Highlights of  Current Economic Scene

Growth Scenario

For the first time in 60years, the world economy is set to be in contraction because of the deepening financial crisis; which will lead to the global GDP shrinking by up to 1% in 2009.

International Monetary Fund (IMF) said that Indian growth is likely to see a downturn to 6.25% in 2008-09 due to falling corporate investment and deteriorating global outlook. It also projected that India ’s growth will moderate to 5.25% next fiscal year (2009-10).

Abhijit Sen, Planning Commission member is of the opinion that growth in the next fiscal year (2009-10) may reach 7% because of stimulus packages, which is being introduced in the economy.

Broking house CLSA Asia-Pacific Markets has forecast GDP growth of 4.6% in 2009-10 and expects the domestic economy to stabilize only by early 2010.

C Rangarajan, member of Rajya sabha, has commented that the economy, particularly the economies of developed countries will start showing distinct improvement only in 2010-2011.

Agriculture

Wheat procurement as on 24 March 2009 for the marketing season 2009-2010 has reached at about 8,500 tonnes as compared to nearly 27,000 tonnes in the year-ago period. Procurement has begun across the country on 18 March in Madhya Pradesh, Rajasthan and Gujarat , almost 10-12 days ahead of the normal schedule of 01 April. According to the latest data, procurement in Madya pradesh stands at 4,491 tonnes as against 26,893 tonnes during the corresponding period last year. The arrivals in the state is expected to be low at 21,649 tonnes as against 1.41 lakh tonnes a year-ago. Rajasthan has procured 3,339 tonnes untill now as there were no purchases made during the same period a year ago. Meanwhile, rice procurement which began in October last year reached at 253.59 lakh tonnes as on 24 March 2009 as compared to 213.76 lakh tonnes in the year-ago period.

The central government has decided to freeze the quantity of rice and wheat, which is supplied at a discounted price to the above poverty line (APL) households at 13.6 lakh tonnes per month. Families under APL would continue to get wheat at Rs 6.10 per kg and rice at Rs 8.30 per kg within this limit, but they would be charged the minimum support prices (MSPs) of the foodgrains for allocation beyond 13.6 lakh tonne per month.

According to industry sources, despite minimum export price (MEP) has been reduced for the basmati rice from US$ 1,200 per tonne to US$ 1,000 per tonne, basmati exporters are still facing stiff competition in the global market i.e. from Pakistan (MEP is at US$ 800 per tonne).

Sugar production in Uttar Pradesh is expected to drop by 43% this year due to reduced sugarcane harvest, leading to fall in supplies of sugar cane. Secretary General of the Uttar Pradesh Sugar Mills Association stated that sugar output by 30 September 2009 would be around 4.15 million tonnes as against 7.3 million tonnes last year. Sugarcane production in the state upto 15 March 2009 was 3.97 million tonnes. More than 115 mills in Uttar Pradesh have been closed down and remaining 15 is expected to run out of supplies by the month-end.

Cotton Corporation of India (CCI) has so far offloaded about 55 lakh bales (each of 170 kg) of cotton due to the ‘bulk discount offer scheme’ with advantage of longer delivery period and supported by good buying from mills and ginners. The corporation has so far procured about 88 lakh bales for the current season, nearly 30% of the national estimated crop. Meanwhile, the Cotton Advisory Board (CAB) has lowered its output estimates to 290 lakh bales from the earlier 322 lakh bales due to delayed sowing and erratic monsoon.

As per the report by National Horticultural Research and Development Foundation (NHRDF), acreage under potato cultivation during 2008-09 is expected to be more by about 5% as compared to last year. Despite reports of crop failure and shrinkage in areas under cultivation in two of biggest potato producing states like West Bengal & Uttar Pradesh. West Bengal , contributes nearly 30% of the total potato production, but this year it is estimated that yield would be lower to 2.2 million tonnes as against 8 million tonne last year as most of the crops in some of the areas has been affected by late blight. Potato output in Uttar Pradesh and Punjab is estimated to be around 13.5 million tonnes, 1.4 million tonnes as against 11.8 million tonnes and 9.50 lakh tonnes, respectively, a year ago.

