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Current Economic Statistics and Review For the
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Theme
of the week:
Invisibles in India’s Balance of Payments- III 1.Introduction The
process of globalization, reinforced by liberalization policies and the
removal of regulating obstacles, has fuelled steady growth of international
investment and trade in services. Spread of telecommunications and computer
technologies have helped in a big way to make all commercial services
tradable across borders. Invisibles
account in balance of payments comprises international trade in services,
income from financial assets, labour and property incomes, and cross-border
unrequited transfers, mainly workers’ remittances. Trade in services
includes travels, transportation, insurance; government not included
elsewhere (GNIE) and miscellaneous services. ‘Miscellaneous
services’ is a misnomer, for it covers a host of identifiable items of
business services. These heterogeneous transactions can be broadly
categorized as technology-related and other business services. Technology
related services encompass communications, software, construction,
financial, software, news agency, royalties, copyrights, license fees,
management services and other business services. Business
services consist of merchanting, trade-related, operational leasing, legal
services, accounting, business and management, advertising, research and
development, architectural and engineering, agricultural services, office
maintenance, environmental, personal and cultural services. Receipts
of technology-related services are related to exports of technology from Under
payments, technology-related services concern foreign collaborations in 2.
Invisibles – An Overview An important feature of Invisible
receipts as per cent of GDP have galloped from 2.6 per cent to 12.5 per cent
during the 17-year period, while the growth in invisible payments as per
cent of GDP has been much slower, i.e., from 2.0 per cent in 1989-90 to 6.7
per cent in 2006-07.At this level, invisible receipts and payments have
accounted for over 47 per cent and 24 per cent of total current account
receipts and payments, respectively. Decomposition of invisibles receipts reveals that the non-factor exports have been the main contributor to the uptrend in invisible receipts. Such non-factor service receipts to GDP ratio during the 17-year period have risen from 1.4 per cent to 8.3 per cent. However, non-factor services accounted for only 57 per cent of invisible receipts in 2006-07, which has been much below to that in 1989-90 at 71 per cent. The increasing use of proper remittance channel for private remittances were responsible for bringing down the share of services exports in invisibles. Transfers to GDP ratio has gone up from 0.1 per cent in 1989-90 to 3.2 percent in 2006-07. Unlike the traditional sources namely, travel, transportation, insurance and GNIE, the recent years have witnessed a booming expansion in ‘miscellaneous service exports’. Miscellaneous services exports to GDP ratio, which was hovering around 0.6 per cent till 1997-98, has steadily improved in the next decade to reach 6.3 per cent in 2006-07 mainly because of the excellent performance witnessed in the software sector, and to some extent, in business services (Annexure 2).
In
recent years, the traditional services have displayed sluggishness, while
new services, particularly high-skill technology-intensive services, are
rising in importance (Table 1). Reflecting the positive developments in
terms of comparative advantage in a number of service exports, India has
emerged as 11th important service exporter in the world with a
market share of 2.5 per cent in 2006 as against 0.6 per cent in 1990 (BOP
Statistics Year Book 2007, IMF) 3.
Software Exports – Performance and Potential Exports of software services from “Although
RBI collects data on software exports through software exports forms (SOFTEX),
it has used NASSCOM data as a controlling total for gross receipts from
software exports. There is, however, a need to reexamine the current
methodology on collection of software exports data. RBI should therefore,
constitute a technical group consisting of members from RBI, ministry of
commerce, CSO, NASSCOM and a few major software companies, to
comprehensively examine the data reporting mechanism for software
exports”. RBI
constituted such a technical group in 2001 and the group submitted its
report to RBI in March 2003 [RBI Technical Group Report 2003]. It
recommended the need to conduct
a comprehensive survey (in the nature of a census) every 3 years to be
followed by quarterly representative survey to collect data on software and
information technology exports in conformity with international guideline on
compilation of BOP prescribed by IMF. The Technical Group 2003 also
recommended the setting up of a ‘standing monitoring committee on software
exports’ (SMCSE) with members from concerned ministries, NASSCOM and RBI
to provide overall guidance to all survey-related issues. Software
exports data collected by RBI from NASSCOM consists of IT-enabled services (ITES)
and business process outsourcing (BPO)
services. The survey conducted by RBI strictly followed the definition given
in the IMF’s balance of payments-5 (BPM 5) 1993/ Manual on Statistics on
International Trade in Services and thus does not include BPO services. The
above survey was undertaken and response was received from 1,036 companies.
As per the survey, 83 per cent of the companies were private and their share
of export was 53 per cent. As against this, 12 per cent of the companies
were public limited companies and their share in exports was about 46 per
cent. The estimated export of computer services in 2002-03 was Rs. 30,880
crore. A majority of computer service exports were made to Exports
of software and IT-enabled services have reached US $ 31.3 billion during
2006-07. Despite increasing competition from other countries, According
to NASSCOM, The
NASSCOM has estimated that the IT-BPO
sector is expected to grow by 28 per cent in the fiscal year 2007-08, but
the current indications are that the growth may exceed 32 per cent according
to NASSCOM. Taking into account the domestic revenues, the gross revenues
are forecast to reach US $ 48 billion and direct employment is projected to
exceed 1.6 million. Destination wise-analysis indicates that the
4.
Business Services The
acceleration in the expansion of non-software exports, mainly emanating from
business and professional services, has been another aspect of the invisible
receipts in recent years. The management consultancy services also have
grown significantly in importance and have witnessed sustained growth in the
last few years. Between 1999-00 and 2006-07, the receipts from business
services exports have grown from a mere US $ 6.4 billion to US $ 192.7
billion. In 2006-07, it has
formed about 33.5 per cent of the ‘miscellaneous services’ exports. As a
per cent of GDP, it has grown from a mere 0.1 per cent in 1999-00 to 2.1 per
cent in 2006-07 (Annexure
3). Alongside, the business services
payments have also witnessed sharp increases in recent period, reflecting
the ongoing technological transformation of the economy and modernization of
Indian industry with great deal of focus on technological up-gradation on a
sustained basis. Business service payments forms about 60 per cent of the
total miscellaneous services payments in 2006-07 and at this level it forms
about 1.8 per cent of GDP (Annexure
4).
