The Week That Was

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Coal-gate: I have nothing to hide, says Prime Minister

Prime Minister Manmohan Singh said he is not above the law of the land. "If there is anything that the CBI, or for that matter, anybody wants to ask, I have nothing to hide," Singh said with reference to the allocation of the coal block in Odisha when he was the minister in-charge in 2005. Hindalco has denied any wrongdoing in the allocation. When questioned about the number of scams in UPA-II regime he said, "First of all, I would say the ‘scams’ that you are referring to, took place not in UPA-II, they took in UPA-I. After that we had a general election. The Congress party won in that election hands down and I am sure when the result of 2014 gets out, country will once again be surprised." On the rising BJP wave, the PM said, "Well, I think the Congress party is quite active. I think the BJP may have started early but I think it will also peak early and slow and steady, I think, is the thing which sometimes works in public life as well and I am confident that Congress party will come out victorious in the 2014 elections."

FM asks regulators to take measures for QE

The Union Finance Minister P.Chidambaram emphasized that as tapering off of Quantitative Easing (QE) in the US is likely to happen sooner or later and, as such, regulators must take all possible concrete measures to avoid any adverse impact on the Indian economy. The Finance Minister was speaking at the Eighth (8th) Meeting of the Financial Stability and Development Council (FSDC) which was held under his Chairmanship. Chidambaram said that the opportunity available due to the postponement of the reversal of the monetary policies in advanced economies should be utilized to further address the macroeconomic imbalances. The meeting was attended among others by Dr. Raghuram G. Rajan, Governor, RBI; R.S.Gujral, Finance Secretary; Dr. Arvind Mayaram, Secretary, Department of Economic Affairs; Rajiv Takru, Secretary, Department of Financial Services; Sumit Bose, Secretary, Department of Revenue; Naved Masood, Secretary, Ministry of Corporate Affairs; U.K.Sinha, Chairman, SEBI; T.S.Vijayan, Chairman, IRDA; Yogesh Agarwal, Chairman, PFRDA; Ramesh Abhishek, Chairman, FMC and other senior officers of the Government.

The Council deliberated on the implementation of the recommendations of the Financial Sector Legislative Reforms Commission (FSLRC); impact of tapering off of the Quantitative Easing (QE) in the US and preventive measures to be taken; Steps to be taken by Regulators/Government to facilitate the "Corporate Distress Resolution Mechanism" as laid-out in the Companies Act, 2013. RBI apprised the Council of the report of FSDC Sub-Committee, the last meeting of which was held on August 07, 2013. The Council took stock of the progress in examining the Report of the FSLRC, in pursuance to the decisions taken in the Seventh Meeting of the FSDC held on June 03, 2013. Based on the deliberations made today, it has been decided that all the financial sector regulators (including FMC) will finalise an action plan for implementation of all the FSLRC principles relating to regulatory governance, transparency and improved operational efficiency that do not require legislative action. As regards legislative recommendations, it was decided to analyze the public comments and feedback to further fine tune the draft Indian Financial Code. It was also decided that action should be taken for finalizing the roadmap for creation of new institutions such as Resolution Corporation, PDMA, FSAT and FDMC...Read More

Corruption charges and high Food Inflation hurts India's Economic Confidence: Ipsos

India’s economic confidence has got hurt severely due to plethora of corruption charges and high food inflation during festival season, according to a report by leading global research firm Ipsos. According to the "Ipsos Economic Pulse of the World" study, India's economic confidence dropped sharply to an all-time low by 14 points to 40 percent in the month of October compared to the month of September 2013. India now stands as eighth most economically confident country in the world after Saudi Arabia, Sweden, Germany, Canada, Australia, China, and Turkey. A paltry 27 percent Indians believe that the local economy which impacts their personal finance is good, a sharp decline of 7 points. However, Indians are hopeful about future; with four in ten (41%) people expecting that the economy in their local area will be stronger in next six months, a slender rise of 1 point. "Exorbitantly high food inflation and lack of new job opportunities is hurting the common man badly. Moreover slow pace of growth, combined with rampant corruption charges is hurting investor and corporate sentiments. This has severely dented India’s economic confidence." said Mick Gordon, CEO, Ipsos in India...Read More

