130511

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Good Morning to all

Banking & Finance

http://www.business-standard.com/india/news/hsbc -eyes-1-bn-profit-before-taxindia-

ops/435432/

HSBC eyes $1-bn profit before tax from India ops Hong Kong and Shanghai Banking Corporation (HSBC) expects the profit before tax

from its business in India to cross $1 billion in the medium term. The British bank¶s

profit before tax from its India operations stood at $700 million in 2010. ³Asia has

emerged as the growth engine of the world, and within Asia, India is a keycomponent. Despite inflationary pressures the GDP (gross domestic product) growth

of India is estimated at 8 per cent in the current financial year,´ said HSBC India

Chief Executive Officer, Stuart A Davis. ³This economic prosperity is fuelling growth

across segments ² from large corporates to the increasing mass-affluent segment.

We are well poised to leverage this growth and are confident we would be able to

meet our group¶s and shareholders¶ expectations,´ he said. ³The group¶s Asia

strategy reaffirms the group¶s confidence in emerging markets. The India story is

about potential and performance. HSBC India recorded its highest profits ever in

2010 and would work towards improving its performance in India,´ said Naina Lal

Kidwai, group general manager and country head,H

SBC India. In India,H

SBC plansto focus on financing top domestic and international companies. The lender would

also target the affluent Indian population overseas to increase its wealth

management business. Davis said HSBC expected the share of revenues from

commercial and retail banking to rise in India over the next few years. The proposed

acquisition of Royal Bank of Scotland¶s commercial and retail bank ing operations in

India would strengthen HSBC¶s position in these businesses, he said. ³The

transaction is expected to be completed by the end of this calendar year, subject to

regulatory approvals. It would help us increase our distribution in India,´ Dav is said.

HSBC Chief Executive Officer (Asia-Pacific) Peter Wong said the bank would

increase its presence in key Asian markets, including India, Hong Kong, mainland

China, Singapore, Malaysia and Indonesia. The bank expects its profit before tax

from its Asia business to cross $5 billion in the medium term. The profit before tax

would be aided by the rise in pre -tax profits in India, Singapore, Malaysia and

Indonesia. The bank¶s profit before tax is already over $1 billion in Hong Kong and

mainland China, where HSBC is the largest foreign bank, with over 270 branches. In

Hong Kong, the bank enjoys the largest market share in deposits, credit cards,

mortgages and local bonds.

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http://www.business-standard.com/india/news/mfis -seek-rs-800-1000-cr-loans/435437/

MFIs seek Rs 800-1,000 cr loans Cash-strapped microfinance companies that plan to restructure their debts haverequested banks for additional loans of Rs 800 -1,000 crore. The micro-lenders also

requested banks to consider these loans for restructuring along with their existing

debts. ³We have initially asked for about Rs 200 crore from banks. Overall, we would

need Rs 700 crore in the next seven years. This would primarily be working capital

loans to meet our short-term business needs. We need these funds to sustain our

business,´ a senior official from Share Microfin, a Hyderabad -based microfinance

company, told Business Standard. Share Microfin's local rival, Spandana Sphoorty

Financial, sought term loans of Rs 100 crore from banks. The funds are aimed at

redeeming commercial papers that the company issued to banks and financial

institutions, including Bank of India, Syndicate Bank and UCO Bank. This loan wouldalso be a part of the total debt that Spandana plans to recast. ³We have to repay

around Rs 140 crore in commercial papers. Spandana has a surplus of Rs 40 crore

from its internal accruals. We have made a presentation to banks to give us Rs 100

crore as working capital loan, which would allow us to honour our commitments on

commercial papers,´ said Managing Director G Padmaja Reddy. Senior officials of

private sector banks said similar requests have been made by Asmitha Mi crofin and

Trident Microfin, which also plan debt -restructuring programmes. However, doubts

remain on whether banks would be willing to provide additional loans. The advances

would increase the restructured portfolios of banks. ³Banks are very reluctant. T he

funds from banks are not assured. A decision would be taken next week,´ said asenior official of a Hyderabad-based microfinance company. Almost a third of the

loans given by banks to microfinance institutions would be restructured. The

corporate debt restructuring cell has admitted loans worth Rs 6,473 crore involving

five microfinance companies ² Asmitha Microfin, Future Financial Services, Share

Microfin, Spandana Sphoorthy Financial and Trident Microfin. Currently, their total

debt is estimated at Rs 7,411 crore. The deadline to finalise the loan-restructuring

programme has been extended till June 6. For the restructuring, microfinance

institutions and banks both have to agree on the terms and conditions. At least 75

per cent of the banks by exposure, or 60 per cent by guarantee, have to favour the

proposals. It has been proposed that interest on restructured loans be charged at 12

per cent. This would have a moratorium of one year and a repayment tenure of six

years.

