIs

FM, labour ministry in talks for investments in IDFs: Reports
To attract long-term investments in the infrastructure sector, the finance ministry is in talks with the labour ministry to allow provident funds (PFs) to invest in IDFs (infrastructure debt funds), the media reports said. The labour ministry administers over Rs 5 trillion through the Employees' Provident Fund Organisation (EPFO), which manages the retirement savings of 60 million organised sector workers. Around Rs. 2 trillion is estimated to be managed by gratuity, pension funds run by India Inc and the new pension scheme (NPS) run by the Pension Fund Regulatory and Development Authority (PFRDA), the reports added. Both the ministries are in talks to create a separate segment for IDFs in PF investment pattern and a decision could be expected soon. The finance ministry is also trying to convince the labour ministry to raise the ceiling for PF investments in private sector bonds from 10% to 40%, the reports said. The Insurance Regulatory and Development Authority (IRDA) is also aiming to attract insurers to invest in IDFs. In its exposure draft on investment norms for insurers in October 2012, IRDA said that total investment in housing and infrastructure should not be less than 15% of the fund for life insurers and 5% for general insurers.

Equity markets improve with reform measures & FII inflows
In the recent period (up to October 25, 2012), the Indian equity market witnessed gains on a y-o-y basis, according to RBI’s (Reserve Bank of India) Second Quarter Review of Monetary Policy 2012-13 report. Equity markets also improved in Q2 of 2012-13 on account of revival in sentiment and the turnaround in foreign institutional investor (FII) inflows. At a level of 18,758, the BSE Sensex is 8.7% higher than it was at the same time last year. Market sentiments, turned positive due to improved global liquidity conditions, FII inflows and the recent policy measures announced by the government, the report added.  However, governance issues and mixed Q2 results of some major companies pared some of the gains recorded earlier. During 2012-13 so far (up to October 23, 2012), FIIs made net investments of about Rs. 497 billion in the Indian equity market, the RBI report mentioned. The primary market, on the other hand, showed mixed trends. Private placement and MFs witnessed substantial pick up during 2012-13 so far, while the IPO market remained sluggish. During April-August 2012, the total resources mobilized through private placement grew by about 73% (y-o-y), while the net inflow of funds into MFs schemes grew by around 41 per cent on account of the base effect.  The MF inflows to the liquid and income schemes were higher, on the back of improved liquidity conditions while they were net sellers in the equity segment.

Many companies which had filed their offer document to raise funds have withdrawn their proposals and two IPOs have not been fully subscribed in 2012-13 so far. The IPO market remained subdued due to weak investment demand arising from the slowdown in overall economic growth, persistent inflation and high fiscal and current account deficits. The IPO activity mirrored the trends in the secondary market, in line with cautious investor sentiments in the recent past. Second, many IPOs listed during 2011-12 are currently trading below their issue price. As on October 25, 2012, of the 34 IPOs listed in the equity market in 2011-12, 20 were trading below their issue price. Negative returns on IPO investments have adversely affected investor sentiments. Third, global IPO activities have also been subdued since 2011. During Q2 of 2012-13, the resources raised through global IPO markets were 48 per cent lower than in the previous quarter, even though the secondary equity market posted huge gains during this period. The SEBI has also taken various measures to revive mutual fund investments and IPO activity. MF companies will now have to shift to the ‘one plan per scheme’ model. Also, a proposal has been made for a mandatory ‘safety net’ to protect the interests of small investors.

FSOC Action on Money Market Fund Regulation

House price inflation remains firm in Q1 FY12-13
The RBI’s (Reserve Bank of India) quarterly house price index suggests that house price inflation remained firm in Q1 of 2012-13. Notwithstanding the increase in house prices, the volume of housing transactions grew y-o-y at a faster pace than in the preceding quarter, the central bank said in its Monthly Bulletin for November 2012 report. Following the cut in the policy repo rate in April 2012 and the cash reserve ratio (CRR) in September 2012, several commercial banks reduced their deposit and lending rates. During H1 of 2012-13, the modal deposit rates of scheduled commercial banks declined by 13 bps across all maturities and the modal base rate of banks also declined by 25 bps, the RBI Second Quarter Review of Monetary Policy 2012-13 report highlighted. During Q2 of 2012-13, yields on government securities (G-secs) eased and have remained rangebound in October 2012. Equity markets also improved in Q2 of 2012-13 on account of revival in sentiment and the turnaround in foreign institutional investor (FII) inflows. The next Mid-Quarter Review of Monetary Policy for 2012-13 will be announced through a press release on December 18, 2012. The Third Quarter Review of Monetary Policy for 2012-13 is scheduled for January 29, 2013.