Spices exports from the country for the first eleven months of the current financial year have crossed US$ 1 billion-mark despite the slowdown in global trade. India exported 3,95,775 tonnes of spices and spice products valued at Rs 4,590.50 crore (US$ 1,020.95 million) this year as against 3,86,875 tonnes valued at Rs 3,950.50 crore during the corresponding period of the last financial year. Exports have shown an increase of 16% in rupee value and 2% in volume. In dollar terms, it has shown a rise of 4%. Spice oils and oleoresins including mint products contributed 43% of the total export earnings. Chilli contributed 21% followed by pepper 8%, cumin 7% and turmeric 5%. Export of seed spices showed an improvement this year. The export of value added products like curry powder and spice oils & oleoresins have also shown a substantial increase both in terms of quantity and value as compared to last year. Export of spices like cardamom, cumin, fenugreek, nutmeg & mace and vanilla have achieved their respective targets in both volume and value fixed for the year 2008-09.

International Grains Council (IGC) has reiterated that global wheat output in 2008-09 is projected to reach a record of 688 million tonnes, marking a 13% increase over 609 million tonnes in the previous year. This augmentation in production is due to higher estimated produce in Australia .

Industry

The General Index (IIP) stands at 280.4, which is 0.5% lower as compared to the level in the month of January 2008. The cumulative growth for the period April-January 2008-09 stands at 3.0% over the corresponding period of the pervious year.

The annual growth of thee Indices of Industrial Production for the Mining, Manufacturing and Electricity sectors for the month of January 2009 at (-) 0.4%, (-) 0.8% and 1.8% as compared to January 2008. The cumulative growth during April-January, 2008-09 over the corresponding period of 2007-08 in the three sectors have been 2.7%, 3.0% and 2.6% respectively, which moved the overall growth in the General Index to 3.0%.

In terms of industries, as many as five (5) out of the seventeen (17) industry groups (as per 2-digit NIC-1987) have shown positive growth during the month of January 2009 as compared to the corresponding month of the previous year. The industry group ‘Machinery and Equipment other than Transport Equipment’ have shown the highest growth of 17.5%, followed by 10.3% in ‘Other Manufacturing Industries’ and 5.3% in ‘Beverages, Tobacco and Related Products’.  On the other hand, the industry group ‘Food Products’ have shown a negative growth of 16.1% followed by 15.2% in ‘Wood and Wood Products; Furniture and Fixtures‘ and 13.4% in ‘Transport Equipment and Parts’.

As per Use-based classification, the Sectoral growth rates in January 2009 over January 2008 are (-) 1.0% in Basic goods, 15.4% in Capital goods and (-) 9.2% in Intermediate goods. The Consumer durables and Consumer non-durables have recorded growth of 2.5% and 0.7% respectively, with the overall growth in Consumer goods being 1.1%.

Infrastructure

The Index of Six core industries having a combined weight of 26.7 per cent in the Index of Industrial Production (IIP) with base 1993-94 stood at 242.0(provisional) in February 2009 and registered a growth of 2.2% (provisional) compared to a growth of 7.0% in February 2008.  During April-February 2008-09, six core-infrastructure industries registered a growth of 3.0% (provisional) as against 5.8% during the corresponding period of the previous year.

Crude Oil production (weight of 4.17% in the IIP) registered a negative growth of 6.2% in February 2009 compared to a growth rate of 2.3% in February 2008. The Crude Oil production registered a growth of (-)1.7 (provisional) during April-February 2008-09 compared to 0.5% during the same period of 2007-08.

Petroleum refinery production  (weight of 2.00% in the IIP) registered a growth of 0.5% (provisional) in February 2009 compared to growth of 5.8% in February 2008. The Petroleum refinery production registered a growth of 3.0% (provisional) during April-February 2008-09 compared to 7.2% during the same period of 2007-08.

