Inflation to hit Indian Inc's growth plans - report

The 13-year-record inflation figures were announced on a day when Hindalco Industries announced its plan to retire loans taken to finance the Novelis acquisition. The Aditya Birla flagship company, which has about $3.03 billion as debt because of a bridge loan taken to fund the acquisition, will be tapping the market soon to meet the bridge payout.

“As long as we can pass on the cost to the market, it is ok,” managing director Debu Bhattacharya told reporters on Friday. “If we can’t, then it will be bad.” Inflation rate surged to a 13-year-high due to high crude and commodity prices, putting a question mark on growth estimates and on the ability of the Indian market to absorb any further increase in input costs.

“It’s (inflation) very unfortunate and certainly a thing that we can do without,” said Tata Sons’ finance director Ishaat Hussain. “But it has been driven by high oil and commodity prices, largely on account of external factors. It will require measures which will impact growth. Borrowing will become costlier and growth momentum will be affected.”

Indian companies, large and small, have drawn up large plans to expand capacities. Since borrowing will become costlier, the future of such expansion plans looks uncertain. However, the infrastructure sector may not be affected as deferring such projects would be even costlier.
India is scheduled to spend $500 billion to develop various infrastructure projects. B Hariharan, group finance director of the Gautam Thapar-controlled Ballarpur Industries, says “The high inflation will slow down the manufacturing sector. Although expansion projects will be affected, those that will be funded by domestic debt will be hard hit, while companies depending on foreign loans may be relatively better off,” he added.

On Thursday, KPMG said India would likely see the largest global investment in the manufacturing sector, with about 25% of large global corporates expected to invest in the country. Investment in other sectors such as in industrial products, will also be large, with India likely to displace the US to gain the second rank after China, said the report, which was based on a survey of 300 corporate investment strategists from 15 economies

Direct Tax collection up 71% then previous year

India's direct tax collections continued to grow at a robust pace to log a 71.28 percent rise in the first two months of this fiscal at Rs.228.4 billion ($5.7 million), against Rs.133.35 billion in the like two months of the previous fiscal.

The growth in personal income tax was the highest with 73.05 percent at Rs.146.9 billion, against Rs.84.89 billion, while the corporate tax mop-up was higher by 68 percent at Rs.81.26 billion against Rs.48.35 billion. "Direct tax collections have been witnessing a high growth due to better tax compliance by the taxpayers and an improved tax administration," a statement issued by the finance ministry said Wednesday.

Finance Minister P. Chidambaram said last week that the Central Board of Direct Taxes (CBDT) would meet soon to revise upward the official estimate on direct taxes for this fiscal, set at Rs.3,650 billion. "For 2007-08, direct tax collection was Rs.3,144.68 billion. This represents an increase of 36.62 percent over the previous fiscal, and 117.56 percent of the original budget estimates," he said. "In four years, this has been tripled - that is from Rs.1,050.88 billion to Rs.3,144.68 billion.

This is a remarkable achievement and I compliment the department for this extraordinary achievement," he added. "The cost of collection has come down to 0.54 percent. For every Rs.100 collected, the department spends only 54 paise. Now, this is the lowest in any jurisdiction in the world."

India second in consumer confidence index

Despite a marginal slowdown in growth, India still ranks second after Norway in consumer confidence and their attitude towards recession, says a survey by a global information and media consultancy. "One market's trash is another's treasure, Norway and India still ride the wave of economic slowdown," says the Nielsen Global Online Consumer Survey conducted among 28,153 Internet users in 51 markets in Europe, Asia Pacific, the Americas and the Middle East.

Aside from consistently high consumer confidence, the two most optimistic nations in the world, Norway and India, share something in common: Their economies are benefiting from the by-products of economic slowdown. The survey says India will see its employment rate rise in inverse proportion to rich nations, thanks to the country's enthusiastic adoption of work-force optimisation practices and the outsourcing bug.

India has established itself as a hub for outsourcing technical and support staff, as belts in the world's leading economies tighten. We may well see India's economy, and the confidence of its consumers, soar. The Nielson survey says 94 percent of Norwegians and 86 percent of Indians were optimistic about their job prospects over the next year, while a staggering 93 percent Portuguese and 89 percent Japanese felt their job prospects were either not so good or downright bad.

The survey says consumers in three of the world's most developed economies - the US, Japan and New Zealand, have taken a serious turn in the last few months. Not surprisingly, consumer confidence has fared badly in the US, the world's largest economy and epicentre of the sub-prime housing and credit crises. The survey says consumer confidence fell in 39 out of 48 countries, with New Zealand, the US and Latvia suffering the deepest declines. "No region or country has been spared the domino effect of the US sub-prime and credit crisis", observed David Parma, global head of customized research for The Nielsen Company.

"The last six months have been the most turbulent period for the global economy in several decades. When the USA sneezed at the outset of the sub prime disaster nearly a year ago, the rest of the world quickly caught a cold," he said. "Consumers around the world are struggling with the same global issues that are impacting their daily lives. It's an unfortunate pendulum." Parma said on the one hand the world was witness to soaring global crude oil and commodity prices and rising interest rates, while on the other there was a fall in property prices, weakening labour markets and falling industrial output.

India not a trade friendly nation - World Economic Forum

Hong Kong and Singapore are the two economies most conducive to global trade, according to a ranking by the World Economic Forum released on Wednesday. The World Economic Forum's new Global Enabling Trade Index survey of 118 economies looked at ten factors impacting trade, such as tariffs, customs administration efficiency and availability of transport and communications infrastructure.

The forum ranked Hong Kong number one thanks to its "very open market" as well as a "secure and open business environment." Singapore's open business environment was also complemented by a "highly efficient and transparent border administration" and a well-developed transport and communications infrastructure.

Third and fourth places were taken by Sweden and Norway respectively, while Canada was ranked fifth. The world's largest economy United States, however, did not figure in the top ten, coming in at number 14, dragged down by its border administration, judged to be "lacking some efficiency." "Customs procedures (in the United States) are seen as comparatively burdensome (ranked 42nd) and there is a relatively high cost to import (ranked 65th)," said the WEF.

Export giant China fared even worse, ranked just 48th, reflecting "underlying weaknesses in its economy and its trading regime." "Above all, China is a fairly closed country. Although its economic success relies heavily on exports, imports are still severely inhibited by tariff and non-tariff barriers, despite the country's accession to the WTO," it said. Fellow Asian giant India ranked even further down the list, at 71st place, due to its market access, which is rated as "severely restricted." Brazil was not far behind India, at 80th place, as its markets remain "fairly closed, with tariffs... inhibiting goods imports."

Finance Minister : Banks to waive farm loans by 30th june

Union Finance Minister P. Chidambaram Monday said state-run banks would waive farm loans by June 30, as outlined in his budget speech Feb 29.

"Yes, they (banks) will implement the farm loan waiver scheme by this month-end. The process is on. The scheme is under implementation by the public sector, regional rural and cooperative banks. The beneficiaries have been identified," Chidambaram told IANS on the sidelines of a bank event here.

In his budget speech, the finance minister had set June 30 as the deadline for waiving bank loans to small and marginal farmers with holdings up to three hectares. The size of the loan waiver scheme was increased in May to Rs.716.8 billion from the Rs.600 billion set initially, as the number of beneficiaries has been estimated to be about 40 million.

The waiver will enable the beneficiary farmers to become eligible for fresh institutional credit for the kharif crop.
Chidambaram Monday visited two Canara Bank and Vijaya Bank branches, as well as a rural bank branch on the outskirts of the city to interact with agricultural borrowers and supervise the debt relief scheme to farmers.