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http://www.business-standard.com/india/news/fslrc -draws-road-map-to-rewrite-laws-in-

financial-sector/435433/

FSLRC draws road map to rewrite laws in financial sector

Kicking off the rewriting of legislations in the financial sector, the Financial Sector Legislative Reforms Commission (FSLRC) has created working groups for specific

areas in the sector. A senior official of the commission, which was constituted on

March 24, said working groups had been created for different areas, including

securities, insurance and pensions and banking. Former chairman of the Pension

Fund Regulatory and Development Authority, D Swarup, heads the group on

insurance and pensions. FSLRC is also appointing consultants, legal advisors and

experts in finance and economics to assist each working group. The commission had

drawn a time-table, complete with milestones for completing its job within the

stipulated period of 24 months, the official said. He said the five-six working groups

would start functioning from June and would report to the commission within thefixed time-frame. The reports, prepared with the help of consultants and experts in

the respective fields, would than be discussed wit h stakeholders ² regulators and

government & non-government agencies. The final reports would be prepared by the

commission after taking into account the responses of the stakeholders within the

given time-frame, the official said. There are over 60 Acts and multiple rules and

regulations dealing with the financial sector and many of these have now turned

archaic. A large number of amendments to these Acts have increased both the

ambiguity as well as the complexity of the system. The commission, headed by

former judge B N Srikrishna, was set up after finance minister Pranab Mukherjee

had, in Budget 2010-11, announced that the laws, rules and regulations in thefinancial sector be rewritten and streamlined to bring them in accordance with the

requirements of the country's fast-growing financial sector. Other members of the 11-

member commission include former Axis Bank chief P J Nayak and Prime Minister¶s

Economic Advisory Council member M Govinda Rao. According to the terms of

reference, the commission would examine the architecture of the legislative and

regulatory system governing the country's financial sector. It would also consider

appropriate means of oversight from regulators and their autonomy from the

government.

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http://www.business-standard.com/india/news/tata -power-set-to-raise-rs-1500-cr-via-

perpetual-bonds/435435/

Tata Power set to raise Rs 1,500 cr via perpetual bonds Private power producer Tata Power plans to issue Rs 1,500 crore of perpetual bonds

in the domestic market. The issue is expected next week. The company is believed

to have appointed Standard Chartered Bank as the lead manager for the issue.

According to market sources, the company was in talks with at least five merchant

bankers to appoint the lead book runner. Perpetual bonds do not have a maturity

date and are not redeemable, unless the issuer wishes to exercise a call option aft er

a certain period of time. They are categorised as hybrid capital, since they have the

features of both equity as well as debt. ³Looking at current market conditions, the

issue is likely to be priced at around 11.50 per cent, payable semi -annually,´ said a

senior official with a domestic brokerage. Corporate bodies may now have to pay

higher prices to raise funds, owing to the recent policy rate increases, he said. The

company may offer a step-up option of 200 basis points if the bonds are not calledfor redemption after 10 years. The rating for the debt instrument is currently awaited.

The Reserve Bank of India had, on May 3, raised key policy rates by 50 basis points

to tackle rising inflation. Yields on the 10 -year, 7.80 per cent government bond,

which serves as the benchmark for corporate debt issuances, have been in the

range of 8.20-8.40 per cent levels since then. ³As a growth-oriented company, we

are always looking for methods to raise funds,´ said S Ramakrishnan, executive

director-finance, Tata Power. He however, declined to spell out the details of the

issue. The Tata Power issue is expected to be similar to the recent bond issue of

another Tata Group company, Tata Steel, which had issued Rs 525 crore of

perpetual bonds at a coupon rate of 11.5 pe r cent, payable semi-annually. In March2010, Tata Steel had also issued Rs 1,500 crore of perpetual bonds priced at 11.80

per cent and callable after 10 years. J P Morgan and ICICI Bank were the lead

managers for the issue. Last month, Tata Power had raised hybrid capital worth

$450 million by issuing overseas bonds at 8.5 per cent, payable semi -annually.