Coal production (weight of 3.2% in the IIP) registered a growth of 6.0% (provisional) in February 2009 compared to growth rate of 11.6% in February 2008. Coal production grew by 8.7% (provisional) during April-February 2008-09 compared to an increase of 5.6% during the same period of 2007-08. 

Electricity generation (weight of 10.17% in the IIP) registered a growth of 0.3% (provisional) in February 2009 compared to a growth rate of 9.8% in February 2008. Electricity generation grew by 2.1% (provisional) during April-February 2008-09 compared to 6.6% during the same period of 2007-08.

Cement production (weight of 1.99% in the IIP) registered a growth of 8.3% (provisional) in February 2009 compared to 12.8% in February 2008. Cement Production grew by 7.2% (provisional) during April-February 2008-09 compared to an increase of 7.9% during the same period of 2007-08.

Finished (carbon) Steel production (weight of 5.13% in the IIP) registered a growth of 3.6%(provisional) in February 2009 compared to 2.3% (estimated) in February 2008. Finished (carbon) Steel production grew by 2.4% (provisional) during April-February 2008-09 compared to an increase of 5.6% during the same period of 2007-08.

Inflation

The official Wholesale Price Index for ‘All Commodities’ (Base: 1993-94 = 100) for the week ended 14 March 2009 rose marginally by 0.1 percent over the previous week.  

The annual rate of inflation, calculated on point-to-point basis, stood at 0.27 percent (Provisional) for the week under reference as compared to 0.44 percent (Provisional) for the previous week and 8.08 percent during the corresponding week of the previous year.  

The index of major group primary articles rose marginally to 245.6 from 245.5 for previous week mainly due to higher price of barley,, bajra, maize, fruits and vegetables, masur, urad, rice.

The index for major group fuel, power, light and lubricants remained unchanged at its previous week's level.

The index for major group manufactured products rose by 0.2 by 0.1 percent over the week due to higher prices of oil cakes and edible oils etc.

Wholesale price index for ‘All Commodities’ (Base: 1993-94=100) revised up to 229.0 from 230.5 for the week ended 17 January 2009 and annual rate of inflation based on final index, calculated on point to point basis, stood at 4.95 percent as compared to 5.64 percent (Provisional).

Financial Market Developments

Capital Markets

Primary Market

The country's largest commodity bourse, Multi-Commodity Exchange (MCX), is reviving its initial public offer (IPO), within a year of shelving its plans to tap the capital market. As per market sources Jignesh Shah-led Financial Technologies, the promoter of MCX, announced some investment bankers and brokers recently about the possibility of reviving plans for the IPO.

Secondary Market

Equity bourses carried forward the week-long momentum, and displayed a distinctly strong trend during the week on the back of strong positive signals from global markets. A steep fall in the India 's inflation also raised expectations of a further easing of the monetary policy by the Reserve Bank of India . India 's (RBI) wholesale price index (WPI) rose 0.27% in the 12 months to 14 March 2009, below the previous week's annual rise of 0.44% which has provided room for the RBI to cut interest rates further to support faltering economic growth. Amid high volatility, the BSE Sensex jumped 1,089 points or 12% to 10,049, in the week ended Friday, 27 March 2009. This is the largest weekly gain for the Sensex in the calendar year 2009. The BSE Mid-Cap index gained 173.10 points or 6.27% to 2,934.16 and the BSE Small-Cap index advanced 124 points or 4% to 3,238 over the week. The NSE Nifty jumped 302 points, or 11%, to end the week at 3109. According to experts, equity markets across the globe witnessed a revival in sentiments following the US government’s plans to pump in $1 trillion to help the US banking system get rid of its toxic assets.

The NSE has decided to calculate its benchmark indices on free float market capitalisation basis. This means that the weightages of companies in the index will be decided according to the floating stock of the company, and not by market capitalisation (full float). The BSE has already been calculating its indices on the basis of free float market capitalisation.

