Economy Updates - Forex reserves at $271.239 billion down YoY

India's foreign exchange reserves fell for the week ended August 7 to $271.239 billion compared to $271.641 billion in the year-ago period.

India's gold reserves and special drawing rights (SDR), during the week, stood unchanged at $9.671 billion and $1-million respectively, the central bank said.

India's reserve position in the International Monetary Fund (IMF) marginally rose to $1.348 billion compared to $1.338 billion in the previous week, RBI said.

Reserves had risen by $3.930 billion for the week ended July 31, compared to $267.711 billion in the previous week.

Foreign currency assets, during the week, fell to $260.219 billion, against $260.631 billion in the previous week, RBI said in its weekly report.

Inflation at 1.74 percent YoY

The wholesale price index (WPI) is forecast to have fallen 1.74 per cent in the 12 months to August 1, steeper than the previous week's decline of 1.58 per cent, a poll showed on Wednesday.

It would be the ninth straight annual fall in the wholesale price based index, but this is widely seen as a statistical effect caused by sharply higher prices a year earlier.

The index has been rising on a weekly basis since March and analysts said it probably climbed in the week ended Aug. 1, mainly due to rising food prices.

The central bank has also said price pressures are building up, suggesting there was little chance for rate cuts. Weak monsoon rains are also expected to put upward pressure on prices.

source - economictimes

Indian Economy to grow at 7.8 percent in 2009-10

India's economy will likely grow at 7.8 per cent in fiscal year 2010/11, higher than a previous forecast of 6.6 per cent due to an improved investment outlook, better external environment and a recovery in consumption demand, Goldman Sachs said in a note on Monday.

But it kept its growth estimate for the current year ending March 2010 at 5.8 per cent citing a poor monsoon and the follow-on negative impact on rural demand in the near-term.

Goldman's fiscal year target for wholesale price index-based inflation as of end-FY10 is 6.5 per cent with an upside risk, and expects the central bank to tighten policy rates by 300 basis points in calendar year 2010.

Govt applies for $3.2 billion loan for capitalising PSU banks

The government has sought a $3.2 billion loan from the World Bank to infuse capital into public sector banks, the Lok Sabha was informed on Friday.

Minister of State for Finance Namo Narain Meena today responded in the affirmative, in a written reply to the Lok Sabha to a query on whether loans from the multilateral lending agency contain a proposed $3.2-billion for recapitalising state-run banks.

"To enable the PSBs to meet credit requirements of the economy while maintaining a healthy and comfortable level of regulatory capital to risk-weighted assets ratio, a proposal has been sent to the World Bank," he said.

However, on whether the government proposes to borrow funds from the World Bank to prop up the banking system, he said, "The assessment of the Indian financial system during 2007-08 done by the Reserve Bank of India shows that the banking sector in India continues to be healthy, sound and resilient."

Meena further said that India is taking loans from the International Bank for Reconstruction and Development (IBRD) and credit (soft loan) from the International Development Association (IDA).

"The cumulative commitment of the World Bank (IBRD and IDA) loans to India till June 2009 is $73.93 billion (IBRD $37.68 billion and IDA $36.25 billion)," he said.

Foreign Direct investors can invest upto $10 bn for building roads

India is likely to attract foreign direct investment of about USD 10 billion for the roads sector in the next two years.

The Transport Minister Kamal Nath said all imediments would be removed to get the foreign investment in the roads and highways sector.