Involving local farmers is key to success of foreign investment: FAO
International investments that give local farmers an active role and leave them in control of their land have the most positive effects on local economies and social development, according to a new FAO report published. The report, Trends and Impacts of Foreign Investment in Developing Country Agriculture, emphasizes that investment projects that combine the strengths of the investor (capital, management and marketing expertise, and technology) with those of local farmers (labour, land, local knowledge) are most successful. Business models that leave farmers in control of their land give them an incentive to invest in land improvements and also favor sustainable development. The publication offers a number of case studies on the impact of foreign investment in Africa and Asia, including large-scale land deals often referred to as land grabbing. "While a number of studies document the negative impacts of large-scale land acquisition in developing countries, there is much less evidence of its benefits to the host country, especially in the short-term and at local level," says the report. "For investments involving large-scale land acquisition in countries where land rights are unclear and insecure, the disadvantages often outweigh the few benefits to the local community," it notes. The report advises that "acquisition of already-utilized land to establish new large farms should be avoided and other forms of investment should be considered."...Read More

Govt gives major initiatives for farmers
The Government gives very high priority to agriculture and specially to the prosperity of farmers. It is implementing a number of large schemes and providing funds to State governments for taking new initiatives for increasing farmers’ incomes. Some of the major actions taken in the recent past are given below:   Government has raised MSP in recent years by huge margin. MSP for wheat and rice has been more than doubled in last 8 years. MSP for some pulse crops has gone up three times.  Government has doubled the sugarcane support price in four years. It stands at Rs. 170 per quintal now. Record foodgrain production of 257 million tonnes last year, supported by massive increase in MSP to farmers. It is more than thrice of foodgrain production 45 years back. Government subsidises farm loans considerably. Crop loans upto Rs. 3 lakh are available at 4% interest. Other farm loans too are available at a subsidised rate of 7%. Farm credit has gone up substantially. Over 60mn farmers avail of loans from banks and cooperatives. Total farm credit exceeds Rs. 5 lakh crore.   Government has made law for warehouse receipts to be negotiable. It allows farmers to take loan from banks on such receipts. Banks have issued nearly 12mn Kisan Credit Cards, helping farmers take loans hassle-free. KCC can now also be used as ATM card. A special scheme, BGREI (Bringing Green Revolution to Eastern India),has been launched to support farmers in eastern India. Farmers in eastern UP, Bihar, Jharkhand, Odisha, Chhattisgarh, WB benefit from this scheme. Government focus on raising pulses production. Initiatives such as special scheme to organise pulses villages and significant rise in MSP will reduce import of pulses. Kisan call centre provides expert advice to farmers. Toll free calls at 18001801551 get advice in 22 languages.

CCEA approves additional allocation of wheat and rice under OMSS (D)

FAO Director-General calls for action to break cycle of hunger in dryland countries

Power companies to get coal blocks at discount on floor price:reports
Government is planning to offer discount on the floor price of coal blocks to be allocated to power producers in auction set to begin in a few months, according to reports. Reports stated that the coal ministry is yet to decide the rate at which discount will be offered and is holding consultations with state governments that will get the entire auction money. The floor price is the upfront payment that an owner of the coal block has to deposit with the State where the mine is located. The Government proposes to hold Case-II bidding, wherein every power project would be accompanied by a captive coal mine for sourcing fuel, says report.