5.
Management Consultancy Services Management
consultancy includes services contracted for, and provided to, organizations
by specially trained and qualified persons, who assist in an objective and
independent manner, the client organizations to identify management
problems, recommend solutions to these problems and help when requested, in
the implementation of solutions. Engineering consultancy is defined as
application of physical laws and principles of engineering to a broad range
of activities in the areas of construction, manufacturing, mining,
transportation and environment. Over
the years, the Indian industry has started maturing; the Indian consulting
industry has also started expanding, not only in terms of size, but also in
terms of the service offerings. Specialist consulting advice was being
sought by clients in In
recent period, the trade policy in Some
of the key initiatives of the government in promoting exports of consultancy
services are through market development assistance, market access initiative
scheme, proactive EXIM policy and EXIM bank schemes. Government also
provides service tax exemption for the export of consultancy services. Growth
potential for consulting services is envisaged to be high in south east
Asian and east African countries as these countries are pursuing fast track
development plans across diverse sectors. Market understanding, promotion,
focused marketing and quality assurance, are the four key strategies adopted
in promoting management consultancy services. A
substantial growth has been witnessed in the business management and
consultancy services in the last three years. The receipts from these
services grew from US $ 15.6 billion in 2005-06 to US $ 73.5 billion in
2006-07. 6.
Engineering Services – A new Frontier in Service Exports ‘Engineering
services’ mainly includes consultancy in designing and detailed designing,
i.e., construction including erecting of plants, turnkey projects and other
information technology enabled services (ITES). According
to WTO, ‘engineering services’ includes work by engineering firms to
provide blueprints and designs for buildings and other structures. It
includes planning, design, construction and management services for building
structures, installations, civil engineering work and industrial processes.
In According
to a study by NASSCOM in association with Booz Allen Hamilton, global
spending on engineering services is large and rising – constituting about
2 per cent of world GDP or US $ 750 billion in 2006, which was projected to
increase to $ 1.1 trillion by 2020. About US $ 10-15 billion engineering
services is off-shored. Companies are increasingly moving these high-value
services to emerging markets and 7.
Financial Services ‘Financial
services’ are one of emerging sectors, which have attracted particular
attention in international trade in services in the recent period. It
broadly refers to the functions performed by financial institutions, viz.,
acceptance of deposits, lending, payment services, securities trading, asset
management, financial advice/consultancy, settlement and clearing service,
etc. and these functions are carried out collectively with non-residents
forming part of international trade in financial services.
It covers financial intermediation and auxiliary services, except
those of insurance and pension funds. Based
on the recommendation of the technical group on ‘Statistics of
International Trade In Services” (March 2002), the reporting system was
revamped by expanding the classification of transactions, facilitating the
collection of disaggregated data in accordance with the extended BOP
statistics during 2004-05. Accordingly, as
part of the administrative requirements under the new Foreign
Exchange Management Act (FEMA) 1999 , the authorized dealers’ (Ads)
branches, which are authorized to deal in foreign exchange transactions, are
needed to report all foreign
exchange transactions dealt with them on a fortnightly basis to RBI through
Foreign Exchange Transaction Electronic Reporting System (FETERS).
Information on financial services are collected based on this AD reporting
under three major heads: (i) Financial intermediation like bank charges, collection charges, LC charges, cancellation of forward contracts, commission on financial leasing, etc., (ii) Financial intermediation for investment banking like brokerage, underwriting commission etc., (iii) Auxiliary services like charges on operation and regulatory fees, custodial services, depository services etc. With the improvements in economic integration of financial markets and activities, the international trade in banking services has significantly increased. Furthermore, foreign direct investment in banking in the form of branches, agencies and subsidiaries or by means of cross-border mergers and acquisitions has increased between the early 1980s and the late 1990s. Financial
service receipts were grown from US $ 0.36 billion in 1999-00 to US $ 2.91
billion by 2006-07 – an eight-fold growth in about 7 years. And payments
have increased from US $ 1.6 billion to US $ 2.1 billion during the same
period.
*
This note has been prepared by R.Krishnaswamy Reference
Highlights of Current Economic Scene AGRICULTURE Total procurement of wheat by various government
agencies as on May 1, 2008 has exceeded the center’s target of 150 lakh
tonnes within a month of the crop arrival, by procuring 154.2 lakh tonnes
against 82.4 lakh tonnes procured during the same period last year.
This procurement was made at the support price of Rs 1,000 per quintal,
though the wheat price in open market ranged between Rs 1,100 and Rs 1,200
per quintal and
given the escalation in global wheat prices. The central government has imposed an export duty of
US $ 200 or Rs 8,000 per tonne on exports of basmati rice with a view to
discourage its export. Further it has also lowered the minimum export
price (MEP) on exports from US $1,200 to US $1,000 per tonne. Country
exports over 80 per cent of its basmati rice annually. Exports of basmati
rice during the period between April-November 2007-08 stood at 648,231
tonnes which valued at Rs 2,028 crore, against 1.045 million tonnes worth
Rs 2,792 crore in 2006-07.
To ensure adequate availability of milk during summer
season, basic customs duty (BCD) on skimmed milk powder has been slashed
from 15 per cent to 5 per cent for a tariff rate quota of 10,000 tonnes
per annum. BCD on butter oil has also been reduced from 40 per cent to 30
per cent.
