Finance Ministry confident of meeting fiscal deficit of 6.8 percent

In July, the government projected the fiscal deficit for 2009/10 (April-March) to be 6.8 per cent of the gross domestic product (GDP), a 16-year high, to be funded by a record high market borrowing of 4.51 trillion rupees ($93 billion). However, rain deficit in the June-September monsoon season, is feared to impact crops including rice and sugar and has already sent food prices higher by over 10 percent from the previous year.

"I don't think there is any reason to think that the 6.8 per cent will be crossed," Montek Singh Ahluwalia, deputy chairman of India's Planning Commission, told reporters. Farm Minister Sharad Pawar said food subsidy would top 600 billion rupees this year, about 15 percent higher than what was estimated last month. Economists estimate India's drought relief measures could push up fiscal deficit by $4 billion, or 0.5 percentage points.

Indian Prime minister is having a meeting scheduled for september 1 with economists and planning commision officials to review current economic scenario and after the meeting we might hear some updates about the fiscal deficit

Disinvestment updates - Govt to sell stake Satluj Jal vidyut

(posted under - disinvestment news) - The government may sell 10 percent of its stake through a public offering in power producer Satluj Jal Vidyut Nigam Ltd. The Himachal Pradesh government holds 25 percent stake in the firm, while the remaining 75 percent is held by the federal government. "

Himachal Pradesh government has given NOC (to the federal government) and we have supplied them a roadmap for disinvestment in seven months," the company official told reporters. The company currently has a capacity to generate 1,500 megwatt of hydro power and it aims to raise the capacity to 4,800 MW by 2017. He said the roadmap was supplied two months back to the Department of Disinvestment.

India has two economies - official and Black economy

According to the Annual Information Return (AIR) filed with the government, high-value transactions amounted to more than Rs 55.7 lakh crore in 2007-08, almost double the Rs 27 lakh crore for the previous year. But about 30% or roughly 1 million of the 3.3 million transactions were without PAN being cited.

The department regards many of the high-value transactions as suspicious. The proportion of cases where PAN is not cited is highest in property sales of a declared value of Rs 30 lakh or more. Barely one in four such sellers has provided PAN.

Similarly, almost two-thirds of those who have cash deposits of Rs 10 lakh or more in savings bank accounts have not provided a PAN to the bank. Over half the credit card transactions of Rs 2 lakh or more have no PAN tagged to them.

Even more shockingly, of the 3,100 transactions of Rs 5 lakh or more in RBI bonds, aggregating to Rs 3.52 lakh crore, about 10% were carried out without mentioning any PAN.

But PAN not being provided is not the only reason the department is suspicious. It is also because in thousands of cases where a PAN has been provided, it is unable to trace the transaction back to the beneficiary.

In some cases this is because the PAN provided has turned out to be fake. In others, there are two or more PANs being used by the same person. In one such case, when the I-T department investigated further it found that the lady holding the two PANs had an income of over Rs 40 crore but had disclosed no income in her return for that year.

Another interesting case is that of a prominent US-based bank. The data provided by the bank on credit cards it had issued showed that just four PANs accounted for thousands of crores of rupees of transactions. On being confronted with this, sources said, the bank explained it away as a case of faulty data entry.

The department's suspicions are further strengthened by the fact that the Rs 3.12 crore collected through income and corporate taxes in 2007-08 does not quite square with such a large volume of high-value transactions.

A thorough investigation and linking of the transactions to the actual beneficiary could make the treasury richer, it feels. However, the scale on which the investigations are needed is simply beyond its capacity given the manpower available, department sources confessed. This has been conveyed to the government.

The AIRs are routinely reported to the I-T department for further investigation. The components include cash deposits of Rs 10 lakh and above in savings bank accounts, purchase and sale of immovable property above Rs 30 lakh, purchase of bonds and debentures, share transactions of Rs 5 lakh and above and credit card expenditure of Rs 2 lakh or more.

All information in the AIRs is supposed to be assessed and analysed in I-T investigations and matched with the I-T return of assessees against the PAN numbers mentioned in these high value transactions.

source - economictimes

Planning commision gives nod for $ 5 billion loan for urban sector

(posted under - Planning commision news) - Planning Commission has given a go-ahead to a proposed $5-bn World Bank loan for India’s urban sector. The Bank is now preparing a detailed concept note indicating what should be the main components of the loan.

Though the Bank had originally proposed to provide $3.8 bn loan for the urban sector, the ministry of urban development requested the Bank to increase the amount to at least $5 bn, or about Rs 25,000 crore.

It has not yet been decided as to which cities will benefit from the Bank’s loan, but it’s believed that many of the 63 Mission cities under the Jawaharlal Nehru Urban Renewal Mission (JNNURM) will get a share of the cake. The government has also decided to add 28 more cities to the list.

With the Plan panel giving its nod, and the finance ministry on board, the loan could be disbursed in 12-18 months, said the official.

Foreign investors bullish FDI increased to $2.58 billion in june

(posted under - FDI updates) - In June 2008, the FDI inflow was $2.39 billion. However, the total foreign investment inflows during April-June contracted by over 30 per cent to $7.02 billion over the same quarter of 2008-09. In the first quarter of the previous fiscal it was $10.07 billion.

India has attracted foreign direct investment worth $2.58 billion in June, an eight per cent increase over the same month last year. The FDI inflow in May was $2.1 billion.

No debt waiver for farmers this time - FM

With fiscal deficit increasing and adding to the government woes is deficit monsoon in almost entire country still Finance minister said that no proposal for farm debt waiver this time around.