Electrosteel Castings financial closure by November end
The Rs. 10,000 Cr 2.51 MTPA Greenfield Integrated Steel Plant at Bokaro, Jharkhand from Electrosteel Steels Limited, (ESL), the associate company of Electrosteel Castings Limited is expecting to achieve financial closure by end November 2012. ESL is expected to close the transaction of this long term project funding of Rs. 2300 Cr (nett) through a debt syndication comprising of credible financial institutions. The lead Banker is The State Bank of India and the Financial advisor for the fund raising is SBI Capital Markets Ltd. The Company has also arranged and invested the balance required Equity of Rs 412 Cr. Ashutosh Agarwal, Executive Director – Finance, Electrosteel Steels Limited, said "We are extremely content to know that we have acquired significant confidence in the minds of our financiers. Such quick financial closure will reinforce the reliance and support of the lending institutions in our credibility and expertise in project execution and commission." He further added "The per capita steel consumption is much lower than the world average and outlay from infrastructure in Indian steel consumption is expected to go up by leaps and bounds. Current steelmaking capacity for India is 67 MT approximately and by 2020 it is planned to increase the capacity in the tune of 120 MT. In this backdrop, this Greenfield Integrated Steel Plant being one of the key primary steel producers from the east is slated to cater to the growing need of steel of the country." The plant will constitute a product mix of long products like wire rod, TMT bars, ductile iron (DI) pipes, billets and pig iron. Having adequate raw material linkages and strategic location supported by leading Chinese Consultation Agency for supply of technology & engineering, the plant have ensured a lower Cost of Project than that of the usual industry figure which forecasts better profitability. The plant has already commenced its production of TMT Bars, Pig Iron, DI Pipes, Sinter and Coking Coal.

Mahindra Quanto registers over 10,000 bookings within 2 months
Mahindra & Mahindra Ltd. (M&M), a part of the US$15.9bn Mahindra Group, today announced that it has received over 10,000 bookings from customers for its newly launched compact and versatile SUV QUANTO within 2 months of launch. Bookings for the Quanto had opened across India from September 21st, 2012. Quanto, the first compact SUV from Mahindra, is a versatile SUV with sub 4 meter length that can be used conveniently for city drives as well as for weekend drives outside the city. In less than 2 months, the Quanto has generated a lot of buzz within the digital as well as traditional media, in addition to garnering positive reviews from auto enthusiasts. The price range of the Quanto starts from Rs. 5.82 lac to Rs 7.36 lac (Ex showroom Thane)*.

Jaguar Land Rover sells 25,176 vehicles in October, up 10% yoy
Jaguar Land Rover sold 25,176 vehicles in the month of October, an increase of 10% from a year ago. The two brands retailed 294,291 vehicles in the first ten months of the 2012 calendar year, an increase of 35% compared to the same period a year ago. October sales were up in all major markets apart from the USA, which was impacted by the hurricane in the last week of the month and in anticipation of new 13 Model Year products for Jaguar. Jaguar Land Rover has experienced strong sales growth across all major markets in the 2012 calendar year to date, with increased sales in North America (up 15%), UK (up 21%), Europe (up 41%), China (up 78%) and Asia Pacific (up 38%). Phil Popham, Jaguar Land Rover’s Director of Group Sales Operations said "We have seen a strong sales performance across both the Jaguar and Land Rover brands in the first ten months of this year."

"During a very competitive year for premium car sales, and in an increasingly uncertain economic environment, I am delighted to see strong demand for our products and that we are still performing well across all our key markets." October retails for Land Rover were 22,166 vehicles up 3,235 units (17%) from 2011 with Evoque, Range Rover Sport, Discovery, and Freelander all up. Since the start of the year, Land Rover has retailed 249,414 vehicles (up 41%). The all new, high aluminium, Range Rover will go on sale to customers in December. Jaguar retails for the month of October was 3,010 vehicles down 929 units (24%) primarily due to the impact of the hurricane in the USA and in advance of the introduction of the 2013 Model Year XF and XJ model ranges across all major markets later this year.  Key new products include the XF Sportbrake and all-wheel drive and smaller engine options in the XF and XJ. For the first 10 months of 2012 Jaguar delivered 44,877 vehicles up 8% from a year ago, reflecting the strong performance of the Jaguar XF.