The Cabinet Committee on Economic Affairs (CCEA) allowed fertiliser manufacturers to charge a maximum retail price of 5 per cent over and above the notified selling prices for all the fortified/coated-subsidised fertilisers that are approved under the Fertiliser Control Order. In case of zincated urea and boronated SSP, the manufacturers would be allowed to sell over and above maximum retail price by 10 per cent. The manufacturers would also be allowed to produce fortified/coated fertilisers up to a maximum price of 20 per cent of their total production of respective subsidised fertilisers.
As per the Central Organisation for Oil Industry and
Trade (COOIT), the acreage of oilseed is expected to increase by 15 per
cent in the ensuing kharif season on account of favourable monsoon
forecast and expectation of better returns, as most of the farmers
cultivating oilseed have experienced 30 per cent profit over other kharif
crops like sugarcane in 2007. During the kharif season 2007, the coverage
under oilseeds sowing increased by 6 per cent from 17 million hectares to
18 million hectares. The total marketable surplus for crushing during the
same period had witnessed a 29 per cent increase to 123.6 lakh tonnes as
against 95.9 lakh tonnes in the corresponding period in 2006. Though the
total oilseeds acreage reduced in 2007-08 rabi season from 102.97 lakh
hectares to 97.14 lakh hectares, it is still 9 per cent higher than the
normal area of 90.94 lakh hectares. The availability of oilseeds declined
by 14 per cent at 74.8 lakh tonnes in the current rabi season as compared
with the 84.6 lakh tonnes last year. In the 2007-08 oil year, the total
oilseed output has jumped sharply by 11 per cent to 25.49 million tonnes
as compared with 22.97 million tonnes in 2006-07. In the wake of estimated higher output of maize and
other principal crops among coarse grains, as per the third advanced
estimates released by the ministry of agricultural, the prices of all
coarse cereals have seen a moderate decline in the domestic market. As per Shellac & Forest Products Export Promotion
Council, gaur gum exports from According to the data furnished by the minister of
State for Food and Public Distribution, the total number of closed sugar
mills in the country has increased to 113 during the sugar season from 105
in the previous season. The number of closed sugar mills has remained
static in some states and has declined in most of the other states, except
in Uttar Pradesh, where it has increased from 14 in 2006-07 to 23 in
2007-08.
Dues of all sugar mills to sugarcane growers, as on
January 15, 2008, have increased to Rs 3922.15 crore. The dues cover the
sugar season till 2007-08.The share of the private sector mills is the
largest at Rs 2,321 crore representing close to 60 per cent of the total
arrears of Rs 3,922.15 crore, while the co-operative sector with arrears
of Rs 1,474.15 crore accounts for slightly less than 40 per cent. The rest
is owed by the public sector. Sugar
prices were declining steeply due to high level of sugar production during
the last season 2006-07 and initial estimate of high production during the
current season 2007-08. It is also believed that falling sugar prices
constrained the capacity of sugar mills to pay cane price to growers in
time. According to Coffee Board, The government of Kerala has planned to implement a
comprehensive organic vegetables farming programme with a view to make the
state self-reliant in vegetables production. This programme is projected
to launch this year, envisaging 5,000 hectares of land, spread over 1,000
villages, under vegetable cultivation and is expected to yield one-lakh
tonnes of vegetables. The Agriculture Department of Kerala would take the
lead to implement the plan in co-ordination with agencies such as State
Horticultural Mission, Vegetable and Fruit Promotion Council, In order to encourage farmers to grow more paddy for
domestic consumption and also for exports, the Consortium of Indian
Farmers’ Associations (CIFA) has urged the Union Government to announce
a minimum support price (MSP) of Rs 18,000 per tonne for paddy for the
upcoming kharif season. The price is totaled at Rs 18,000 per tonne, as
production cost is estimated to be Rs 12,000 plus 50 per cent of this cost
to make it remunerative. Industry A
pick up in the index of industrial production has been seen during
February 2008 as compared to February 2007. The growth in the index of
industrial production during February 2008 at 8.6 is less than half that
recorded in February 2007 (11.0 per cent). All the three major groups
contributed for this pick up. As a result during the fiscal so far
registered IIP index rose by 8.7 per cent as compared to 11.2 per cent
last year. Mining sector and electricity sector grew by 7.5 per cent and
9.8 per cent during the month. The growth of manufacturing sector is at
8.6 per cent during February has been much below to that of 12.0 per cent
recorded last February. Out of the 17 industries, two industries declined
and eight industries registered double digit growth.. As per use-based
classification, the sectoral growth rates in February 2008 over February
2007 are 7.3 per cent in basic goods industries, 10.4 per cent in capital
goods and 8.2 per cent in intermediate goods. Consumer goods recorded an
increase of 9.2 per cent. Infrastructure Riding
on the back of good performance of coal, electricity and cement the index
of six core infrastructure industries having a combined weight of 26.7 per
cent in the index of industrial production with base 1993-94 registered an
impressive growth of 8.7 per cent during February 2008 as compared to 7.6
per cent in February 2007. This impressive performance exhibited by
the core industries in
February 2008 resulting the core index registering a growth of 5.6 per
cent during the fiscal so far as against 8.7 last year. All the six-core
industries witnessed better performance during February 2008 compared to
January 2008.. Thus refinery products, electricity, cement, steel and coal
all contributed for the higher rate of growth. Inflation The
annual rate of inflation calculated on a point-to-point basis, rose by
7.57 per cent for the week ended April 19,2008 as compared 7.33 per cent
as on April 21,2007. Index
of Primary Articles group rose by 0.3 per cent to 237.9 from 237.1 for the
previous week. Food articles group rose by 0.3 per cent. Index of non-food
articles rose by 0.6 per cent The
index for the major group Fuel, Power, Light and Lubricants rose by 0.1