http://www.business-standard.com/india/news/syndicate -bank-net-soars-72/435434/

Syndicate Bank net soars 72% Public sector lender Syndicate Bank today registered a net profit of Rs 289 crore for

the quarter ended March 31, a 72 per cent rise compared with the Rs 168-crore net

profit in the year-ago period. The jump in net profit primarily due to higher core

earnings. The bank's total income rose 24.6 per cent to Rs 3,416.6 crore from Rs

2,742.2 crore in the same period last year. Operating profit increased by 21.7 per

cent to Rs 672 crore, compared with Rs 552 crore reported a year earlier. Net

interest income in the fourth quarter increased by 35 per cent to Rs 1,161 crore,

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against Rs 861 crore a year ago. For the year ended March 31, 2011, the bank

registered a 29 per cent growth in its net profit at Rs 1,048 crore, compared with Rs

813 crore in the previous financial year. Total income in 2010 -11 registered a

10.3per cent rise at Rs 12,368 crore, compared with Rs 11,214 crore in 2009 -10.

The bank's operating profit rose 47 per cent to Rs 2,750 crore in 2010-11 from Rs

1,873 crore reported a year earlier. While net interest income increased by 60 per cent to Rs 4,383 crore, compared with Rs 2,740 crore in the year-ago period, net

interest margin rose to 3.40 per cent in 2010-11 from 2.35 per cent in 2009-10.

³Current account, savings account (Casa) deposits increased by 15 per cent in the

last financial year, accounting for 31 per cent of the total deposits,´ the bank said.

The yield on advances increased by 12 basis points to 9.52 per cent and the cost of

deposits declined by 71 basis points to 6.14 per cent by the end of March, the bank

said. The bank's total business increased by 17 per cent to Rs 243,946 crore in the

last financial year. While deposits rose 15.9 per cent to Rs 135,596 crore, the bank's

advances increased by 18.5 per cent to Rs 108,350 crore. On the quality of assets,

gross non-performing assets (NPAs) increased marginally to 2.40 per cent in 2010 -

11, compared with 2.19 per cent a year ago. However, net NPA ratio declined to

0.97 per cent from 1.07 per cent. Provision coverage ratio improved to 77.18 per

cent in 2010-11, compared with 73.31 per cent in the year-ago period. The

company's capital adequacy ratio increased to 13.04 per cent in th e last financial

year from 12.70 per cent in 2009-10.

http://www.business-standard.com/india/news/sbi -to-raise-3-4-bn-offshore-this-

year/135010/on

SBI to raise $3-4 bn offshore this year

State Bank of India (SBI) will borrow $3 billion to $4 billion overseas this year and

plans a slew of initiatives to reinforce its dominant market position, including entering

local bond underwriting, new chairman Pratip Chaudhuri told Reuters. Chaudhuri,

who took up his role a month ago, intends to build the bank's market share by 1% a

year but expects surging interest rates to crimp loan growth this year to 17-19%,

from a January target of 20-22%. SBI, which with its associates controls about a

quarter of Indian bank loans and deposits, aims to strengthen its retail deposit

business and is looking to enter the domestic bond underwriting business in the next

three to four months. It also wants to build on its leading position in funding big -ticket

projects like steel and power plants in a fast-growing economy that is ramping up its

infrastructure and industrial base, Chaudhuri said. "We'd like to be the leader in

every good and viable project that is coming up," he said. Of the bank's planned

overseas fund-raising for the current fiscal year, the first tranche of $1 billion to $1.5

billion is expected around July, said Chaudhuri. SBI's overseas lending stands at $32

billion to $34 billion and is likely to grow another $5 billion to $6 billion in the year

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ending March 2012, Chaudhuri said, as the bank funds overseas operations of

India's increasingly global companies, such as cellphone giant Bharti Airtel.

SURGING RATES

A spree of interest rate increases by the central bank will take a toll on loan demand,

Chaudhuri said. The Reserve Bank of India this month raised its key interest rates by

a larger-than-expected 50 basis points to battle stubbornly high inflation, its ninth

rate increase since March 2010. In response, SBI this week raised its benchmark

lending rate to 9.25%. Industry-wide loan growth was 21.4% in the fiscal year that

ended in March 2011. "We expect some deceleration in the term loan segment and

some shifting of demand from rupee to external commercial borrowings," Chaudhuri

said. While many banks have said they see net interest margins (NIM) under

pressure due to surging interest rates, SBI expects NIMs of around 3.5% this year,

with less focus on working capital loans, better pricing and tenure management, he

said. In the December quarter, SBI's net interest margin was 3.6%. SBI, whose

13,542 branches include one in Sydney, is in advanced stages of opening a

subsidiary in Australia to tap the market there, Chaudhuri said. It also plans

branches in Jeddah and Qatar. Chaudhuri said SBI had lost enthusiasm for a

planned acquisition in Indonesia due to regulatory hurdles. "In Indonesia we already

have a bank and we were trying to expand that by buying another bank but we are

slightly disappointed by the regulatory process and the time taken to navigate that.

