|
Current Economic Statistics and Review For the
Week | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Social Sector Development in India*I MDGs
as the Backdrop
It has been quite some time
now since when the academic
community realised the importance of
the social sector development in the
south-east Asian economies in
general and in the Chinese economy
in particular; this contrasts with
the inadequate development of the
social sector in the south Asian
economies (such as
At
the international level, one
important development which took
place in the early part of the
current century was the
establishment of millennium
development goals (MDGs) binding
countries to eradicate poverty and
hunger and social deprivations (UN
Millennium Deceleration 2000).
Analysing the root causes of
failed development in a number of
countries, a package of eight
goals, 18 targets and 48 indicators
in
the form of millennium development
goals and action programmes were
designed (Box 1).
An overwhelming proportion of
these action programmes related to
promoting human development in as
many as 137 countries, but, of the
137 countries, 59 countries were in
dire straight identified as
top priority (31
countries) and high priority (28
countries).
The aim was to identify
countries where urgent action was
needed to meet the goals (top
priority countries) and the
countries where the situation was
less desperate but still demanded
significant improvements in progress
[high priority countries (UNDP
2003)].
These two sets of countries
that combined low human development
and exhibited poor performance in
the achievement of the defined
goals.
Finally, there are 78 other
countries for which there are data,
which indicate that they are
progressing well towards the goals
set but they nurture “deep pockets
of poor people” who are left
behind (UNDP 2003). For such
countries, national averages can be
misleading. Deep pockets of poverty
and social deprivation exist. Such
countries generally portray in the
public eye an image of progressing
well but they leave behind large
groups and areas with deeply
deprived state. Such disparities are
agalore: gender inequality between
men and women; between SCs and STs
on the one hand and other
communities, on the other; and
between minorities and the others;
and between rural and urban
communities.
To address significant
disparities between such groups, we
require to look beyond the national
averages (UNDP 2003).
In an incisive study, UN’s Human
Development Report 2003
(p.3) singles out “Many
countries with national averages
indicating adequate progress towards
the Goals by the target dates have
deep pockets of entrenched poverty.
In
the case of “It
is clear from Table 1 that in some
States with high average level of
development, there is a wide
variation in the HDI of individual
districts. For example,
Reverting to the eight goals, 18 targets and 48 indicators which constitute the MDGs and which are designed to address many of the problems of human deprivations, to quote the UN Human Development Report 2003, they are intended to “address many of the most enduring failures of human development” (p.27). And in doing so, goals, targets and indicators have overwhelmingly concerned top priority and high priority countries which are primarily located in Sub-Saharan Africa, as shown in Table 2. Thus,
impliedly MDG targets are more
relevant to the national level
indicators for such poorer countries
as in Sub-Saharan Africa. In the
case of bigger countries like
II India’s
Social Sector Performance The
profile of disparities is
self-evident in the narrowest
estimates of poverty. The four
BIMARU states and Social
Deprivations
There is now increasing realisation that measuring of poverty based only on conventional nutritional norms is not enough; instead it is necessary to take into account the minimum aspirations of the poor in terms of improved quality of life based on their basic needs such as improved nutrition, drinking water availability, shelter, hygiene, clothing and health and educational facilities.
A detailed work done in this
manner by Guruswamy and Abraham
(2006) has placed the poverty level
at Rs 840
per capita per month as
against the Planning Commission norm
of Rs 368 for rural areas and Rs 559
for urban areas probably for
2005-06.
Based on this exercise, the
authors have said that “nearly 69% of India’s total population is
below the poverty line, which is
over two and a half times the
present official poverty rate of
26.1%” (p.2539).
For rural Social
Sector Development
“The biggest barrier is, I
believe,
Detailed reviews of physical
achievements under social services
(essentially health and education)
suggest that the progress has been
slow, much slower than targeted, and
what is more, all programmes have
suffered from inadequacy in quality
and equity.
One of the important factors
has been the failure to provide the
targeted amounts of budgetary
allocations to primary social
sectors, education and health.
With a view to honouring the
country’s commitments under the
National Common Minimum Programme (NCMP)
(MDGs) and ‘Education for all’,
there was the target of 6% of GDP as
education expenditure to be achieved
by 2008-09; likewise, the
expenditure on health was to reach
3% of GDP.
Instead, as shown in Table 4,
there has hardly been any increase
in this expenditure to GDP ratio in
respect of education since 1990-91
and some marginal increase in
respect of health.