per cent to 342.5 due to higher prices of furnace oil and light diesel
oil. Manufactured
products rose by 0.4 per cent to 198.3 from 197.6. mainly due to increase
in prices of acids, cast iron pipes, basic pig iron, aluminium ingots etc. The
final WPI for all commodities had been revised upward from 219.5 to
220.9for the week ended February 23,28. As a result the rate of inflation
calculated on a point-to-point basis stood at 5.69 per cent as compared to
5.02 percent provisional. Banking RBI governor, Dr. Y. Venugopal Reddy introduced
monetary policy for the year 2008-09 on April 29, 2008. The following are
some of the major highlights of the RBI's annual policy statement. Scheduled banks required to maintain CRR of 8.25 per
cent with effect from the fortnight beginning May 24, 2008. Bank Rate, Reverse Repo Rate and Repo Rate kept
unchanged. Deposits projected to increase by around 17.0 per
cent or Rs.5, 50,000 crore during 2008-09. Asset classification norms for credit to
infrastructure projects relaxed. The prudential guidelines for specific off-balance
sheet exposures of banks to be reviewed. Reserve Bank to carry out supervisory review of
banks' exposure to the commodity sector. The limit of bank loans to individuals for housing
having lower risk weight of 50 per cent has been enhanced from Rs. 20 lakh
to Rs. 30 lakh. Consolidated supervision of financial conglomerates
proposed. Working Group to be set up for a supervisory
framework for SPVs/Trusts. Inter-departmental Group to review the existing
regulatory and supervisory framework for overseas operations of Indian
banks. All transactions of Rs. 1 crore and above are made
mandatory to be routed through the electronic payment mechanism. Dispense with the extant eligibility norms for
opening on-site ATMs for well-managed and financially sound UCBs. Regulations in respect of capital adequacy, liquidity
and disclosure norms for systemically important NBFCs to be reviewed. Birla Sun Life Insurance Company Ltd. (BSLI) has
registered an increase in market share to 6.6 per cent. The group business
has a market share of 7.8 per cent amongst private life insurance players
in Birla Sun Life Asset Management Company Ltd. tied
with the Jammu & Kashmir Bank Ltd. for the distribution of Birla Sun
Life’s Mutual Fund products to the selected branches of the bank. The Asian Development Bank (ADB) has secured US $11.3
billion of Asian Development Fund (ADF) for the next four-year phase i.e.
(2009-2012) of its concessional development fund to fight poverty in the Mortgage lender HDFC reported a rise in the net
profit of 39.64 per cent to Rs 768.12 crore in the fourth quarter of
2007-08 as compared to Rs 550.05 crore during January-March 2006-07.
HDFC's total income in the fourth quarter of the financial year 2007-08
has gone up by 33.82 per cent to Rs 2,320.21 crore from Rs 1,733.77 crore
in the corresponding period in 2006-07. The interest income has grown by
46.66 per cent to Rs 2,240.26 crore as against the earlier Rs 1,527.50
crore. Dena Bank has posted a 153.40 per cent rise in net
profit at Rs 110.99 crore for the fourth quarter ended March 2008 as
against Rs 43.80 crore during the same period in the last year. Total
deposits increased by 22.58 per cent to Rs 33,943.18 crore at the end of
March 2008 as against Rs 27,689.91 crore a year ago. The gross credit grew
by 25.15 per cent at Rs 23,381 crore. Allahabad Bank has recorded a net profit of Rs16.95
billion for the quarter ended March 31, 2008 as compared to Rs 12.57
billion during the corresponding period of the previous year. Total Income
has increased from Rs 151.92 bn for the quarter ended March 31, 2007 to
Rs198.01 bn for the quarter ended March 31, 2008. It has posted a net
profit of Rs99.39 bn during the financial year 2008 as compared to Rs75.87
bn last year and total Income has increased from Rs 526.72 bn to
Rs715.64bn for the year ended March 31, 2008. State Bank of India (SBI) has posted its results for the quarter and whole year ended on March 31, 2008. The Bank has posted a net profit of Rs18832.5 mn for the quarter ended on March 31, 2008 as compared to Rs 14931.9 million for the quarter ended last year. Total income has increased from Rs 1,29,351 million for the quarter ended March 31, 2007 to Rs 1,63,939.3 million for the quarter ended March 31, 2008. However, for the whole financial year 2008 the bank posted a net profit of Rs 67,291.2 million as compared to Rs 45413.1 million last year. Total Income has increased from Rs 4,40,075.9 million to Rs 5,76,452.4 million for the fiscal year ended on March 31, 2008. Housing Development Finance Corporation Ltd. (HDFC),
as on April 31, 2008, has announced its results for the quarter and year
ended on March 31, 2008. The company has posted a profit after tax of Rs
7.68 billion for the quarter as compared to Rs 5.5 billion in the same
quarter last year. Total income for the quarter has increased to Rs 23.2
billion from Rs 17.34 billion in the quarter ended on March 31, 2007. HDFC
has posted a net profit of Rs 24.36 billion during the current financial
year as compared to Rs 15.7 billion in the previous financial year. Total
income, for the year 2007-08, has increased to Rs 81.96 billion from Rs
58.63 billion in the year ended on March 31, 2007. On a consolidated
basis, HDFC has posted a profit after tax of Rs 27.12 billion for the year
ended March 31, 2008 as against Rs 17.42 billion in the previous fiscal
year. Consolidated total income has increased to Rs 88.9 billion from Rs
63.94 billion in the year 2006-07. Indian Overseas Bank (IOB) has posted a net profit of
Rs 30.59 billion for the quarter ended on March 31, 2008 as compared to Rs
28.97 billion for the quarter ended on March 31, 2007. Total Income has
increased from Rs 193.58 billion for the quarter ended on March 31, 2007
to Rs 246.79 billion for the quarter ended on March 31, 2008.The bank has
posted a net profit of Rs 120.23 billion for the year ended March 31, 2008
as compared to Rs 100.84 billion for the year ended March 31, 2007. Total
Income has increased from Rs 621.91 billion for the year ended March 31,
2007 to Rs 877.58 billion for the year ended March 31, 2008. ICICI Bank Ltd. has revealed its results for the year
financial year 2008. Under which profit after tax for the quarter ended on
March 31, 2008 has increased by 39 per cent to Rs 11.50 billion (US $287
million) from Rs 8.25 billion (US $206 million) for the quarter ended
March 31, 2007. Profit after tax for financial year 2008 has increased by