The country’s two top equity exchanges, the BSE and the NSE will share stock feeds on their electronic trading platform. The alliance could later extend to market players on both the exchanges trading on a single platform. BSE’s online trading platform (BOLT) could be available on NSE’s software Neat-on-Web (NOW), though no agreement has been reached on this so far.

The Association of Mutual Fund in India (Amfi) is planning to make the proposal with Securities Exchange Board of India (SEBI) to the expenses charged by a mutual fund to its investors. The move will witness a mechanism where investors could choose between different classes of units and also the applicable expenses or load to be payable. For the past couple of months, a committee of Amfi has been working to replicate in the Indian context the ‘share classes’ structures used in US and Europe . These classes segregate the schemes of the mutual fund into different categories and investors can choose their preferred class and pay the applicable ‘load’ or expense.

Mutual funds will need to realign investments worth Rs 16,000 crore following the move by NSE to switch to free-float capitalisation method for calculating the weightages of companies in the S&P CNX Nifty, effective from 26 June. Actively managed equity funds worth Rs 16,000 crore and index funds worth Rs 600 crore are benchmarked to the 50-share S&P CNX Nifty. The NSE, at present, uses the full-market capitalisation method for reaching relative weightages of constituent stocks in Nifty. Foreign institutional investors (FIIs) however, will not need to churn their India portfolios much as most of their funds are benchmarked to the MSCI Index, which is calculated on the basis of free-float method.

Over the last couple of months, a lot of debt mutual funds have shifted their assets into short-term money market instruments, as they want to be ready to meet redemption pressures in the last quarter of this financial year. As a result, their investments in collateralised lending and borrowing obligations (CBLOs) have risen from Rs 4,500 crore as of December to Rs 19,000 crore by February-end.

The NSE the leader in the equities trading space is expecting an increase of over 8.5% in the number of its terminals by the end of 2009. According to sources at the exchange, the number of terminals is expected to cross 2,00,000 by the end of the year. The exchange has 1,84,000 terminals at present. NSE, the country’s largest exchange in terms of trading volumes, is pushing for more terminals at a time when new players are looking to enter the equities trading space. The exchange is now planning to spread its network to over 100 new towns. According to sources, the exchange also intends to go ahead with the introduction of new products. In the last 15 months, it has launched six new indices, including Nifty Junior, dollar index S&P CNX Nifty Defty, Nifty Mid-cap 50 and volatility index (VIX), besides launching a gold exchange traded fund.

Following the SEBI’s directive to the exchanges to carry out internal audits of their stockbrokers and clearing members, the NSE has asked its brokers and members to appoint an internal auditor for carrying out audits of their operations in all segments of the exchange. NSE said that reports on internal audits were required to be submitted on a half-yearly basis with the first half-year period starting from 1 October 2008.

Derivatives

The Nifty surpassed the 3000-mark quite comfortably during the week and the upsurge was supported by high volumes, which indicates a widespread participation in the rally. The Nifty future closed at about 3,126 points against its previous week’s close of about 2,799, gaining a whopping 11.8%. It also ended in sharp premium to the spot, which closed at 3108.65. While market-wide rollover stood at 77%, slightly higher than its score on previous occasions, Nifty rollover stood at 68-70%, significantly lower from its previous performance.

India VIX or Volatility Index, which measures the immediate expected volatility, slid to 26.66, the lowest level in the last one-year. But it recovered sharply from lows to end at 37.14, indicating that that Nifty rally could turn weak.

The cumulative FII positions as a percentage of the total gross market position on the derivative segment as on 26 March rose to 39.51%. They were predominantly net buyers in the futures and options (F&O) segment during the week. They now hold index futures worth Rs 9,610.5 crore (Rs 8,239.68 crore) and stock futures worth Rs 13,372.16 crore (Rs 14,108.97 crore). Their index options slipped to Rs 19,024.57 crore (Rs 25,066.26 crore).