The Eleventh Five Year Plan (pp.4-61) document lists various aspects of the deficiencies in the delivery of educational and health services. To cite a few examples: (i)
The
fact that children drop out of
school early or fail to acquire
basic literacy and numeracy skills
partially reflects poor quality of
education. The average school
attendance was around 70% of the
enrolment in 2004– 05. (ii)
Teacher
attendance, ability, and motivation
appear to be the weakest links of
elementary education programmes.
Lack of universal pre-schooling
(Early Childhood Care and Education,
ECCE) and consequent poor vocabulary
and poor conceptual development of
mind makes even enrolled children
less participative in the class,
even for learning by rote. (iii)
However,
the dropout rate at the elementary
level (classes I–VIII) has
remained very high at 50.8% [Tables
5 and 6]; it is much higher at
57-66% for SCs and STs. (iv)
There
are glaring inter-state and
intra-state variations in enrolment,
dropouts, and access to secondary
and higher secondary schools
(v)
The comparative picture with
regard to health indicators such as
life expectancy, TFR, IMR, and MMR
points that countries placed in
almost similar situations such as (vi)
As for maternal mortality
ratio (MMR), there has been a
substantial decline during the
seven-year period of 1997–2003.
However, the pace of decline is
insufficient. At the present rate of
decline, it will be difficult to
achieve the goal of 100 per one lakh
live births by 2012, the end of the
eleventh plan (Table 7). (vii)
Likewise
in infant mortality rate (IMR); the
rate has declined from 72 per 1000
live births in 1997 to 58 in 2005
and this pace of decline is said to
be insufficient to bring it down to
30 by 2012. (viii)
Public health care system in
rural areas in many states and
regions is in shambles.
Extreme inequalities and disparities
persist both in terms of access to
health care as well as health
outcomes.
This large disparity across (viii)
Thus,
even though there is a concentration
of health care facilities in urban
areas, the urban poor lack access;
initiatives in the country to date
in providing such access have been
limited and fragmented. Progress
Under MDGs
In recent years, the social
sector development has become a live
subject in the context of
the millennium development
goals (MDGs). These goals are
apparently too meagre for
Goal
1: Eradicate extreme poverty and
hunger Target
1: Halve, between 1990 and 2015, the
proportion of people whose income is
less than $1
a day
Target
2: Halve, between 1990 and 2015, the
proportion of people who suffer from
hunger Goal
2: Achieve universal primary
education Target
3: Ensure that, by 2015, children
everywhere, boys and girls alike,
will be able to complete a full
course of primary schooling Goal
3: Promote gender equality and
empower women Target
4: Eliminate gender disparity in
primary and secondary education
preferably by 2005 and in all levels
of education no later than 2015 Goal
4: Reduce child mortality Target
5: Reduce by two-thirds, between
1990 and 2015, the under-five
mortality rate Goal
5: Improve maternal health
Target
6: Reduce by three-quarters, between
1990 and 2015, the maternal
mortality ratio
Goal
6: Combat HIV/AIDS, malaria and
other diseases Target
7: Have halted by 2015 and begun to
reverse the spread of HIV/AIDS Target
8: Have halted by 2015 and begun to
reverse the incidence of malaria and
other major diseases Goal
7: Ensure environmental
sustainability Target
9: Integrate the principles of
sustainable development into country
policies and programs and reverse
the loss of environmental resources Target
10: Halve by 2015 the proportion of
people without sustainable access to
safe drinking water Target
11: Have achieved by 2020 a
significant improvement in the lives
of at least 100 million slum
dwellers Goal
8: Develop a global partnership for
development Target
12:
Develop further an open
rule-based, predictable,
non-discriminatory trading and
financial system (includes a
commitment to good governance,
development and poverty
reduction—both nationally and
internationally). Target
13:
Address the special needs of
the least developed countries’
(includes tariff- and quota-free
access for exports, enhanced program
of debt relief for and cancellation
of official bilateral debt; and more
generous official development
assistance for countries committed
to poverty reduction) Target
14:
Address the special needs of
landlocked countries and small
island developing states (through
the Program of Action for the
Sustainable Development of Target
15: Deal comprehensively with the
debt problems of developing
countries through national and
international measures in order to
make debt sustainable in the long
term. Target
16:
In cooperation with
developing countries, develop and
implement strategies for
decent and productive work
for youth. Target
17: In cooperation with
pharmaceutical companies, provide
access to affordable essential drugs
in developing countries. Target
18: In cooperation with the private
sector, make available the benefits
of new technologies, especially
information and communications
technologies. Amartya
Sen (1994): ‘Growth Isn’t
Everything’, Interview of Prof.