34 per cent to Rs 41.58 billion (US $1billion) from Rs 31.10 billion (US $
775 million) for the year ended on March 31, 2007. Net interest income has
increased by 30 per cent to Rs 73.04 billion (US $ 1.8 billion) for
financial year 2008 from Rs 56.37 billion (US $ 1.4 billion) for financial
year 2006-07. Fee income increased by 32 per cent to Rs 66.27 billion (US
$ 1.7 billion) for the financial year 2008 from Rs. 50.12 billion (US $
1.2 billion) last year. Current and savings account (CASA) deposits ratio
has increased to 26 per cent as on March 31, 2008 from 22 per cent a year
ago. At March 31, 2008, ICICI Bank and its subsidiaries have consolidated
total assets of Rs 4858.3 billion (US $ 121.1 billion). Financial
Sector Capital
Markets Primary
Market Gokul Refoils & Solvent Ltd, a company engaged in
the business of solvent extraction, refining of edible oils and vanaspati
manufacturing, is entering the market with an initial public offering
(IPO) of 71-lakh equity shares. The issue will be open for subscription
from May 8 to May 13. The price band has been fixed between Rs 175 and Rs
195. The net issue to the public comprises of 70 lakh shares and 75,000
shares have been reserved for the employees. The issue will constitute
27.14 per cent of the fully-diluted post issue paid up equity share
capital of the company. The company intends to raise Rs 139.59 crore at
the cap price of the price band.
Secondary Market For the fourth consecutive week, Indian indices
posted good returns and managed to close on a positive note in spite of a
spike in the inflation rate. For the week ending on May 2, the BSE Sensex
closed at 17,125 points added 584.16 points (up 3.4 per cent) while the
NSE Nifty closed at 5,228.2 points with a gain of 132.55 points (up 2.7
per cent). The Defty was up only 0.81 per cent. Volumes picked up in the
last three sessions. The Nifty Junior was up 4.46 per cent, while the
Nifty Midcap 50 rose 4.39 per cent. The BSE 500 was ahead by 2.88 per
cent. Reliance Power Ltd, which raised Rs 11,562 crore in
its IPO in January 2007, has temporarily parked almost the entire money in
mutual funds. As per the 2007-08 financial results of the company, it has
been indicated that Rs 11,412.81 crore has been invested in mutual funds.
The company has not disclosed either the mutual funds or the schemes where
the money has been invested. According to experts, real estate mutual funds (REMF),
which have been launched on April 25, 2008, will help the real estate
sector to be more organised and transparent while providing retail
investors with a new avenue in a relatively stable asset class. The timing
of the launch is good for both developers and investors, as getting an
alternative source of funding at a time when real estate prices are on the
decline and tight monetory policy. After a wait of almost two years, the government and
the Securities and Exchange Board of India (SEBI) have firmed up their
views on finalising the guidelines for delisting of companies from stock
exchanges. The government has also initiated the process of
corporatisation of clearing corporations. Despite differences of opinion,
the reverse book-building process remains the choice for finalising the
delisting price of shares. In its draft proposal, SEBI has mooted a fixed
price for delisting, which will be a 25 per cent premium over a fixed
floor price. The fixed floor price is to be calculated by an accredited
rating agency. SEBI has mooted the alternative price discovery method as
it considers that the reverse book-building process has failed to serve
its purpose of fixing fair exit value for shareholders, giving
disproportionate powers to public shareholders for cartelisation in price
discovery. Meanwhile, the issue of a threshold level of shareholding to be
decided on delisting still remains a cause of disagreement. In its
presentation to the finance ministry, SEBI has given two options.
Promoters should either acquire at least half of the public shareholding
in their respective companies or buy shares that will take their
shareholding to a little over 90 per cent, whichever ensures a larger
number of shares. The mutual fund (MF) industry's average assets under
management (AUM) surged by 6.76 per cent to Rs 5,64,660.42 crore in April
after witnessing a sharp decline in March due to advance tax payments.
Analysts attribute the rise in assets to the inflows into fixed maturity
plans (FMPs) and liquid plus schemes. The money that was redeemed in March
came back to mutual funds and led to a rise in assets. According to the
Association for mutual funds in India (AMFI) data, Reliance mutual fund
continued to lead the pack with assets under management worth Rs 96,386.40
crore in April, up 6 per cent from Rs 90,937.94 crore in March. Derivatives Volumes rose in the cash market, they remained almost
unchanged in the F&O segment. The share of FIIs in overall market
position was 42 per cent. The new VIX hit all-time lows and the put-call
ratio also dipped as the cash market rose through the week. Nifty future closed the week at 5247 points against
last week’s close of 5126, putting in a neat weekly gain over 2.3
percentage. Furthermore, the Nifty future closed at a premium of about 18
points over the Nifty spot, which closed the week at 5228. Overall bullish
sentiment notwithstanding, the average daily turnover continued to remain
moderate at around Rs 34,000 crore. However, the market-wide open interest
positions improved to over Rs 65,000 crore. The May Nifty put call ratio (PCR)
open interest (OI) is 1.2 while June-July PCR is 2.1 and the combined PCR
for three series is 1.4. All the May index futures are at premiums to
respective underlyings and the overall liquidity has increased with the OI
rising. The spot Nifty closed at 5,228 while May, June and July futures
were settled respectively at 5,246.5, 5,248.6 and 5,247.3. While 13 lakh
May contracts were extinguished, over 18.5 lakh new June contracts were
opened. No other index had liquidity in June and July but the Bank Nifty
saw a big increase in May OI with the spot closing at 7,871.9, while the
May future was held at 7,895. The CNX IT closed at 4,458.5 with the future
settled at 4,466. The CNX Nifty Junior closed at 9,364 with the future at
9,390. Government Securities Market Primary Market On April 30, 2008, Reserve Bank of India (RBI) auctioned
91-day and 182-day T-bills for the notified amounts of Rs.3,000 crore and
Rs.1,000 crore respectively. The cut-off yields for 91-day and 184-day
T-bills were 7.35 per cent and 7.45 per cent respectively.