"There is no such proposal," Finance Minister Pranab Mukherjee said when asked if the government was considering a fresh debt waiver scheme to give relief to farmers.

The UPA government had last year announced a nearly Rs 71,000 crore farm loan waiver scheme to offer relief to small and marginal farmers and one-time settlement scheme for large ones.

Talking to reporters after holding a review meeting of Regional Rural Banks, he exuded confidence that the economy would clock over six per cent growth despite weak monsoon.

"No doubt, this year we are not expecting to reach nine per cent growth. This year we are projecting six per cent plus growth," he said, adding that the full impact of drought will be known to all as and when it is felt.

Meanwhile, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the poor monsoon will adversely impact farm production and eat into economic growth.

"The existence of drought by itself can lead to some shaving" off of the growth projections. - said Ahluwalia

Indian exports might be +ve in december - FICCI

In a survey conducted by Federation of Indian Chamber of Commerce and Industry, majority of respondents said exports are expected to be in positive terrain by December this year.

The chamber expects an improvement but only in terms of stemming the falling exports on a year-to-year basis in the months ahead.

"Exports are likely to register a reasonable positive growth but we will have to wait at least till the end of this year," the survey said.

Exports have declined by 26 per cent in June for tenth month in a row due to less demand from the global markets.

Countries like Hong Kong, Germany and France are showing fresh signs of global recovery, with the European economy recording marginal GDP growth of 0.3 per cent and Asian economy expanding 3.3 per cent in the second quarter of 2009.

The survey said, "While orders are not coming in thick and fast, still some foreign clients have started placing some new orders or at least reduced the pace of order cancellation."

Ficci surveyed 316 exporters in different sectors such as automotive, gems and jewellery, textiles, handicrafts, leather and marine IT products during June and July 2009.

However, in May exports declined to USD 11.01 billion, down 29.2 per cent year-on-year.

As such, sequentially there is a growth of about 16.4 per cent.

However, Prasad hastened to caution that it is too early to come to any conclusion about export growth.

"The next two months are deciding months. We have to see whether there will be real recovery in trade sector or only changes due to the base effect for the coming months," he added.

However, Federation of Indian Export Organisations (FIEO) Director-General Ajay Sahai said the declining trend is likely to continue for some more months.

The exporters' body acknowledged that the government cannot increase demand in the global markets but it should give incentives to exporters so that they do not lose orders.

"The government should take short-term measures first and then come out with long-term policies after the global commerce shows improvement," Sahai said.

The Government is slated to unveil Foreign Trade Policy, which spells out the segments of priority in external trade and also gives incentives and disincentives, depending on the country's needs.

source - economictimes.com

India's arms imports to touch $30 bn by 2012

India's arms imports are expected to touch $30 bn by 2012 even as the domestic defence market is poised to grow to $700 mn in five years, according to an industry lobby report.

The report submitted to the defence ministry by the Associated Chambers of Commerce and Industry (Assocham) said: "India's arms imports alone would rise to $30 bn by 2012."

"The Defence Offset Facilitation Agency (DOFA) and the armed forces in consultation with India Inc should work out a comprehensive strategy to ensure that defence imports happen at extremely competitive rates," Assocham president Sajjan Jindal said.

DOFA, under the Department of Defence Production, is a single window agency to implement the government's defence offset policy.

Assocham has urged the government to allow India Inc to participate in defence deals as the domestic defence market would expand to over $700 million in four-five years.

According to the chamber, if the Indian economy grows at a steady rate of 7 percent, the defence spending would exceed 3 percent of the gross domestic product (GDP) in future.

"This could be used to finance additional capital outlays for modern equipment," the Assocham report said.

Currently defence expenditure accounts for around 2.5 percent of the gross domestic product (GDP). India has upped its defence expenditure by 34 percent to Rs.141,703 crore ($28 billion) for the fiscal 2009-10.

India is the world's largest importer of defence articles with its armed forces buying over $6 billion worth of military hardware every year.

The paper also called for raising the foreign direct investment (FDI) limit in the defence sector to 49 percent from the current 26 percent.

Higher FDI will help procurement of latest technologies as per provisions of the latest defence offset policy, Assocham said.

-source-economictimes.com

Govt steps up efforts to attract Foreign Direct Investors (FDI)

(posted under - FDI updates - Economy updates) - Transport Minister Kamal Nath had said all impediments would be removed to get foreign investment in the roads and highways sector.

He added that the roads sector is expected to attract USD 10 billion of FDI in the next two years.

The government is also making efforts to bring in foreign investment in the textiles sector, the largest employer after agriculture in the country.

Textiles Minister Dayanidhi Maran had led a business delegation to Japan last month to woo foreign investors in the labour intensive sector.

FDI inflow in January-May period of 2009 was USD 10.58 billion compared to USD 19.56 billion in the same period previous year, a dip of 46 per cent.

The government also proposes to raise the FDI cap in private insurance firms from 26 to 49 per cent and a bill to give effect to the proposal is pending in the Rajya Sabha.

CRISIL Principal economist D K Joshi said by taking the steps government is building pipeline to attract FDI.

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.

Govt set to raise $3.2 billion by selling stake in steel companies

In yet another news of selling stake in sick cos the indian government is all set to sell stake in steel companies which might help in raising money, in future we can see more disinvestment news from the government of india, The details are as follows :

The government may raise 150 billion rupees ($3.2 billion) by selling up to 20 percent stake in state-run firms, Steel Minister Virbhadra Singh said on Friday.

The minister said the government was in the process of choosing companies for divestment.