So, that's why we are not very actively pursuing it," he said. Shares of SBI, valued at

around $38 billion, have fallen nearly 6% so far this year, versus a fall of 7% in the

BSE Bank index. The broader 30-share benchmark BSE index has fallen 10.6% in

the same period.

http://www.business-standard.com/india/news/sks-moves-sc-against-ap-govts-microfinance-

act/134993/on

SKS moves SC against AP govt's Microfinance Act SKS Microfinance today challenged in the Supreme Court the special act passed by

the Andhra Pradesh government to regulate microfinance institutions in the state

after allegations that their high interest rates and strong -arm recovery methods led to

suicides by farmers. A bench of justices Markandey Katju and Gyan Sudha Mishra

issued notice to the state government, directing it to file reply and posted the matter

for hearing in the third week of July Senior Advocate Fali S Nariman, appearing for

SKS, the country¶s largest and only listed microfinance company, submitted that the

state government has no power to regulate the sector. The state government passed

the Andhra Pradesh Microfinance Institutions (Regulation of Money lending) Act,

2010, to ensure that it has oversight on the sector. According to the petitioner,

microfinance sector falls under the central list and is not a state subject on which the

Andhra Pradesh government could pass any act.

8/6/2019 130511


http://www.business-standard.com/india/news/hdfc -bank-raises-rs-3650-crbonds/134985/on

HDFC Bank raises Rs 3,650 cr from bonds Private sector lender HDFC Bank today said it has raised Rs 3,650 crore from bondsto fund business growth. The bank has issued on a private placement basis

unsecured, redeemable, subordinated bonds in the nature of debentures towards

Tier-II capital, HDFC Bank said in a filing to the Bombay Stock Exchange. Thus, the

bank has raised Rs 3,650 crore from lower Tier-II bonds, it said. For the financial

year 2010-11, the bank posted a net profit of Rs 3,926.30 crore, representing an

increase of 33.1% from Rs 2,948.6 crore in the previous year. The bank earned an

income of Rs 24,263.4 crore in FY11 as compared to Rs 20,155.83 crore in the

previous fiscal. The bank's total balance sheet size increased by 24.7% from Rs

2,22,459 crore as of March 31, 2010 to Rs 2,77,353 crore as of March 31, 2011.

Recording a growth of 27.1%, total gross advances was at Rs 1,59,983 crore, whiletotal deposits grew by 24.1% at Rs 2,08,586 crore.

Economy

http://www.business-standard.com/india/news/refunds -pull-down-net-direct-tax-mop-up-in-

april/435447/

Refunds pull down net direct tax mop-up in April The government¶s net direct tax collections in April have fallen sharply by over 70 per

cent to about Rs 4,000 crore, compared with over Rs 14,000 crore in the same

month last year. The collections came down on account of the refund drive started

by the Income Tax Department. Gross direct tax collections in April were about Rs

29,000 crore, about 15 per cent higher from the same month last year, but a refund

outgo of about Rs 25,000 crore led to a decline in the net mop -up this year. Finance

ministry officials, however, said higher refund in April would not affect the

government¶s direct tax collection target of Rs 5,32,651 crore this financial year. ³The

refunds have been more in April, but this is going to help us during the rest of the

year. We will meet the target,´ said one official. The revenue department has

managed to marginally exceed its direct tax collection target of Rs 4,46,000 crore for

2010-11. The collections so far have touched Rs 4,46,070 crore, comprising Rs

2,99,486 crore from corporation tax, Rs 1,45,897 crore from personal income tax,

and Rs 687 crore from wealth tax. The department is expecting another Rs 1,000 -

2,000 crore by the end of this month. Indirect tax collections have also exceeded the

target of Rs 3,34,500 crore at the end of March. The collections for the financial year

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2010-11 stood at Rs 3,44,268 crore. This comprised Rs 1,36,006 crore from customs

duty, Rs 70,835 crore from service tax, and Rs 1,37,427 crore from excise duty.

Officials also ruled out that a lower gross dome stic product (GDP) growth this year

could affect tax collection target ² both direct and indirect. The Budget estimate for

total tax collections in this financial year is Rs 9,32,440 crore, which includes Rs

3,99,789 crore as the target for indirect tax collections. The Reserve Bank of Indiahas lowered its GDP growth projection to eight per cent from the projected nine per

cent. Finance Minister Pranab Mukherjee also said growth could be lower as the

central bank had increased policy rates to combat inflat ion which continued to

remain high. The Planning Commission had recently suggested the government to

raise the net tax-GDP ratio from 7.4 per cent in 2011-12 to 9.1 per cent by 2016-17.