Under Market Stabilisation Scheme (MSS), RBI
auctioned 6.57 per cent 2011, for the notified amounts of Rs.3,000 crore
at the cut-off yields of 7.87 per cent on April 30, 2008. In consultation with the Government of India, RBI
decided to release the information regularly on a quarterly basis with a
view to enhancing transparency in G-Sec market. The data, being collected
on a quarterly basis, would be published in the RBI Bulletin for the
months of March, June, September and December with a lag of one quarter.
The data are based on the information available with Subsidiary General
Ledger (SGL) accounts maintained in the Public Debt Office – Negotiated
Dealing System (PDO-NDS) in Mumbai which covers about 97 per cent of the
total outstanding stock of Government of India dated securities. Besides,
the ownership pattern of G-Secs held in the Constitutent SGL (CSGL)
accounts has been collected from CSGL account holders and is included in
the overall holding pattern. Secondary Market Call rates quoted within the range of 6-6.30 per cent
indicating comfortable liquidity in the banking system. At the LAF window
the RBI mopped an average of Rs 9,675 crore through reverse repo. The
cumulative CBLO volumes for the week fell to Rs 2,03,649 crore from Rs
2,29,173 crore. After the flawed launch of interest rate futures in
June 2003, the RBI has once again decided to re- introduce the product.
The product failed to take off due to flaws in the design and the lack of
a pricing benchmark. An interest rate future is a standardised contract
traded on an exchange to buy or sell an underlying asset (rupee interest
rate in this case) at a certain date in future at a specified price today.
The product is used to hedge volatility in the Indian interest rate. The
RBI has set up an internal working group and is re-working the product.
Moreover, RBI plans to introduce STRIPS (separate trading for registered
interest and principal of securities) in government securities by the end
of 2008-09. The government securities Act in 2006 already provides the
legal basis for the launch of STRIPS. STRIPS is the process of separating
the interest and principal portions of a security, which then may be sold
separately in the secondary market. It allows investors additional
liquidity while holding government paper since the individual interest and
principal components can be traded as separate securities. These are
popular with investors who want to receive a known payment on a specific
future date. After witnessing a drastic fall in bond prices over
the past one month, the bond market finally had some reason to cheer.
Following the RBI’s decision during the monetary policy on Tuesday, bond
yields dropped 20 basis points from an intra-day high of 8.14 per cent to
7.94 per cent on Tuesday. Market players who expected an increase in
interest rates during the monetary policy were quite thrilled as the apex
bank left interest rates unchanged in its policy review, instead raised
banks' reserve requirement (cash reserve ratio from 8 to 8.25 per cent
with effect from May 24) to tame inflation. Bond Market ICICI Home Finance Ltd tapped the market by issuing
bonds to mobilise Rs 100 crore by offering 9.80 per cent and 9.90 per cent
for 63 months and 10 years, respectively. The bond has been rated AAA by
Care and Icra. NABARD tapped the market by issuance of bonds to
mobilise Rs 240 crore by offering 9.40 per cent 2 years. The bond has been
rated AAA by Care and Crisil. Indian Oil Corp Ltd tapped the market by issuing
special bonds to mobilise Rs 2277 crore by offering 7.33 per cent, 8.13
per cent, 8.20 per cent and 8.40 per cent for 1 year, 13 years, 15 years
and 18 years, respectively. To make the government borrowing porgramme attractive
in times of rising interest rates, the RBI has mooted the introduction of
floating rate bonds (FRBs). Usually, banks and primary dealers shun
securities in a rising market because a rise in yields means fall in price
of the bonds and results in a loss of value. Dealers say that an FRB
carries a variable coupon unlike fixed rate government bonds. These
variable coupons are pegged as a spread over a fixed rate like that of the
364-day T- bill or current market yield of the benchmark ten year bond.
The Clearing Corporation of India (CCIL) is working on a new issuance and
auction format structure for FRBs which is being inbuilt into the NDS
current auction format. The auction format will also help price FRBs in
the secondary market. Foreign Exchange Market Rupee fell the most in almost two months after the
central bank said the nation’s current-account deficit will widen in the
year through March. RBI has announced the introduction of currency
futures on eligible exchanges. The central bank has, in principle, allowed
banks and brokers as the first participants to start currency futures on
eligible exchanges. As regards companies, the RBI has clarified that
corporates accessing such products should make compulsory disclosures of
unhedged exposures and hedging in their annual accounts. The companies can
use such products only if they have an underlying rupee dollar positions
or trades. Foreign institutional investors and non-resident Indians will
be allowed hedgers in the currency futures market once the market
stabilises. The RBI is of the view that banks, being regulated entities,
will be allowed both as trading cum clearing members of their own account
and clients account and also as professional clearing members to provide
liquidity in the market. Brokers could be allowed on basis of multiple
criteria like net worth, market reputation, regulatory framework, and
participation in the derivative segment. Any existing exchange could be
selected to roll out the product based on some basic criteria. Eligible
exchanges will, however have to set up separate segments within the
exchange with separate membership criteria, trading rules and a risk
management framework. Commodities Futures derivatives The five-member Abhijit Sen committee on futures trading submitted its long-awaited recommendations to the government on April 29 2008 has said that it is difficult to establish that futures trading of agricultural commodities affect spot prices. Sen further said that "this committee is not in the business of recommending lifting or imposing a ban on futures trading. We are not giving any unanimous view on the subject”. Thus, the panel did not recommend a ban on futures trading, but wanted the existing temporary suspension of futures trading in wheat, rice urad and tur to continue for some time. The panel suggested strengthening of Forward Markets Commission and the commodity exchanges to deal with proper functioning of futures trading in a transparent manner. The panel report also said that statistically there was no perfect model to find the linkage between futures trading and the present situation of rise in prices of essential commodities.