Amartya Sen in Business Today,
August 22-September 6. Chen,
Shaohua, Martin Ravallion (2008):
The
Developing World Is Poorer Than We
Thought, But No Less Successful in
the Fight against Poverty, Policy
Research
Working Paper
4703, Development
Research Group ,The World Bank,
August Guruswamy,
Mohan, Ronald Joseph Abraham (2006):
‘Redefining Poverty: A New Poverty
Line for a New UNDP
(2003):
Human Development
Report
2003,
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 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 has begun on 18 March
2009, in Madhya Pradesh (MP),
Rajasthan and The central government would not be extending wheat stockpile limits beyond 30 April 2009 due to record harvest in the last rabi marketing season on account of bumper crop and high procurement prices. Wheat production this year is expected to be around 77.8 million tonnes as compared with a record 78.6 million tonnes last year. The Centre for Monitoring Indian Economy (CMIE) has reiterated that crop production in 2010 is expected to rise by 1.7%. Foodgrains production is expected to increase by 1.1%. Of which, wheat production is projected to remain at the same level of 80-million tonnes as estimated for financial year 2009. Rice production would increase by 1.1% to 98.8 million tonnes, while production of coarse cereals and pulses, each, is also expected to rise slightly as that of last year. Growth in non-food crops production is placed at 2.4% of which sugarcane and oilseeds production would show an upward trend, while cotton production is expected to fall. The central government has decided to release 54 lakh tonnes of non-levy (free sale) sugar for the April-June 2009 quarter as against 52 lakh tonnes made available during the corresponding quarter of the last sugar season. Further, it has stated that any unsold or undispatched stocks out of normal quota during the month and 30% of the remaining 75% of the dismantled second buffer stock (6 lakh tonnes) should be sold or dispatched by 30 June 2009; otherwise it would be converted into levy sugar. It has extended the validity period of non-levy sugar quota for the March 2009 by ten days, i.e. upto 10 April 2009. If the sugar prices in the open market rises sharply then government would release additional non-levy sugar. Central
Organisation for Oil Trade and
Industry (COOIT) has reiterated
that Onion prices in the retail market of Uttar Pradesh are not sliding down despite import from neighbouring states and the arrival of the new crop, on account of large-scale hoarding of the commodity by traders in the state. At present, prices of onion in the wholesale market are hovering around Rs 650-700 per quintal, whereas retail rates are as high as Rs 1,200. Interestingly, retail rates were as high as Rs 1,500 a fortnight back. All-India Coffee Exporters Association reiterated that coffee exports from the country in 2008-09 have stood at 2.04 lakh tonnes (provisional) as against 2.22 lakh tonnes in the financial year 2007-08, reflecting a downfall of 8%. It is the second lowest performance since last four years. This reduction is projected due to global economic recession. Contrary to it, in value terms, exports of coffee have witnessed higher dollar earnings at US $ 521 million in 2008-09 compared to US $ 512 million in financial year 2007-08. In rupee terms, coffee exports have raked in Rs 2,291 crore in 2008-09 as against Rs 2,074 crore during the last fiscal. Coffee exports have declined by 20% to 55,812 tonnes between January-March 2009 as against 70,162 tonnes during the same period a year ago, on poor demand for instant coffee and value-added products. Exports of Instant coffee dropped to 7,358 tonnes during the three month- period from 9,100 tonnes in the year-ago period. Re-exports of the products have also declined during the same period. As per Rubber Board estimates, production of natural rubber has increased by 5% to 8.65 lakh tonnes during the year ended 31 March 2009, due to higher tapping during the October-December period. Total consumption of rubber has increased to 8.66 lakh tonnes during the financial year as compared with 8.61 lakh tonnes consumed during the same period a year ago. In 2008-09, higher production led to 10% decline in imports to 78,000 tonnes while stocks at the end of the financial year 2009 have risen to 24% to 2.04 lakh tonnes. Production during 2009-10 is likely to rise to 8.67 lakh tonnes while consumption is likely to increase to 8.75 lakh tonnes. Imports are expected to decline to 60,000 tonnes, while stocks by the end of the financial year 2010 would be around 2.05 lakh tonnes. The
central government would be
imposing an anti-dumping duty on
imports of polyester yarn from 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 previous 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