The stocks of Akruti City fell by over 45% on NSE on 26 March, as the stock would be out of F&O segment from 27 March. The counter was volatile in the bourses. The share price of Akruti fell to an intra-day low of Rs 700, after touching a high of Rs 1,948 and closed at Rs 999.45 on the NSE. On the BSE, the stock touched a low of Rs 670; it opened at Rs 1,830, and touched a high of Rs 1,948 and closed at Rs 819.40. The difference in the share price between the BSE and the NSE was as high as about Rs 400 during intra-day. As the F&O positions in the stock had to be squared off today, investors wound up their positions and sold the stock. The total traded quantity on BSE and NSE was 42 lakh shares and 73 lakh shares, respectively. The stock price of the stock had doubled in five trading sessions, after which the NSE posted the announcement of the discontinuation of trading in F&O segment for Akruti City . The stock will continue to trade in the cash segment. On BSE, nearly 38,000 shares of Akruti City were auctioned since 16 March when the real-estate firm’s stock rose significantly.

On 23 March the turnover jumped to Rs 78,271 crore, in the F&O segment on the NSE, which was the highest since 25 September 2008. The Nifty March future closed in discount at 2934 and the April future ended at 2935 against the spot close of 2939. The rollover was a healthy 57%, and most of them were on the long side.

The Derivatives Market Review Committee appointed by SEBI has proposed introduction of a range of sophisticated derivative products, such as over-the-counter (OTC), exchange-traded derivative and exchange-traded third-party products, to SEBI. As per a dealer the proposed products might not garner a lot of response initially but they will expand the market. The committee suggested introduction of products such as mini-contract on equity indices, options contract with long tenure, volatility index, bond index, exchange-traded currency contracts and exchange-traded credit derivatives.

Expansion of derivative products outside the equity segment is being put on hold for the time being. As a result, the stock exchanges, which were planning to introduce interest rate futures during the first quarter of the current calendar year, will have to wait till the regulators give a go-ahead. Even the expansion of currency derivatives, that was expected to be launched in the second half, would be delayed further.

A team from rating agency Standard and Poor’s (S&P) is expected to hold discussions with finance ministry officials after the government asked for an explanation for lowering India’s long-term sovereign rating outlook from “stable” to “negative”. The government is also approaching the other two major rating agencies — Moody’s and Fitch — to explain its fiscal strategy, the economic situation and the outlook. On 24 February, S&P cited the deteriorating fiscal situation as a key reason for lowering the outlook. Though the agency left the actual rating unchanged at BBB-, lowering the outlook raises the prospects of a downgrade to sub-investment grade, which would make it more expensive for Indian companies to raise money overseas.

Government Securities Market

Primary Market

Seventeen state governments auctioned 10-year paper maturing in 2019 for the notified amount of Rs 5,048.17 crore on 24 March. The cut-off yield for the securities was range from 8.08-8.48% being highest for Puducherry and lowest for Goa .

On 25 March 2009, RBI auctioned 91-day treasury bills (TBs) and 364 day TBs for the notified amount of Rs 5,000 crore and 3,000 crore, respectively. The cut-off yield for the 91-day TB was set at 4.95% and for 364-day TB was at 5.50%.

RBI re-issued 7.27% 2013 and 6.05% 2019 on 26 March for the notified amount of Rs 5,000 crore and 7,000 crore, respectively. The cut-of yield for the securities was set at 6.77% and 6.97%, respectively.

Through OMO, RBI purchased 7.38% 2015, 8.24% 2018, 7.94% 2021, 8.24% 2027 and 8.33% 2036 for the aggregate amount of Rs 10,000 crore with the cut-off yield of 6.70%, 6.73%, 7.48%, 7.69% and 7.77%, respectively.

Secondary Market

Bonds shed their gains and yields lurched forward as traders ignored low inflation numbers and shifted focus to rising international oil prices. The Government reported inflation of 0.27%, the lowest level in about 30 years. Most traders were, in fact, worried over rising international oil prices. The oil import basket prices breached $50 per barrel or the highest level since December this year. Besides, traders said there was considerable confusion from the RBI signaling mechanism. The confusion emerged from the Open Market Operations (OMO) held during the week. The securities purchased by RBI during the week were the 7.38% 2015, 8.24% 2018, 7.94% 2021, 8.24% 2027 and the 8.33% 2036.