The Multi Commodity Exchange of India (MCX) is
exploring the possibility of setting up a national spot exchange for
trading in energy products, such as natural gas and crude oil. The
exchange has already initiated talks with the Gujarat State Petroleum
Corporation (GSPC). Acording to sources, MCX is likely to hold 51 per cent
stake in the new exchange. GSPC, on the other hand, may hold about 26 per
cent stake. The National Commodity & Derivatives Exchange (NCDEX),
the country's second largest commodity bourse, is in talks with global
exchanges to set up a framework for a common delivery platform for carbon
products. Experts believe that the participation would increase by leaps
and bounds once the delivery norms are eased. Significantly, after the
common delivery platform is ready, even the intention unmatching contracts
would together for global auction. Global trading and delivery will not
only increase trading transparency but also help sellers get better
prices. MMTC, one of The jute industry has urged the Centre to exempt raw
jute from futures trade and ban the system at the commodity exchanges on
fears that unbridled speculation will rig up the fibre market affecting
spot prices as it did in 2005-06 with the opening of the futures trading
in jute at the NCDEX. It was only to arrest such speculation that the
government was compelled to impose a ban on futures trade three years ago,
which has once again been brought back by the UPA government. The
commencement of futures trading in raw jute by MCX from July 31 2007
witnessed a rise in fibre prices to unprecedented levels mainly due to
speculative activities, which is wholly unrelated to the demand-supply
scenario. With price being the prime indicator and determinant factor that
influences decisions of the international buyers to purchase jute goods
from NCDEX has recorded total volumes of Rs 174.66 crore
in the first fortnight of trading in certified emission reduction (CER).
The total number of CERs traded contracts was 3,396 during this period,
making the exchange one of the largest in the world in CERs. NCDEX is the
first exchange in any of the developing countries of the world to launch a
futures contract for carbon credit issued under United Nations Framework
Conventionon Climate Change on its exchange platform. The CER contract is
available for delivery in December 2008. The CERs contracts launched on
April 10 has witnessed significant trading interest. The subsequent yearly
contracts are likely to be launched within two months for deliveries in
December between 2009 and 2012 Banks exposure to the commodity sector has come under
the Reserve Bank of India (RBI) glare. The central bank has decided to
carry out a supervisory review of banks' exposure to the commodity sector
and has asked banks to review their advances to traders in agricultural
commodities including rice, wheat, oilseeds and pulses as also advances
against warehouse receipts. The National Multi-Commodity Exchange (NMCE),
Ahemdabad has launched new series for futures contract in non-ferrous
metals, menthol crystal and raw jute. All the contracts will be available
for trading on NMCE e-platforms from May 02,2008. The new contracts in six
non-ferrous metals - aluminium ingot, nickel prime, copper, zinc, lead and
tin - will mature on July 31. The new contract in menthol crystal will
mature on August 30 and the contract raw jute on September 30. Currently,
these non-ferrous metals are simultaneously traded in different monthly
contracts on NMCE terminals, up to three months in advance, each expiring
on the last trading day of the respective calendar month. Menthol crystal
contracts run up to four months and that in raw jute, up to five months
simultaneously. The exchange also introduced futures contracts in coffee
arabica and coffee robusta in early April. The two new contracts in both
varieties will expire on July 15 and September 15, respectively.
The MCX will launch aviation turbine fuel (ATF)
futures in the country soon. Permission by commodity market regulator FMC
to operate such a platform will allow carriers to hedge their fuel-price
risk on a domestic commodity exchange rather than an overseas one, as they
do at present. On May 02, 2008, the government cleared 15 FDI
proposals along with the proposal of the world’s largest stock exchange
NYSE Euronext to pick up a 5 per cent stake in the MCX at an estimated
investment of Rs 218.51 crore. The proposals approved by finance minister
P Chidambaram on the recommendations of Foreign Investment Promotion Board
(FIPB). Corporate Sector Nearly 345 companies have so far declared their
results, of which 237 companies have performed well with their net profit
growth touching 21.97 per cent compared to the two preceding quarters. The
star performers are Bharti Airtel, Bharat Electronics, Cipla, Hero Honda,
Hindustan Zinc, Idea Cellular and Nicholas Piramal. These seven companies
have posted an average net profit growth rate of 42.5 per cent compared to
the two preceding quarters. If these seven companies have been excluded
from the list then average net profit growth would decline to 15.7 per
cent. Information technology and cement companies are the laggards as they
were badly hit from an appreciating rupee, the sub-prime meltdown in the
West and the slowdown in the Reliance Communications (RCom) posted a rise in net
profit of 46.8 per cent at Rs 1,503 crore in fourth quarter ended March
2008 as compared with Rs 1,024 crore during the same period last year. For
the whole year ended on March 2008, the company posted a net profit of Rs
5,401 crore showing an increase of 70.8 per cent compared with Rs 3,164
crore during the same period a year ago. The company's revenues have grown
to Rs 19,068 crore as against Rs 14,468 crore during the previous
financial year. State-run Mahanagar Telephone Nigam (MTNL) has posted
an 8.86 per cent increase in its net profit at Rs 507.32 crore for the
year ended March 2008 against Rs 466 crore in the financial year 2006-07.