21 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 0.31 percent
(Provisional) for the week under
reference as compared to 0.27
percent (Provisional) for the
previous week and 7.85 percent
during the corresponding week of
the previous year. The
index of major group primary
articles rose marginally to 245.7
from 245.6 for previous week
mainly due to higher price of
barley, bajra, soyabean, The
index for major group fuel, power,
light and lubricants marginally
declined due to low price of
furnace oil. The
index for major group manufactured
products rose by 0.2 percent over
the week due to higher prices of
tea, oil cakes and edible oils
etc. Wholesale price index for ‘All Commodities’ (Base: 1993-94=100) revised up to 229.3 from 230.1 for the week ended 24 January 2009 and annual rate of inflation based on final index, calculated on point to point basis, stood at 4.70 percent as compared to 5.07 percent (Provisional). Financial
Market Developments Capital
Markets
Primary Market According to data compiled by SMC Capitals, the brokerage arm of SMC Global, a steep fall in the number of proposed initial public offerings (IPOs), coupled with the downslide in the domestic bourses during 2008, has hit the merchant banking fraternity, with fees plunging 70% in a year. During the calendar year 2008, the total fees charged by India-based merchant bankers dipped to Rs 230 crore, a drop of 70% from Rs 771 crore in the year 2007. According to the study, the average percentage fee range for IPOs of size less than Rs 500 crore is about 3.17% to 3.67% during 2007 and 2008. Qualified institutional placement (QIP) deals, which were struck during the bull run at hefty premiums, have now turned sour because of the sharp fall in the valuations of companies. According to data from SMC Capital, the mark-to-market (MTM) value of QIP deals raised has fallen 73.47% to $1.75 billion (about Rs 8,841 crore) from $6.58 billion (about Rs 33,245 crore). Data shows that 49 QIP deals which have raised $6.58 billion till March were all in losses. Large financial institutions have lost more than Rs 24,000 crore in these QIP issues. These include HSBC, Deutsche Bank, Citigroup, Merrill Lynch, Fidelity, Goldman Sachs and others who had subscribed to these issuances during the 2006-08. In August 2008, the Securities and Exchange Board of India (SEBI) had amended pricing norms for QIPs by allowing firms to fix the price based on the average price of two week. Earlier, they had to fix the price based on six-month average prices. However, however not a single QIP issue has hit the market since then. Secondary
Market Broader
indices have notched up gains for
the third consecutive week boosted
by some encouraging news from the During the week under review, all the sectoral indices of BSE recorded positive gains. Among them, the BSE Realty sector was the largest gainer with 11.2% followed by the BSE consumer durables with 8.5%, BSE Healthcare with 7.0%, BSE Metal with 6.8% and BSE Oil & Gas with 6.7%. On the weaker side, the BSE FMCG sector gained only 0.04% over the week. The SEBI is considering regulations to help settle trade undertaken in the over the counter (OTC) market through a clearing corporation. The market regulator has already initiated discussions in this regard with the Reserve Bank of India (RBI). The
mutual fund industry is likely to
witness an erosion in its average
assets under management (AAUM)
during final month of the fiscal
year 2008-09 due to redemptions
from liquid and bond funds. As per
data from Association of Mutual
Funds in The drop in assets under management (AUM) of the mutual fund industry to sub-Rs 5 lakh crore levels has led to a flurry of activity in the mutual fund industry towards wooing investors. This time around, there are a lot of investor friendly plans on the anvil. Soon, on the website of the Amfi, investors in the country will able to glance at dividends declared by asset management companies (AMC). Amfi is also in process of launching a common platform for mutual funds transactions, which will facilitate transactions like buying and selling schemes. The mutual fund industry, at the moment, is going through testing times. The withdrawal of funds by the banking sector has seen most of the big AMC report depleted AUM numbers. Among the top five houses, only HDFC Mutual Fund has seen an increase in the AUM in March. Additionally, the mutual fund industry also faces a big asset-liability mismatch. UK Sinha, chairman of UTI Mutual Fund, mentioned that the industry acquired 75-80% of its resources from short-term avenues, and then invested these in long-term loans to corporates. With
foreign institutional investors (FIIs)
buoyed by Timothy Geithner’s $1
trillion rescue plans, domestic
institutional investors (DIIs) are
using this recent rise in stocks
to sell some of their holdings.