The tax-GDP ratio reflects the portion of taxes the government collect s as a

percentage of GDP in a year. High ratio target means the government will have to

raise tax rates and widen base to garner more revenue.

http://www.business-standard.com/india/news/april -exports34-at-24-bn/435448/

April exports up 34% at $24 bn But govt says µit is not going to be an easy summer¶ for exporters. The current

financial year (2011-12) began well for the country¶s exports which grew by an

impressive 34.4 per cent annually in April at $23.9 billion. Imports reached $32.8

billion, up 14.1 per cent compared to the same month a year ago. However,

exporters have said while exports are growing in value terms, the high cost of credit

is eroding their margins. In April, the balance of trade ² the difference between a

country¶s exports and its imports ² in April stood at $ (-) 8.9 billion, according to theinitial estimated released by Commerce Secretary Rahul Khullar here today. The

figures could be revised once the official data gets released on June 1. ³I expect

2011 will be good despite slowdown in Europe and the US but it is not going to be an

easy summer,´ Khullar said adding that exports might end up with a growth rate of

20-25 per cent in the present financial year. He, however, said uncertainties in the

global economy were not over yet. ³There is constantly a fear of the unknown and a

domino effect is likely in Europe. Until some clarity emerges on that front there will

be uncertainties in the business sentiments and consumer sentiments which might

affect the exports,´ Khullar added. Exporters, on the other hand, have expressed

concern with the unabated rise in interest rates, which is making their productsuncompetitive compared to other countries. They have also urged the government to

extend the duty entitlement passbook scheme (DEPB) to sustain such high level of

growth. The scheme is scheduled to expire on June 30. ³We fully support the

government¶s efforts to curb inflation, but there should be a distinction between

export finance and domestic finance. If Indian exporters get credit a t 10.5-11 per

cent, they will be totally outpriced in global markets. Also, the uncertainty about

continuance of the DEPB scheme coming on the heel of withdrawal of interest

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subvention scheme for exports has defused the enthusiasm of the exporters,´ said

Ramu S Deora, president, Federation of Indian Export Organisations. During April,

the sectors that did well in export are engineering that grew 109 per cent, gems and

jewellery 39 per cent, electronic goods 48 per cent, petroleum products 53 per cent,

plastics and linoleum 30 per cent. In imports, petroleum products grew 7.7 per cent,

pearls and precious stones increased 19 per cent and gold 60 per cent.³Composition of exports has shifted from labour-intensive; traditional items to capital -

intensive manufactured items as well as petro products. This is reflective of

supportive policy, growing demand, and a build-up in refining capacity,´ said Rohini

Malkani, economist, Citigroup India. Destination markets have seen a shift, with the

US and EU seeing a declining share and West Asia and rest of Asia now comprising

a growing share of total exports. Share of the US and EU has come down to 11.8 per

cent and 22.2 per cent in 2009-10 from 24.4 per cent and 27.9 per cent in 1999 -2000

respectively, while that of West Asia has grown to 22.4 per cent in 2009-10 from 12

per cent in 1999-2000. Share of Asean countries also increased from 6.1 per cent in

1999-2000 to 10.3 per cent in 2009-10, according to a research by Citigroup. In the

last financial year, merchandise exports ended up at $246 billion growing by 37.55

per cent compared to 2009-10, while imports topped $350 billion in 2010 -11, up by

21.6 per cent over the previous year. The trade deficit in 2010-11 stood at $104

billion.

http://www.business-standard.com/india/news/iip -export-figures-show-economy-in-good-

shape/435426/

IIP, export figures show economy in good shape Things seem to be going India¶s way. At least that¶s what the latest economic

numbers show. While industrial growth surged 7.3 per cent in March after staying

below five per cent for four months prior to that, food inflation fell to an 18 -month low

of 7.7 per cent during the week ended April 30. Exports rose 34 per cent to $23.9

billion in April, while imports were up only 14.1 per cent to $32.8 billion. Even the

taxman had something to cheer, as gross direct tax collections went up by 15 per

cent in April. But industry and economists are in no mood to celebrate yet. High

industrial growth in one month may not represent a reversal of weak factory output in

the long term, they say. ³These weekly and monthly cycles of bad and good news

must be treated without over-reaction. The good news that we have got this week,both on price and industrial production fronts, must not be over -interpreted, just as

we must not get overly pessimistic when the economy does badly during a week or a

month,´ said Finance Minister Pranab Mukherjee The markets were not enthused

either. Sensex shed 249.17 points today and closed at 18,335.79 points. Economists

warn that food inflation is still high and non-food and global commodity prices are

exerting pressure on manufactured products too. ³Sustained high non-food primary

prices are creating cost-push inflationary conditions in the manufacturing sector,´