Total income of the company has decreased to Rs 5,407.84 crore for the
year ended March 2008 from Rs 5,582.85 crore last year. On the contrary,
quarter ended on March 2008 has depicted a net profit of Rs 219.93 crore
as compared with Rs 202 crore in the corresponding period a year ago.
Total income during this quarter increased to Rs 1,463.56 crore over last
year’s quarter of Rs 1,390.47 crore. Grasim Industries has reported 58 per cent rise in
its consolidated net profit (after minority share) at Rs 880.77 crore for
the quarter ended March 31, 2008, as compared to Rs 558.42 crore during
the corresponding quarter last year. Consolidated income of the company
during the quarter also increased to Rs 4,832.02 crore from Rs 4,167.69
crore last year. For the year ended on March 31, 2008, the consolidated
net profit of the company stood at Rs 2,891.44 crore, a rise of 47 per
cent from Rs 1,967.39 crore during last year. Total income of the company
surged at Rs 17,436.19 crore from Rs 14,387.18 crore. On a stand-alone
basis, the company reported a 41 per cent increase in its net profit at Rs
667.37 crore for the quarter ended March 31, 2008 as compared to Rs 474.49
crore in the comparable period last year. Total income of the company rose
to Rs 2861.09 crore from Rs 2552.18 crore last year. The stand-alone net
profit of the firm stood at Rs 2,232.60 crore for the year ended March 31,
2008 as compared to Rs 1,535.81 crore during last year. Total annualised
income of the company rose to Rs 10,592.89 crore from Rs 8,853.47 crore
last year. Berger Paints India signed an agreement with Advent
International, a global private equity group, to acquire 100 per cent
shares of Bolix SA (Bolix), a leading provider of external insulation
finishing system (EIFS) in Poland, for an estimated Rs 154 crore ($38.6
million). The acquisition will be made through a wholly owned subsidiary
of Berger Paints India in The Reserve Bank of India (RBI) would launch an India
Pay credit card by the end of the year 2008, in order to promote the use
of plastic money among Indians. Inspired by the success of the China Union
Pay card. The credit card would be especially designed for the common
people with low interest rates and risk reduction facilities. National
Payment Council of India (NPCI) is working on the registration process of
the card and its format. Bharat Heavy Electricals Ltd (BHEL) and NTPC on APRIL
30 2008 formed a 50:50 joint venture company known as NTPC-BHEL Power
Project Pvt Ltd. under which Engineering Procurement and Construction (EPC)
contract for power plants and infrastructure projects as well as
manufacture and supply equipment in Hindalco Industries Ltd., on April 30 2008 issued
fourthe quarter results ended on March 31, 2008,The net profit of the
company has seen a rise of 49
per cent at 10.77 billion rupees (US $266 million) from 7.21 billion a
year ago. Total income has increased to 51.54 billion rupees from 48.72
billion last year. The latest report '2008 Global Outsourcing 100',
compiled by the International Association of Outsourcing Professionals (IAOP)
features that at least 20 Indian firms are among top 100 outsourcing
companies in the world. Five of them are in top 10, which include
Infosys (third rank), TCS (sixth), Wipro (seventh), Genpact (ninth)
and Tech Mahindra (tenth). All the five are leading software service
providers. Other Indian companies in
the list are HCL Technology (11th rank) Mastek (16), WNS Global Services
(19), Hexaware (22), ExlService (26), 24/7 Customer (28), Cambridge (36),
ITC Infotech (40), KPIT Cummins (42), Patni (46), Zensar (53), MindTree
(54), Mphasis (56), Aditya Birla Minacs (62), FirstSource Solutions (73)
and VCustomer (84). External Sector Exports during the fiscal year 2007-08 was US $ 155512.49 million as
against US $ 126413.99 million registering a growth of 23.02 per cent . As
against this Imports was valued at US $ 235910.73 million as against US$
185735.17 million recording a growth of 27.01 per cent. In rupee terms, while export increased by 9.39 per cent , import flared
up by 12.92 per cent. As a result trade deficit was estimated at US $ 80398.24 million higher
than the deficit at US $ 59321.18 million during April-March 2007-08. Oil imports were estimated during the year at US$ 77033.57 million during
the 2007-08 and non-oil imports at US $ 158877.15 million Telecom Bharti Airtel has set-up a joint venture with Indian
Farmers Fertiliser Co-operative Limited (IFFCO) initiating IFFCO Kisan
Sanchar Ltd., under which company would provide telecom services at
village level. The farmer would also get access to a unique VAS platform
that would broadcast five free voice messages on mandi prices, farming
techniques, weather forecasts, diary farming, animal husbandry, rural
health initiatives and fertiliser availability etc. on a daily basis. In
addition to it, the farmer would also be able to call a dedicated
helpline, manned by experts from various fields, to get answers to their
specific queries. Supreme Court upholds TDSAT order classifying Tata
Tele's Walky, Reliance Communication's services as limited mobile phones,
making them liable to pay access deficit charges to BSNL for
interconnection. Tata Teleservices and Reliance Communication's services
would now have to pay liable of Rs 300 and crore and Rs 400 crore as levy
to BSNL on account of ADC. The Telecom Regulatory Authority of India (TRAI) has
recommended that within the composite foreign investment limit of 74 per
cent, wherever applicable for carriage services, foreign investments up to
49 per cent would be permitted under the automatic route. Beyond that
level, an approval from the Foreign Investment Promotion Board (FIPB)
should be taken. For content services, the recommendations suggest that
the FIPB approval should be required for foreign investments.
*These statistics and the accompanying review are a product arising from the work undertaken under the joint ICICI research centre.org-EPWRF Data Base Project. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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