According to the BSE’s
provisional data, DIIs, which
include mutual funds, banks and
insurance companies, have been net
sellers of Rs 275.83 crore in the
last six trading sessions. While
FIIs have bought as much as Rs
2,678.24 crore during the same
time, they have sold only Rs 452
crore. Since 23 March, DIIs have
bought only Rs 471.39 crore on a
net basis. Derivatives Though spot market shows signs of overheating, sentiment was cheery through the opening week of the April settlement. Trading volumes were high and prices have risen with high velocity. The FIIs made a significant contribution to the rally. They were net buyers through March and hold around 38% of open interest (OI). In the first few sessions of April, daily derivatives volumes comfortably crossed Rs 50,000 crore. During the past six sessions, the FIIs have been net sellers thrice. The Nifty has risen nearly 20% in the past three weeks. The Nifty futures and CNXIT futures are both at some premium to their respective underlying. The Nifty put-call ratio (PCR) is reasonably healthy but it’s edging up to dangerous levels. In terms of OI, the overall Nifty PCR is at 1.7 while the April PCR is 2.1 with around 67% of OI in the April PCR. PCRs above 2 are unusual – this has been caused by cash out of calls while outs have increased. The PCR of the stock options market on the NSE increased to 0.34 in March 2009 from the level of 0.16 in April 2008. This reflects a bearish sentiment has played in the market with sellers outnumbering buyers during 2008-09. The PCR was 0.16 in April 2008 and increased thereafter to 0.41 in November after reaching a lower level of 0.20 in August. But after November, the ratio was more or less stable around 0.34 up to March 2009. The volume of call options have increased from 69.21 crore in April to 94.49 crore in July and decreased thereafter to 46.61 crore in November. Again in December 2008, the volume increased to 77.83 crore and reached a higher level of 120.38 crore in March 2009. On the other hand, volume of put options also increased from 10.82 crore during April 2008 to 26.12 crore during July 2008 and decreased thereafter to 16 crore in October 2008. Again in November, the volume of put option increased to 19.23 crore and reached a higher level of 40.42 crore in March 2009. Similarly, in terms of value, call options showed a steady increase from Rs 13,139 crore during April to Rs 19,354 crore during July, decreased thereafter to a lower level of Rs 6,428 crore in November. Government
Securities Market Primary
Market On
April 2 2009, RBI re-issued 7.56%
2014 and 7.94% 2021 for the
notified amount of Rs 8,000 crore
and Rs 4,000 crore, respectively.
The cut-off yield for the security
maturing in 5-year was set at
6.80% and for the 12-year paper
was at 7.62%. The
RBI has permitted transfer of or
trading in the Power Bonds
maturing on 1 October 2013 and 1
April 2014, issued by various
States to Central Public Sector
Undertakings (CPSUs) in terms of
the Tripartite Agreement among 27
State Governments, Ministry of
Power, Government of India and the
RBI under One Time Settlement
Scheme for dues of State
Electricity Boards with effect
from 1 April 2009. RBI
auctioned 91-day treasury bills (TBs)
and 182-day TBs for the notified
amounts of Rs 500 crore each,
respectively on 2 April 2009. The
cut-off yield for the 91-day TB
was set at 4.50% and 182-day TB at
4.70%. Secondary
Market Call rates edged up, as banks stepped up borrowing ahead of the financial year-end and the long weekend. Demand was also high in the first week of the bi-weekly reporting cycle. Rates touched a high of 5.75% intra-week, making a range of 3.8-5.0% during the week. Rates ended just below 3.80-4%. However, ample liquidity prevailed in the banking system and most banks were able to meet their reserve requirements. A sharper drop in call rates was averted as money was also lent for a four-day period. Government bonds recovered some ground in the later half of the week,due to some uncertainty getting alleviated owing to RBI announcements of bond buybacks, along with the market stabilisation scheme (MSS) unwind plan aiding sentiment. After market hours, RBI said it would buy up to Rs 60,000 crore of bonds at an auction on 1 April. The faint rise in the WPI inflation rate (0.31% Y-o-Y from the previous 0.27% Y-o-Y) did hit bonds for a brief period. In
view of its comfortable cash
position, the Centre, in
consultation with the RBI, has now
decided not to transfer the
balance amount of Rs 33,000 crore
from the MSS cash account to the
normal cash account of the
government in the current fiscal
year. Based on the emerging fund
requirements of the government, Rs
33,000 crore of MSS will be
de-sequestered against the
approved market borrowing
programme or bought back in the
fiscal year 2009-10. Following the
amendment to the memorandum of
understanding on the MSS, it was
decided that an amount of Rs
45,000 crore would be transferred
in installments from the MSS cash
account to the normal cash account
of the government by 31 March. An
equivalent amount of government
securities were to accordingly
form part of the normal borrowing
of the government. In this regard,
an amount of Rs 12,000 crore was
transferred from the MSS cash
account to the normal cash account
of the Centre on 4 March. The MSS
outstanding as on 31 March is Rs
88,773 crore. On Tuesday, the RBI
announced the treasury bills
(T-Bills) issuance for the fiscal
year 2009-10. The TBs, which were
issued for enhanced amounts in the
fiscal year 2008-09 and have
become due for redemption in the
first quarter of the fiscal year
2009-10, will be rolled over. Bond
Market During
the week under review, two FIs/banks
and one central PSU tapped the
bond market through issuance of
bonds to mobilise Rs 1,000 crore.