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said the finance

minister. As such, the

central bank was not

expected to ease its

stance, economists

said. Export growthwas up year-on-year

but fell sequentially

from 44 per cent in

March. ³March is

always a peak month. I

am not worried,´ said

Commerce Secretary Rahul Khullar. India¶s merchandise exports were $246 billion,

up an impressive 37.55 per cent, in the previous financial year. Industrial growth, as

shown by the Index of Industrial Production (IIP), was slower in March compared to

15.5 per cent a year ago. However, given the subdued numbers in months since

November 2010, the latest performance is quite robust.

Growth in manufacturing, with 80 per cent weight in I IP, fell by half to 7.9 per cent

over 16.4 per cent a year ago, but was much higher than just 3.62 per cent in

February. Capital goods was up 12.9 per cent. It had shrunk in the previous three

months. It was up 36 per cent a year ago. Among others, passenger cars drove

growth, an official statement said. Passenger car production grew 33.57 per cent in

March to 2.56 lakh units, industry figures showed. However, the growth of consumer

durables slowed to 12.3 per cent from over 23 per cent a month ago. ³Our regression

model shows a negative impact of high interest rates on production of consumer

durables,´ said YES Bank Chief Economist Shubhada Rao. For 2010-11, industrialgrowth stood at 7.8 per cent compared to 10.5 per cent a year ago. This is slightly

lower than the 8.15 per cent pegged in advance gross domestic product (GDP)

estimates. As such, economists say the 2010-11 GDP growth will not sharply vary

from the 8.6 per cent estimated by the Central Statistical Organisation. One may ask

what has given industrial growth such a push in March. ³Nobody has an answer to

that. IIP numbers are too volatile. Good numbers in one month do not indicate a

trend. The numbers should be interpreted with caution. Underline trend shows

weakening growth,´ said Crisil Chief Eocnomist D K Joshi. Industry chamber Ficci

also did not seem to be too upbeat on industrial growth. ³Growth in manufacturing is

going to slow in the coming months because commercial banks have raised interestrates further,´said Ficci Director General Rajiv Kumar. The new IIP numbers, with

2004-05 as the base year, will start coming from the next month, and that may end

the volatility debate. The current base year is 1993 -94.

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http://www.business-standard.com/india/news/food -inflation-at-18-month-low77/435449/

Food inflation at 18-month low of 7.7%

Food inflation declined to an 18-month low of 7.7 per cent during the week ended

April 30, but economists said the rate of price rise was still at an elevated level and

the government cautioned that non-food prices are exerting pressure on

manufactured product rates. Food inflation fell from 8.53 per cent a week ago, but

fruits turn quite costlier. Fruits inflation rose to 35.43 per cent during the week

against 32.69 per cent a week ago. Egg, meat and fish inflation, which was in double

digits a few weeks ago, was down to 4.62 per cent from 5.13 in the previous week.

Vegetable prices declined by 3.64 per cent against a rise of 3.44 per cent in the

previous week. Finance Minister Pranab Mukherjee expressed the hope that food

inflation will moderate in the coming weeks. However, he expressed concern over

non-food items. ³Even though food inflation is declining, the conc ern on higher core

(manufactured products sans food items) inflation remains,´ he added. In non-food

articles among primary goods (those in the un -processed form), inflation rose to

28.62 per cent during the week from 27.84 per cent a week ago. Fuel inflat ion

remains steady at 12.25 per cent. Overall inflation had risen to 8.98 per cent in

March, against RBI projection of around 8 per cent and the finance ministry

expectations of 7-7.5 per cent. RBI has pegged inflation at 6 per cent with an upward

bias in March, 2012. The Planning Commission expects inflation to average around

6 per cent this fiscal. ³Softening is something which we have expected...I do think

that the inflation is on its way down... I am hopeful that it (average inflation for 2011 -

12) may be around 6 per cent,´ Commission deputy chairman Montek Singh

Ahluwalia told reporters. April figures for overall inflation is expected to come shortly.

http://www.business-standard.com/india/news/land -acquisition-bill-to-comein-monsoon-session/435450/

Land Acquisition Bill to come up in monsoon session The Centre today said the Land Acquisition (amendment) Bill would be introduced in

Parliament in the monsoon session. The introduction of the Bill was stalled for almost

two years due to political differences within the United Progressive Alliance (UPA).