Liquidity remained comfortable during the week, as was evident from the high recourse to the reverse repurchase window of Rs 13,750 crore, though some banks took advantage of repo window for Rs 2,600 crore, for meeting year-end liquidity requirements. Bankers said that the recourse to the repo window was mostly from private sector banks and some foreign banks for meeting their year-end reserve obligations.

Average daily trade volume plunged Rs 1,500 crore to Rs 8,700 crore. Equity trade volume in the NSE rose to Rs 12,900 crore exceeding debt trade for the first time since December last year. Though banks raised close to Rs 5,500 crore through certificate of deposits during the week, interest in securities remained lacklustre.

Bond Market

During the week under review, four FIs/banks, one NBFC, one central PSU and two corporates tapped the bond market to moblise an amount of Rs 4,360 crore.

RBI considered a proposal to relax the provisions of non-banking finance companies (NBFCs) to get some more time to meet higher capital adequacy ratio requirements. The roadmap prepared by the RBI required NBFCs who do not take deposits to achieve a capital-to-risk-assets (CRAR) ratio of 12% by April 2009, as against 10% at present. In fact, the CRAR was proposed to be enhanced further to 15% from April 2010.

Foreign Exchange Market

The absence of fresh inflows and high import demand for dollar pushed the rupee-dollar exchange down to Rs 50.54 per dollar during the weekend, down from the previous week’s Rs 50.14 per dollar. But traders said that at these levels some exporters took cover, hedging their forward receivables anticipating a dollar weakening. As a result, one, three, six and 12-month forwards ended the week at 5.97% (6.19%), 4.30% (4.69%), 3.38% (3.91%) and 2.56% (2.90%) respectively. Cash to spot forward premia though hardened to 5.75% as some foreign banks resorted to buy-sell swaps taking advantage of the firm call money rates. But the rupee’s short-term trajectory was evident from the high non-deliverable forward markets (NDF) that saw the rupee end the week at Rs 51.41 per dollar.

Currency Derivatives

The daily volumes in currency futures market has risen to Rs 5,915 crore as on 26 March 2009 from less than Rs 200 crore in September 2008 due to the high volatility in the currency market. Of this, Rs 3,260 crore is accounted for by the NSE and the rest by the MCX-SX. In the six months from September 2008 to March 2009, the rate of growth of business at NSE has been 1,641%. The growth rate for MCX-SX has also been 780%. This is also the reason government-owned MMTC, one of India ’s biggest trading firms, has become the fourth company to launch a currency futures market, even before it could set up a commodity exchange that it announced in June 2008. The new exchange would be the fourth such venture in less than two years after NSE, BSE and MCX-SX.

The SEBI has raised the gross open market position limits in currency derivatives segment. The modified limits will come into effect from 25 March. Turnover and open interest in currency futures on MCX-SX and the NSE surged sharply on 24 March. According to a SEBI circular, the gross open interest position limit of a client has been enhanced up to $10 million or 6% of the open interest, whichever is higher. Earlier, this was 6% of the total open interest or $5 million. For non-bank trading members the gross open position across all contracts was increased up to 15% of the total open interest (OI) or $50 million, whichever is higher. This limit was earlier up to 15% of the total OI or $25 million, whichever is higher. The position limit for trading members, which are banks, was kept unchanged. The revision in the gross position limits of the client and non-bank trading member have been carried out by the market regulator following the recommendation of a technical standing committee of the RBI and SEBI.