The RBI decided to made amendments to the guidelines on perpetual non-cumulative preference shares (PNCPS) as part of Tier-I capital and perpetual cumulative preference shares (PCPS) or redeemable non-cumulative preference shares (RNCPS), redeemable cumulative preference shares (RCPS) as part of upper tier-II capital. Accordingly, talking about the guidelines on perpetual non-cumulative preference shares (PNCPS) as part of tier-I capital, the RBI said that the dividend shall not be cumulative. This essentially means the dividend missed in a year will not be paid in future years, even if adequate profit is available and the level of CRAR conforms to the regulatory minimum. When dividend is paid at a rate lesser than the prescribed rate, the unpaid amount will not be paid in future years, even if adequate profit is available and the level of CRAR conforms to the regulatory minimum. Talking about instruments like perpetual cumulative preference shares, redeemable non-cumulative preference shares and redeemable cumulative preference shares as part of upper tier-II capital, the RBI said that the coupon payable on these instruments will be treated as interest and accordingly debited to Profit & Loss Account. However, it will be payable only if in the case of PCPS and RCPS the unpaid or partly unpaid coupon will be treated as a liability. The interest amount due and remaining unpaid may be allowed to be paid in later years subject to the bank complying with the above requirements. In the case of RNCPS, deferred coupon will not be paid in future years, even if adequate profit is available and the level of CRAR conforms to the regulatory minimum. RBI relaxed rules for subordinated debt issues by primary dealers, removing a restriction on the coupon rate offered on their Tier-II and Tier-III debt. Primary dealers have been allowed to issue subordinated Tier II and Tier III bonds at coupons decided by their boards, the bank said in a notification on its website late on 1 April. Under the previous rule, primary dealers could not offer a maximum coupon of 200 basis points above a comparable government bond yield. The change takes effect with immediate effect, the statement said. In a bid to make the corporate bond market more transparent, and to ensure timely settlement of transactions Capital market regulator SEBI plans to introduce the system of clearing house for over-the-counter (OTC) products in the bond market. A clearing house provides clearing and settlement services for financial transactions, and also acts as a central counterparty. As
per Bloomberg data, India
Infrastructure Finance Co and
Reliance Gas Transportation
Infrastructure Ltd led Indian
corporate bond sales to a record
quarter as borrowers sought
alternatives to scarce bank loans.
Companies raised $7.45 billion in
the three months to 31 March 2009,
44 % more than a year earlier and
the most in a quarter. New
Delhi-based India Infrastructure
Finance raised Rs 10,000 crore
from two sales of 6.85 % notes.