H

ome minister P Chidambaram, in his first press conference as the head of the newgroup of ministers on media, claimed a consensus was now reached on the issue.

³Consensus building took some time. Now, we are at a point where there is a fair

degree of certainty about a consensus on the law, with some amendments,´ he said.

Railway minister Mamata Banerjee had vehemently opposed the Bill which, along

with the Rehabilitation and Resettlement Bill, seeks to give better compensation

packages to farmers selling their land. According to Congress sources, she had

asked senior UPA leaders not to proceed with the Bill till the elections in West

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Bengal were over. With the poll results expected to be declared on Friday, the UPA

is confident the Trinamool bottleneck would now be history. While no details about

the proposed clauses in the Bill were given, Chidambaram said some amendments

had been accommodated in the original Bill. Agitations in Uttar Pradesh may have

hastened the announcement on the introduction of the Bill. However, the Congress is

also worried about land protests in other areas, including Congress -ruled Jaitapur inMaharashtra. Chidambaram said the government cannot rule out the possibility of

promulgating an ordinance to enforce the new law in the wake of the violence in

Uttar Pradesh. Sources in the Congress, however, said there was a remote

possibility of bringing the proposed law under the ordinance route, as it was too

sensitive an issue to be passed in a hurry. ³The Haryana government had formulated

some packages for farmers of the state regarding land acquisition. If the Uttar

Pradesh government wants, it can always evolve similar packages. It doesn¶t need to

wait for a central law,´ Chidambaram said.

http://www.business-standard.com/india/news/govt -uses-entire-budget-petro-subsidy-for-omc-losses-/435467/

Govt uses entire Budget petro subsidy for OMC losses Today, less than six weeks into the 2011-12 financial year, the government used up

its entire budgetary provision of Rs 20,000 crore for petroleum subsidy. It approved

an additional cash subsidy of Rs 20,000 crore to oil marketing companies for the

losses they¶d made in 2010-11 due to retailing petro products at government -capped

prices. This will enable these companies, all government -owned (Indian Oil,

Hindustan Petroleum and Bharat Petroleum) to declare a profit for the quarter endedMarch 31. During the first three quarters of 2010-11, the government had released

Rs 21,000 crore to the OMCs for subsidised sale of diesel, kerosene and domestic

LPG. The additional amount of Rs 20,000 crore would be registered in the

government¶s accounts for 2011-12, leaving nothing for the burgeoning losses of the

current financial year. Of the Rs 20,000 crore granted on Thursday, Rs 11,027 crore

has been allocated to IOC, Rs 4,595 crore to BPC and Rs 4,379 crore to HPC. The

cumulative Rs 41,000-crore cash subsidy is a little more than half of the Rs 78,000

crore the three companies lost on selling auto and cooking fuel in 2010 -11. While

upstream firms Oil and Natural Gas Corporation and Oil India will contribute about

Rs 25,750 crore, the oil marketers will have to take a hit of about Rs 11,000 crore.Currently, the OMCs lose Rs 18.19 on every litre of diesel sold, Rs 29.69 on every

litre of kerosene and Rs 330 for every LPG cylinder. The diesel price has not been

raised since June 26 last year. At these rates, the OMCs cou ld end 2011-12 with an

all-time high loss of Rs 180,000 crore.

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http://economictimes.indiatimes.com/news/economy/indicators/at -27-bn-fdi-hits-4-year-low-trails-portfolio-inflows/articleshow/8286444.cms

At $27 bn, FDI hits 4-year low & trails portfolio inflows

Foreign direct investments (FDI) last fiscal fell 28% to a four-year low, data showed

on Thursday, raising concerns over stability of capital flows. This is also the first time

in five years that FDI is lower than portfolio flows. A slowdown in FDI means the

economy is not getting enough long-term foreign funds to invest in projects and add

physical assets, such as plants and machinery. Provisional data released by the

Reserve Bank of India (RBI) pegged total FDI at $27.024 billion as of end March.

This included fresh equity in green -field projects, reinvested earnings as well as

change in ownership of existing equity by new investors. Investments in new projects

stood at $20.09 billion, the lowest that the country has received in the last four

years. The central bank had said last week "this was mainly on account of lower FDI

inflows under services and construction, real estate and mining. Also, the slowdown

in domestic investments has proved to be a disincentive for global investments in theIndian market. If one looks at the Q3'11 GDP growth numbers, the investm ent

growth is less than 7%, even though the economy grew 8.2%". The bank has

warned that the slowdown in FDI is because of concern over stability of capital flows.