Commodities Futures derivatives

National Commodities and Derivatives Exchange (NCDEX), which is trying to step up volume in bullion trading, has reduced the open position limits in gold futures for both brokers and individual traders by over 66% to 6 tonne and 2 tonne, respectively. Earlier on the NCDEX platform, large brokers had exposure in gold up to 18 tonne including all gold contracts, which has now been reduced to 6 tonne, or 15%, of OI. For small traders, open position limit has been revised from 6 tonne to 2 tonne including all gold contracts, or 15%, of OI. The revised limits are effective from 24 March on all gold variants --gold 1 kg, gold international and gold 100 gram. The exchange has made changes as per the directives received from the market regulator Forward Markets Commission (FMC). Any new variants of gold contracts will also be included for calculation of said limits. Bullion experts opine that, the NCDEX move may fail to encourage brokers and small traders, as they will have less exposure to gold now. Gold volumes on the NCDEX stood at 6,755 tonne in the second fortnight of February, while on the MCX, its competitor, volumes soared to 8.18 lakh tonne.

Base metals exhibited good movement on 26 March on the back of strong rally in the stock markets and a slide in dollar against major currencies and the rupee. However, a firmer rupee prevented metals on domestic bourses from reflecting similar gains that were witnessed on London Metal Exchange (LME). There was an unexpected jump in the monthly new home sales data from the US that revived the hope for base metals demand. The fall in dollar versus currencies such as yen, euro, etc, contributed to the metal rally.

Public Finance

According to the latest press note revenue receipts as on February 2009 works out to be 79 per cent of the actual to revised estimates at Rs. 437,397 crore with the receipts under net tax revenue reaching to Rs. 356,390 crore and non-tax revenue Rs.81, 007 crore.

With total expenditure reaching 83.1 per cent of the revised estimates, fiscal deficit till date works out to be Rs.307, 133 crore. Market borrowings at Rs.300255 crores financed about 98 per cent of the fiscal deficit.

Banking

India ’s largest home loan financer, HDFC has slashed its prime lending rate (PLR) for retail borrowers by 50 basis points. The move will benefit all existing HDFC customers who have borrowed at floating rates. HDFC has a share of about 40% of new home loans approved every year. This is the second time in three months that it has reduced its retail PLR.

The Supreme Court will be finalising its decision in the month of September regarding the petition challenging the imposition of “professional tax” on ATMs and extension counters of banks. State Bank of Hyderabad has sought the apex court’s intervention in deciding whether ATMs and extension counters established by banks at various places would be separate assesse for levying of professional tax.

Central Bank of India and Andhra Bank have reduced the benchmark prime lending rates (B-PLR) by 50 and 25 basis points respectively from April 1, 2009. Central Bank has reduced its B-PLR by 50 bps to 12% while Andhra Bank by 25 bps to 12.25% from 12.50%.

Corporate

Tata Motors is looking to set up a truck manufacturing plant in Myammar with support from the Indian government in the form of financial participation. This will be the first foray by an Indian automobile company in the military-controlled country. Tata Motors has a plant in Thailand which produces pick-up trucks.

Surya pharmaceutical is venturing into healthcare retail and is planning to open around 500 outlets in the next three years. This venture will require investment of Rs 250 crore. The company forecast that it will achieve a turnover of Rs 800 crore by 2011. Along with organic growth the company is planning to acquire two pharmaceutical companies.

Essar Energy Overseas Ltd., a subsidiary of Essar Oil, is acquiring 50% stake in Kenya ’s only refinery in Mombasa . It will buy stake from Shell Petroleum, Chevron Global Energy Inc and BP Africa. Kenyan government is holding the remaining 50% stake.  This refinery has a capacity of 4-million tonnes a year. Essar will upgrade the refinery at a cost of $400-450 million.

V-Guard Industries has entered into manufacturing power cables by setting up two plants at Coimbatore and Uttaranchal respectively to capture a sizeable chunk of the over Rs 8,000 crore cable market in India. The company is also setting up a new plant in Himachal Pradesh to manufacture electric water heaters.

State refiner Indian Oil (IOC) has received the government’s approval for merger of Bongaigaon Refinery and Petrochemicals Ltd with itself. IOC owns around 74% in BRPL.