According to RBI
data credit to
manufacturers and individuals rose
15% to Rs 26.4 lakh crore in the
period of 28 March 2008 to13 March
2009, excluding advances made to
state agencies for food
procurement. State Bank of Foreign
Exchange Market The rupee recovered from an early week low of 51.32 per dollar to end the week at 50.34 per dollar and gained nearly 1.9% from the lows. The rupee closed the previous week at 50.58 per dollar. Dollar demand from importers and weakness in domestic equity markets had weighed on the rupee early week, but a return of risk appetite and softness in dollar overseas aided the unit to come off lows. The country’s foreign exchange reserve shrunk by $1.5 billion during the week ended 27 March, largely on account of revaluation of non-dollar assets in reserves. Reserves have dipped by almost $57 billion during the financial year 2008-09. On 2 April, the government suspended a key accounting norm on foreign-exchange losses for the period starting 7 December 2006 to 31 March 2011 allowing companies like Tata Steel, Suzlon Energy and Wockhardt to protect their profits from a sudden increase in their foreign loan liability on account of adverse currency movements. Under the amended rule, forex losses (or gains) can be kept on the balance sheet itself, and not brought to the profit and loss account. Currency
Derivatives On
20 March BNP Paribas Personal
Investors deputy chief executive
Vincent Lecomte launched internet
trading in currency derivatives.
Lecomte said that, BNP Paribas
will bring its global expertise
and best practices for further
strengthening Geojit’s products
and services. BNP Paribas, one of
the leading online brokers in Commodities
Futures derivatives The country’s largest commodity trading platform, the Multi-Commodity Exchange (MCX), is setting up a clearing corporation, a 100% subsidiary, to look after the clearing of trading orders floated by members and clients. The corporation, christened MCX Clearing Corporation, is likely to start functioning next month. So far, the exchange’s clearing activities are controlled by an integrated clearing house which remains a function of the exchange platform and the clearing corporation would remain the 100% subsidiary of MCX. However, the exchange is open to any equity participation proposal, and the activities of the clearing corporation will include risk management, taking stock of pay-in and pay-out, collateral maintenance, co-ordinating with clearing banks and other support institutions, and settlement accounting. The corporation will also impose special margins, follow-up for over-utilisation of margins, follow-up mark to losses, initiate square-up of positions in either case, levy of collection of penalties with regard to settlement dues. Unlike the clearing house which is an integral part of the futures trading platform, clearing corporation would take an independent view on the responsibilities conferred on it. The
global expansion plans of
Financial Technologies, promoter
of top domestic commodity bourse
MCX, was affected by the recent
turmoil in financial markets as
trading at its overseas exchange
ventures in Singapore, Mauritius
and Bahrain got delayed by about a
year. Singapore Mercantile
Exchange (SMX) and Global Board of
Trade (GBOT), the two overseas
exchanges set up by MCX group in The commodity market regulator Forward Markets Commission (FMC) expressed hope that the government would lift the ban on futures trading in rice and wheat before the general elections. FMC has already submitted a detailed report to the consumer affairs ministry, explaining the reasons for lifting the nearly two-year ban on rice, wheat, tur and urad. Currently, there is no inflationary pressure and prices of rice and wheat are ruling low. The
National Spot Exchange (NSEL), the
spot trading arm MCX, is planning
to launch wheat contracts in April
second week. Its rival, the spot
trading platform of the National
Commodity & Derivatives
Exchange (NCDEX) is currently
working on the idea and plans to
facilitate trading by April-end to
cover the rabi crop. This assumes
significance as suspension of
wheat from the futures market in
early 2007 has left hundreds of
participants in a lurch, forcing
them to shift to other
commodities. The spot trading
platform will not only provide a
nationwide benchmark price, but
also allow the participants to
trade in desired quantity for
delivery at the exchange-specified
centres. NSEL is currently
launching standard mill quality of
the Gujarat variety of wheat for
delivery in Visnagar and FMC Chairman B C Khatua expects commodity futures turnover to rise 15.4% to Rs 60 lakh crore in the financial year 2009-10 from Rs 51.5-52 lakh crore expected in 2008-09. According to him in 2008-09, the turnover is likely to be 26% higher due to falling commodity prices and impact of futures suspension on certain commodities. On 2 April crude oil prices jumped by over 2% in futures trade as traders indulged in enlarging their positions influenced by a firming global trend. On the MCX crude oil for the April contract gained the most by rising 2.06% to Rs 2,476 per barrel with a business turnover of 8,210 lots and May contract rose by 1.86% to Rs 2,577 per barrel, recording 571 lots. 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. BankingICICI
Bank became the first Indian bank
to enter into an agreement with
China Exim Bank. The Export-Import
Bank of Presently
the Government of India (GOI)
wholly owns Banking
cash transaction tax (BCTT) will
be abolished from April 1, 2009.
