Rural Consumption Story at Risk ? FY 10 GDP Estimates at 5.5%
Saturday, February 28, 2009Growth was below ours and consensus estimates (6.1%), with the surprise element being the 2.2% contraction in agriculture (partly due to a high base effect). While industry growth slowed to 2.4%, growth in services remained buoyant - up 9.9% largely due to a reflection of the pay commission outgo (community services, up 17.3%). With 9MFY09 GDP growth at 6.9%, growth in 4QFY09 would need to come in at 7.6% in order for the government to achieve its 7.1% advance estimate put out earlier this month. This appears optimistic given the weakening global environment and continued contraction in trade.
The deceleration in investment continued, with fixed capital formation slowing to 5.3% in 3Q vs. 12.6%yoy during 1HFY09. However, headline consumption growth remained buoyant at 7.8% (vs. 7.3% in 1HFY09) with the deceleration in the private sector +5.4% being offset by the pay revision which is accounted under public consumption - up 24.6% yoy.
Citi revised India's FY 2010 GDP expectations to 5.5% with contraction in exports, a further deceleration in investment, and a moderation in consumption.
Published by Webmaster @ 12:27 PM IST.
Inflation at 3.36% for week ended Feb 14
Thursday, February 26, 2009Riding on tax cuts and softening commodity prices, Inflation is continuing its downward journey. The wholesale price index (WPI) for all commodities fell by 0.1% to 227.8 on weekly basis for the week ended February 14.
Growth in WPI on annual basis stood at 3.36% in the said week compared with 3.92% in the previous week. Faster than expected decline in inflation and high base effect of last year is likely to drag India into negative inflation territory by April. Another fuel prices cut, which the government is understood to be considering, will further hasten the downward journey of inflation.
However, with Reserve Bank of India expected to cut its policy and reserve rates in near term, relatively stronger rural demand, and expectations of improvement in consumer demand by mid-20009 may still be able to save India from facing any serious deflation threats.
Published by Webmaster @ 12:02 PM IST.
HDFC fears erosion in its market share
Tuesday, February 24, 2009Irked by State Bank of India's (SBI) move to offer home loans at 8% for the first year, housing loan giant Housing Development Finance Company (HDFC) is set to punish its wayward borrowers.
HDFC, fearing a slide in its market share, has decided to charge up to 3% of the outstanding home loan if its existing borrowers chose to switch their lender.
However, HDFC claimed that prepayment charges existed in the range of 0-3% depending on certain conditions. It added all lenders levy a prepayment charge as a difference between the contracted loan rate and the market rate prevalent at the time of the switch.
Don't you think this is an unfair trade practice by HDFC ? Log on your complaints if any against HDFC Home Loans.
Published by Webmaster @ 3:15 PM IST.
Inflation at 3.92% for week ended Feb 7
Thursday, February 19, 2009Inflation continues its downward journey as the wholesale price index (WPI) for all commodities fell by 0.2% to 228 on weekly basis for the week ended February 7.
Growth in WPI on annual basis stood at 3.92% in the said week compared with 4.39% in the previous week. Faster than expected decline in inflation has raised hopes for further cut in policy or reserve rates by the Reserve Bank of India. However, the monetary authority may decide to wait to see the impact of earlier cuts and fiscal stimuli measures taken by government of India in wake of soaring fiscal deficit.
RBI will also probably like to finalise the way through which it will arrange additional borrowings of Rs 45,000 crore which have not been mentioned in the borrowing calendar released with the interim budget.
Published by Webmaster @ 12:24 PM IST.
Areva T&D Rs 700 cr CAPEX
Wednesday, February 18, 2009Leading electrical equipment manufacturer - Areva T&D - has set aside Rs 700 crore for its capacity expansion plan.
It is currently involved in setting up a second transformer facility in Baroda having a capacity of 765 kilo vaults. The plant's capacity would later be raised to 1,200 kilo vaults.
The company is also in talks with Bharat Heavy Electricals (BHEL) to form a joint venture for manufacturing nuclear reactors. Its clients include state-run NTPC, PowerGrid, GMR and Reliance Power amongst others.
Published by Webmaster @ 4:01 PM IST.
Government borrowing to Rise in FY10
Monday, February 16, 2009The general government fiscal deficit will rise from 6.2% of GDP in FY08 to 10.2% of GDP in FY09 and forecast it to remain high at 10% of GDP in FY10. Both the state and central deficits are likely to increase as revenues slump due to the slowdown in economic growth. Tax revenues fell 19% yoy in December 2008 compared to a rise of 34% yoy in December 2007.
Expenses on the other hand, are likely to remain elevated in FY10, given that many of the expenditure commitments of FY09 such as the Sixth Pay Commission pay hike arrears, farm loan waiver and the National Rural Employment Guarantee program will spill over into FY10.
The government has already overshot its borrowing plan this year by US$25 billion to a total of US$47 billion. Net borrowings forecast for FY10 to be even higher at US$55 billion due to the central government's deficit remaining high. This is likely to steepen the yield curve. Also note that, Money supply growth continued to fall as growth in private-sector lending and net FX assets of the banking sector declined. Inflation continued its downward march.
Published by Webmaster @ 9:46 AM IST.
Industrial production Output @ -2%
Thursday, February 12, 2009For Dec 08, growth in industrial production, at -2.0%.
Industrial production was also affected due to a high base in Dec 07. Although there has a y-o-y decline, there was a significant improvement on a m-o-m basis. Mining and electricity stayed positive at 1.0% and 1.6%, respectively, whereas manufacturing reported a negative number (2.5%) for Dec 08.
There has been a decline in food products, machinery and transport equipment in the manufactured sectors, which contributes 80% of industrial production. In the use based category, there has been a decline in consumer durables and intermediate goods. Consumer durables is correcting faster than expected.
Given that manufacturing activity is more exposed to international demand, the results show that the serious global demand destruction has affected India. The ministry of commerce had earlier mentioned that there might have been a 20% decline of exports in Jan 09.
Published by Webmaster @ 2:11 PM IST.
Activity indicators weaker than expected
Monday, February 09, 2009A look at recent activity indicators. The January reading of our India Surprise Index1 points to a fourth consecutive month of negative surprises, impacting asset prices. Other indicators of activity also show across the board weakness.
Other indicators to note: Foreign exchange reserves rose by US$1 billion after falling sharply by US$4.6 billion in the previous week. After a fortnight of interruption due to a trucker's strike, WPI inflation started to move down again to 5.1%. Money market spreads have been moving lower since the start of the year, but are still high compared to pre-crisis levels.
Although industrial production growth was stronger than expected, exports and motor sales data was very weak. Exports fell 9.9% yoy and motor sales fell 11.8% yoy, pulling the surprise index down. The PMI Index contracted for a third consecutive month in January, although at 46.7 it rose slightly from the low of 44.4 in December. Domestic data on tax collections, commercial vehicle sales and domestic airline traffic fell rapidly.
Real policy rates are still high in India compared to the region, and we think that the RBI will cut rates further in the face of declining activity. Watch out for our preview on the budget, coming up soon.
Published by Webmaster @ 12:31 PM IST.