International Stories

Economic growth is expected to slow to 3½ % in 2012: IMF
A mission led by Koshy Mathai visited Malé during October 30–November 12 for discussions on the 2012 Article IV Consultation, the IMF’s regular exchange of economic views with member countries. The team met with President Waheed, Vice President Deen, Minister of Finance Jihad, Maldives Monetary Authority (MMA) Governor Najeeb, members of the People’s Majlis, and other Cabinet ministers and senior officials, as well as representatives of civil society and the private sector. The team expresses its appreciation to the authorities and other stakeholders for the frank and constructive discussions. It issued the following statement today at the conclusion of its visit: "Economic growth is expected to slow to 3½ percent in 2012, as depressed tourist arrivals earlier in the year and weak global conditions have been only partially offset by strong performance in construction and fisheries-related manufacturing. A modest recovery is forecast for 2013 and beyond. Inflation is currently elevated on account of increases in the general GST and international food prices but is expected to slow to under 6 percent next year and decline further thereafter. The balance of payments continues to be weak, with the current account deficit forecast at nearly 30 percent of GDP this year. Gross international reserves at the MMA have been declining slowly, now account for just 1½ months of imports, and could be more substantially pressured if major borrowings maturing in the next few months are not rolled over. "The most pressing macroeconomic priority for Maldives is strengthening government finances, which have been weak for many years. The fiscal deficit is expected to rise in 2012 to 16 percent of GDP in cash terms, and likely even higher if one accounts for the government’s unpaid bills, accumulated in an increasingly challenging environment for financing. The large deficit has implied a rise in the public debt ratio, which now stands at over 80 percent of GDP, and has also helped to boost national imports, thus worsening dollar shortages in the economy and putting pressure on MMA reserves...Read More

Challenges in Housing and Mortgage markets: Bernanke

Chairman Ben S. Bernanke, At the Operation HOPE Global Financial Dignity Summit, Atlanta, Georgia 

Good afternoon. I'd like to thank John Bryant and Operation HOPE for inviting me to speak today. I'd also like to congratulate Operation HOPE and the Ebenezer Baptist Church on the grand opening of the HOPE Financial Dignity Center, which holds the promise of becoming a tremendous resource for the people of Atlanta and sits next to Martin Luther King's home church. Dr. King's legacy to our society is strong and enduring, and the new center is very much in the spirit of his work. The past few years have been difficult for many Americans and their communities. At the Federal Reserve, we understand the depth of the problem and the need for action, and we will continue to use the policy tools that we have to help support economic recovery. We also know that the burdens of a weak economy and the benefits of economic growth often are not equally shared, and that, to be truly effective, policymakers must take into account how their decisions affect the least advantaged, not just the economy as a whole. My remarks today will focus on an important part of our economy, the housing sector. Housing and housing finance played a central role in touching off the financial crisis and the associated recession, and the ensuing wave of foreclosures wreaked great damage on communities across the country. As I will discuss, for the first time in a number of years, the housing sector is improving, adding to growth and jobs. But the housing revival still faces significant obstacles, and the benefits of that revival remain quite uneven. Strengthening and broadening the housing recovery remain a critical challenge for policymakers, lenders, and community leaders. The degree to which that challenge is met will help determine the strength and sustainability of the economic recovery and the extent to which its benefits are broadly felt.

Developments in Housing and Housing Finance
The multiyear boom and bust in housing prices of the past decade, together with the sharp increase in mortgage delinquencies and defaults that followed, were among the principal causes of the financial crisis and the ensuing deep recession--a recession that cost some 8 million jobs. And continued weakness in housing--reflected in falling prices, low rates of new construction, and historic levels of foreclosure--has proved a powerful headwind to recovery. It is encouraging, therefore, that we are seeing signs of improvement in the housing market in most parts of the country. House prices nationally have increased for nine consecutive months, residential investment has risen about 15% from its low point, and sales of both new and existing homes have edged up.1Homebuilder sentiment has improved considerably over the past year, and real estate agents report a substantial rise in homebuyer traffic. The growing demand for homes has been underpinned by record levels of affordability, the result of historically low mortgage rates and house prices that are 30% or more below their peaks in many areas...Read More

A lot more to do: David Lipton
David Lipton, IMF First Deputy Managing Director, Keynote speech, Chatham House City Series Conference: "Deleveraging the West: The Impact on Global Growth" November 12, 2012, Royal Institute of International Affairs, Chatham House, London
When the G20 Leaders met here in London in the Spring of 2009 and took decisions that turned back the financial panic at its high water mark, they had two simple, understandable objectives: i) to resolve the crisis; and ii) to make sure it doesn't happen again. Unfortunately this agenda is still with us, despite the progress that has been made, because in fact "this time is different" and this crisis is proving very hard to end. Let me talk about why this is, and then take stock of how much has been done and how much remains to be done, and how we should go about it.