"The dominance of portfolio equity flows and the decline in FDI raise concern over

the stability of capital flows," it said. AGoldman Sachs report in November 2010 had

said, "Given the excess spare capacity globally, FDI may remain weak going

forward. Indeed, after the Asian financial crisis of 1997, FDI to the region remained

weak for several years. Thus, the Basic Balance of Payments (BBOP) may be in

deficit in FY12." A section of the market feels that since globally FDI is expected to

pick up this year, India too could benefit. According to the United NationsConference on Trade and Development (UNCTAD), growth in global FDI flows is

likely to accelerate to 15% to 30% in 2011 from 1% in 2010 and India should benefit

from this, said a recent report by Standard Chartered Bank.

http://economictimes.indiatimes.com/news/economy/foreign -trade/india-australia-to-start-talks-on-fta-next-month/articleshow/8286574.cms

India, Australia to start talks on FTA next month

Setting a target of doubling bilateral trade in five years, India and Australia on

Thursday agreed to start talks on a comprehensive free trade agreement (FTA) inJune. Bilateral trade between the two economies was about $20 billion in 2009 -10,

tilted in favour of Australia because of India's need for natural resources. A free trade

agreement will open up markets in goods and services and facilitate investments in

both countries. "We expect to make strong gains in services and have greater

market access for goods such as pharmaceuticals," Sharma said at a joint press

conference with his Australian counterpart, Craig Emerson , in Canberra. The first

round of FTA talks will be held in New Delhi next month, Commerce Minister Anand

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Sharma said. India is Australia's fourth largest export market, being a heavy importer

of gold, coal and copper. It is also a big contributor to Australia's lucrative foreign

student market. In the nine months to March, it had a trade deficit of A$9.6 billion

with Australia. Sharma said India's share would go up once the FTA was in

place. Both countries are expected to make substantial welfare gains from the FTA,

with Australia's being slightly more than Ind ia's, according to the India-Australia jointFTA feasibility study carried out by experts from both sides. The welfare gains could

be in the range of 0.15%-1.14% of GDP for India, and 0.23%-1.17% of GDP for

Australia, the study says. "Our job is to create the right environment for business.

Rest would be decided by market forces," Emerson said. Services is one area where

India is seen benefiting the most, as an FTA would offer more opportunities to Indian

professionals to work in Australia. "We do expect greater access for our

professionals," Sharma said. Australia's main exports to India include coal, gold,

copper, fertilisers, manganese, wool and aluminium. India mainly exports machinery

& equipment, clothing, diamonds, iron and steel products and medicine s to Australia.

http://economictimes.indiatimes.com/news/economy/policy/sc -may-decide-who-gets-to-regulate-power-futures-trading/articleshow/8286624.cms

SC may decide who gets to regulate power futures trading

The dispute over regulation of power futures between the elect ricity regulator and the

commodity futures watchdog has now reached the Supreme Court. After the

Bombay High Court gave neither the Forward Markets Commission nor the Central

Electricity Regulatory Commission "exclusive jurisdiction" over power futures, t he

CERC filed a special leave petition against the order in the Supreme Court onSaturday while an FMC offical said the regulator would file an SLP independently.

CERC chairman Pramod Deo said, "We approached the SC after PXIL filed an SLP

on May 2 against the same (HC) order." CERC oversees PXIL, a spot exchange that

offers 'day' and 'week ahead' trading in power. It is promoted by NSE and commodity

futures exchange NCDEX. The row began after PXIL, in early 2009, drew the power

regulator's attention to Multi-Commodity Exchange's launch of electricity futures

based solely on an approval by FMC, which it termed as "incorrect". CERC then

issued a review order in January 2010 giving it sole control of electricity futures, after

which FMC took it to court. The high court set aside CERC's orders on February 7

this year but gave neither FMC nor CERC "exclusive jurisdiction" over power futures. Although the dispute relates to two central regulators, it is the culmination of

a bitter rivalry between NSE and Financial Technologies (FT), a leading exchange

solutions provider, which, along with MCX, has promoted MCX Stock Exchange , a

competitor of NSE in the currency futures segment on stock markets. FT has already

dragged NSE to court after the exchange put it on notice citing performance issues

with its front-end trading technology, Odin, which is used by most brokers to trade in

stocks and commodities. Like PXIL, it has also launched a spot exchange called IEX.

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