We project CAD to come down to 3.7% in FY14: RBI

(Leatherbee Lecture by Dr. Raghuram Rajan, Governor, Reserve Bank of India on India: Opportunities and Challenges Ahead' at Harvard Business School (HBS), Boston, delivered on October 15, 2013)

Indian cricket fans are manic-depressive in their treatment of their favorite teams. They elevate players to god-like status when their team performs well, ignoring obvious weaknesses; but when it loses, as any team must, the fall is equally steep and every weakness is dissected. In fact, the team is never as good as fans make it out to be when it wins, nor as bad as it is made out to be when it loses. Its weaknesses existed in victory, too, but were overlooked. Such bipolar behavior seems to apply to assessments of India’s economy as well, with foreign analysts joining Indians in similar swings between over-exuberance and self-flagellation. A few years ago, India could do no wrong. Commentators talked of "Chindia", elevating India’s performance to that of its northern neighbor. Today, India can do no right. India does have its problems. Annual GDP growth slowed significantly in the last quarter to 4.4%, inflation is high, and the current-account and budget deficits last year were too large. Every commentator today highlights India’s poor infrastructure, excessive regulation, small manufacturing sector, and a workforce with inadequate education and skills. These are indeed deficiencies, and they must be fixed if India is to grow strongly and stably. But the same deficiencies existed when India was growing fast. To understand what needs to be done in the short run, we must understand what dampened the Indian success story. In part, India’s slowdown paradoxically reflects the substantial fiscal and monetary stimulus that its policymakers, like those in all major emerging markets, injected into its economy in the aftermath of the 2008 financial crisis. The resulting growth spurt led to inflation, especially because the world did not slide into a second Great Depression, as was originally feared. So monetary policy has had to be tight, with high interest rates contributing to slowing investment and consumption...Read More

RBI issues paper on Corporate Pricing Power, Inflation, IIP

Winners, losers if rupee, rupiah fall 15%: Fitch

Fitch in a special report published today highlights the Indian and Indonesian corporates whose financial profiles could strengthen or weaken if the rupee and rupiah depreciate by 15% and 30%. The report comes in the context of the significant fall in both the Indian rupee and the Indonesian rupiah in August and September. The report examines the impact of the currency depreciations, from both a balance sheet and cash flow perspective, on its internationally rated corporates in India and Indonesia. Specifically Fitch highlights eight Indian and five Indonesian corporates who are likely to benefit, and conversely three Indian and eight Indonesian corporates likely to witness deterioration in their financial profiles. The report shows the impact on net leverage (adjusted net debt to operating EBITDAR) under our base case of 15% currency depreciation and stress case of 30% depreciation, and compares this with our official negative rating triggers (for those corporates where we have assigned leverage rating triggers)...Read More

Weak end for Sensex, Nifty

Nifty closed marginally lower on Friday a day after hitting a 3-year high of 6,252 as it continues to consolidate in a narrow trading band. It was yet another day of lackluster trade as traders remained cautious ahead of the Reserve Bank meet scheduled on 29 October. The BSE Realty index was the top loser, down 2% followed by BSE capital goods index down 1.7% and BSE metal index down 1%. Even the mid-cap and the small-cap index witnessed selling pressure. Among the top gainers were, BSE IT index up 1.5% and BSE Teck index up 1%.  Finally, BSE Sensex closed at 20,655 down 70 points, while, NSE Nifty fell 31 points to close at 6,133. DLF, Hindalco, NMDC, Cairn, Tata Steel, BPCL, M&M, Hindustan Unilever, L&T and BHEL were among the top losers in the Nifty. On the other hand, TCS, HCL Tech, Wipro, Sesa Sterlite, NTPC and Grasim were among the top gainers. Advance declined ratio favoured the bears. On the BSE, 1385 stocks declined against 964 advancing stocks, while 140 remained unchanged. The INDIA VIX was down 1.4% at 20.53. It hit a day’s high of 21.04 and low of 19.87. On the currency front, the rupee was weak at around 61.61 against the dollar. The Indian unit had opened a tad weak at 61.50 per dollar against the previous close of 61.47...Read More

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