Progress has been hard in part because the measures called for under each agenda item to some extent undermine the other agenda item. The first objective, exiting the crisis requires strong enough demand to restore growth and jobs. At the same time, the second objective, ensuring sustainability and laying the foundation for a stronger global economy, requires deleveraging in many advanced economies, which will dampen demand, particularly if it happens simultaneously in many sectors in many countries. In particular:

In many countries, households need to work off debt, in order to restore their financial position and be ready to cope with the uncertain financial future they now see before them. Doing so will leave them stronger and will support more sustainable spending down the road. Yet, as Keynes warned with his "paradox of thrift," in the short-run repairing household balance sheets means higher saving, lower consumption, and other things equal an economic slowdown.

Meanwhile banks need to deleverage, secure more stable funding sources, and build higher capital buffers in order to bolster their balance sheets and future resilience. Banks can and should reduce leverage by increasing the level of capital on their balance sheets—and they have been doing this. But in difficult market conditions banks also de-lever by reducing assets. If banks cut back assets by tightening their lending, credit to the private sector will decline, hurting those that are most dependent on bank lending (i.e., SMEs and households), which also undercuts recovery.

In the face of those pressures on households and banks, the standard prescription for the public sector is to be countercyclical. We saw some countries respond counter-cyclically early in this crisis. Budget deficits and public debt rose as countries supported the economy both providing demand and in some cases relieving the private sector debt burden and financial stress via bank recapitalization. But the high public sector indebtedness in advanced economies, adds a constraint, and requires major, sustained consolidation over the medium term if countries are to restore the soundness of their finances, rebuild fiscal space, and lay a foundation for sustained long-term growth...Read More

Uncertainty grips EU as risks mount and policy action is delayed
EUROFER’s Q4-2012 Economic & Steel Market Outlook shows that the outlook for the EU steel market has darkened further in recent months. Low levels of confidence reflect that uncertainty has taken hold across all sectors of the EU economy, from the financial and retail sector to services, industry, construction and consumers, fuelling risk aversion and stifling growth. However, while the EU is clearly the weakest link, also support of exports is fading due to slowing global economic growth.   EUROFER director-general Gordon Moffat: "Our downstream customers in manufacturing and construction face a steady erosion of orders books. They buy only steel products for immediate needs, waiting for the business climate to improve". Key question is what could change sentiment to the extent that risk aversion starts to fade and investment and private consumption will strengthen again. Gordon Moffat: "The ECB has done its part; it is now up to the governments to reach more consensus about the way forward and make a decisive turn in fighting the crisis". The current outlook is based on the assumption of a further major escalation of the Eurozone debt crisis being prevented. Another assumption is the global economy will overcome current headwinds.   This should translate in a moderate improvement in international trade in 2013. Nevertheless, risks and uncertainties are mounting, now the rest of the world is no longer decoupled from what is happening in the EU. Production in the steel using sectors will fall by 3% this year; 2013 will see a minor further decline. As steel intensity is also declining, real steel consumption will fall by 4% in 2012, followed by a slight drop in 2013. Apparent steel consumption is seen falling 9% in 2012. The seasonal post-summer recovery in bookings did not occur; instead customers are destocking. Early next year may see some technical recovery as a seasonal uptick in demand may fuel some selective inventory replenishment, but overall steel demand in 2013 will remain dull.

U.S. foreclosures down 19% in October: reports
The number of U.S. properties with foreclosure filings dropped 19% in October from a year earlier, RealtyTrac reportedly said. Reports stated that there there were 186,455 U.S. properties with default notices, scheduled auctions and bank repossessions in October. The report also showed one in every 706 U.S. housing units with a foreclosure filing during the month.

2013 will be a very crucial year with many rupture points: IMF

Middle East economies post divergent performance: IMF Survey

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