GE-Hitachi Nuclear Energy, a joint-venture of GE and Japan ’s Hitachi has signed two separate agreements with the Nuclear Power Corporation of India and BHEL for designing and building multiple nuclear reactors.

Nigeria has short-listed GAIL India to develop Africa ’s natural gas reserves. GAIL featured in the list of 15 companies that Nigeria has short-listed for increasing gas production to boost supply to its crippled power sector.

FMCG major Tata Tea is negotiating with the European Bank of Reconstruction and Development (EBRD) to acquire 51% of Grand, a branding, packing and distribution company in Russia . This deal, subject to the fulfillment of various conditions, will see the beverage group of companies enter Russia , a market where coffee is becoming increasingly popular and tea is a national beverage.

GAIL India has planned an investment of Rs 1,000 crore for setting up 2,000 CNG dispensing stations on major national highways to create a CNG Quadrilateral.

Garment manufacturer Bombay Rayon Fashions is raising Rs 333 crore by issuing shares to the Netherlands-based AAA United BV on a preferential basis for funding new projects and businesses.

External Sector

Exports during February 2009 were valued at US$ 11931 million which was 21.7% lower than that in Februry 208 as a result during the fiscal year so far the total exports at US$156597 million registered a growth of 7.3% over that of US $ 145878 million reported in the comparable period last year.

Imports during February were valued at US $ 16823 million, a decrease of 23.3 per cent over that of US$ 21934 million in February 2008 and the cumulative import at US$ 271687 million was 19.1% more than that of US $ 228081 during April- February 2007-08.

Trade balance during February thus worked out to be $ 4910 as compared to $6714 in 2008. The cumulative trade balance for April-February 2008-09 estimated at US $ 115090 million was 1.4 times to that of US $ 82203 million during April-February 2007-08.

While oil imports during the current fiscal year so far gone up from US $ 70704 million in April-February 2007-08 to US $ 89684 million, that of non-oil imports accelerated by 15.6% to US $ 182003 million.

Information Technology

One of the country’s largest BPO firm Genpact is planning to open delivery centre in the US to service high-end projects of its clients. This is a detour from the current trend where IT companies are trying to cut their onsite presence to save costs. The company already has four centres in the US .

BK Modi-owned Spice Group, engineering major L&T and Tech Mahindra have been short-listed by the board of fraud-hit Satyam Computer Services for the next level of the bidding process. The short-listed companies will now be given access to certain business, financial and legal information on Satyam to decide on a bid price, provided they sign a non-disclosure and non-solicitation agreement, a stand-still pact and a no-claims undertaking.

Telecom

State-owned BSNL has decided to lease its passive infrastructure in the semi-urban area to other telecom companies as the large tower base of BSNL, over 60,000 towers, will bring more revenue for the company and lead to full utilisation of the towers. BSNL has more towers in Tier II and Tier III cities with under utilized capacity while the private service providers have less spread of towers in the semi-urban areas as compared to BSNL. The agreement for leasing will be on bilateral basis. It’s a win-a-win situation, as leasing of towers will be generating additional revenue for BSNL and on the other hand the players will get an opportunity to broaden their presence where they don’t have infrastructure to support their services. 

Recently, Tata Communications and Tata Power have sold stake in Tata Teleservices (TTSL) to Japanese telecom company NTT DoCoMo. According to the deal DoCoMo will be acquiring 26% stake in TTSL of which 20% will come from a fresh issue of shares and 6% will come from buying stake from Tata group companies. Tata Communications has sold 1% stake in TTSL for Rs 424 crore and Tata Power sold part of its holding in TTSL for Rs 317 crore. TTSL will be using the funds for expanding its network and up gradating 3G services in rural areas.

Tata Teleservices has moved to Supreme Court challenging the levy of around Rs 30 crore value added-tax by the Andhra government. The company has challenged the Andhra High Court order that asked it to pay one-third of the Rs 30 crore, the alleged tax liability, before granting a stay on the recovery of the remaining amount.

Etisalat, which holds a minority stake in Swan Telecom, is planning to invest $1 billion in India .

*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.