This tax was introduced in
2005. The objective behind the
introduction of the tax was to
keep track of large cash
withdrawals. If individuals and
HUFs withdraw more than Rs 50,000
and others Rs 1 lakh in a single
day from non-saving account in any
scheduled commercial bank are come
under this tax.
Not just withdrawals but
single day receipts exceeding Rs
50,000 for individuals and HUFs
and Rs 1 lakh for others on
encashment of one or more time
deposits are also come under the
tax. As the BCTT was envisaged as
an anti tax evasion measure, in
terms of revenue, its contribution
to the direct tax kitty has not
been too significant. As per the
revised estimates, the BCTT is
expected to bring in Rs 600 crore
in 2008-09, around 9% more than
the revised estimate of Rs 550
crore for 2007-08. Now with the
Financial Intelligence Unit in
place, along with the mandatory
use of the PAN for high value cash
transactions as well as strict
norms from the RBI, the utility of
the BCTT has gone down
substantially. Although
the RBI has now facilitated cash
withdrawals at no transaction fee
from ATM networks across the
country, millions of debit card
holders had an unpleasant
experience while flocking to
withdraw money from ATMs of
another banks. As ATMs became free
of cost to use another bank
customers problems have faced by
so many people when they went for
withdrawal from nearby ATM. They
received printouts telling,
“transaction declined”.
This problem is not
countered by account holders of
same bank of which they have used
ATM.SBI Bank, ICICI Bank and HDFC
Bank which have a wide ATM network
(the 3 banks together have more
than 14,000 ATMs as on March 31,
2008), were exposed to huge stress
in the past 48 hours as they were
visited in vast numbers for cash
withdrawals by customers. This
problem has happened due to load
on the national financial switch (NFS),
which enables interbank
transactions. A
different switching system is used
for the transactions on a bank’s
home ATM network. Withdrawals from
the ATMs has increased manifold
and NFS doesn’t have required
system to support such huge
transactions. The RBI has assured
that the system will be upgraded
within few days. Insurance The
Insurance Regulatory and
Development Authority (IRDA) have
tightened norms on renewability
and other aspects of health
insurance policies to ensure
better protection of interests of
the policyholders. According to
the guidelines, a health insurance
policy shall be renewable except
on grounds such as fraud or
misrepresentation and shall not be
rejected on arbitrary grounds,
especially if the insured made a
claim in the previous or earlier
years. Further regulatory clears
that renewal shall not be denied
on the basis of that the
policyholder had made claim
previous years. Once specific
health insurance policy is chosen
and bought by the policyholder an
insurer cannot force to shift to
another health insurance product
unless in the circumstances where
a specific product is being
upgraded or discontinued with the
approval of the Irda. About any
change in premium structure or
terms of the product by the
insurance company will be
implemented only if regulator
allows it. The concern insurance
company should inform policyholder
at least three months before the
renewal date. Corporate L&T
has received a contract worth Rs
1,245 crore for
construction-related works at the
Punatsangchhu Hydroelectric
project in Engineering
major L&T is looking to exit
from the infrastructure projects
in which it holds minority stake.
Only in extremely large and
complex projects, like urban
metro, L&T might bid in a
consortium and take less than a
50% stake to diversify the risk. Technical
Instruments Manufacturers India (TIMI)
Ltd is wholly owned subsidiary of
Paint manufacturer Asian Paints.
The subsidiary of Asian Paints
owns only a building in which
Asian Paints have its office.
The rent from the office is
the only way of earning income.
So the board of Asian
Paints has agreed to merge TIMI
with itself. Two
cement manufacturers, Ambuja
Cements and Aditya Birla Cement
have recorded growth in their
production.
Ambuja Cements production
for March 2009 grew by 1.6% to
17.40 lakh tonne which was 17.12
lakh tonne in the corresponding
period last year. Dispatch of
cement has also increased to 17.16
lakh tonne in March 2008. Aditya
Birla Cement company has also
recorded growth and its output in
March 2009 was 34.04 lakh metric
tonne which is up by 13.4% than
production of the cement at
corresponding period of last year.
Dispatches of March stood at 33.70
lakh mt which is up by 11.2%.
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. Telecom Report
on “Points of Interconnection
congestion (POI)” is published
by Telecom regulatory authority of
*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. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
We will be grateful if you could kindly send us your feed back at epwrf@vsnl.com | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||