12th Plan document will not be ready by 1 April 2012

Traditionally, the Plan panel has been unveiling the policy documents after the lapse by several months and this time it would be no exception. The documents for 10th and 11th Plans were finalised much after the beginning of the respective Plan periods

New Delhi: The 12th Plan document that seeks to raise the economic growth rate to 9% during the five-year period will not be ready by 1 April 2012, the day the next Plan begins, reports PTI.

As per the schedule, the Planning Commission will begin writing the 12th Plan document that runs into several volumes after March 2012.

Traditionally, the Plan panel has been unveiling the policy documents after the lapse by several months and this time it would be no exception, sources said.

“The Commission is scheduled to complete spade work relating to formulation of the Plan document by March 2012.

This includes submission of reports of steering committees and working groups and eliciting views of different ministries and departments,” the official said.

After the finalisation of the document, it will be placed before the full Planning Commission, the Union Cabinet and the National Development Council (NDC), the highest policy making body of the country. This exercise is likely to take time.

The documents for 10th and 11th Plans too were finalised much after the beginning of the respective Plan periods.

The 11th Plan which began in April 2007 was approved by the NDC in December 2007. Similarly, the 10th Plan which begun in April 2002, was cleared for implementation by the NDC in December 2002.

As far as progress of the 12th Plan documentation is concerned, the NDC had approved the ‘Approach Paper’, which provides a broad framework of the government policy to be pursued in the five-year period to achieve the desired growth rate, 20th on August last.

The Approach Paper would be the basis for running the various government programmes and schemes till the new Plan is unveiled and implemented, the official said.

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Inflation to moderate only in early 2012: BNP Paribas

“It is not until early 2012 when favourable base effect kicks in that spot inflation should genuinely fall back, but remain well above the RBI’s comfort zone,” BNP Paribas said in its latest issue of ‘Asian Instant Insight’

New Delhi: Global banking major BNP Paribas has said inflationary pressure in India will moderate early next year, but will stay above the Reserve Bank of India’s (RBI) comfort level of around 5%-6%, reports PTI.

“It is not until early 2012 when favourable base effect kicks in that spot inflation should genuinely fall back, but remain well above the RBI’s comfort zone,” BNP Paribas said in its latest issue of ‘Asian Instant Insight’.

The banking major’s projection is at variance with the forecasts made by the government and the RBI.

Both the government and the central bank expect inflation to start cooling by the third quarter of this fiscal (October-December).

While RBI has said that overall inflation will moderate to around 7% by March, the government expects it to be around 6.5% by then.

Inflation soared to 13-month high of 9.78% in August. It has been above 9% since December 2010.

“Despite signs of a cooling economy, elevated inflation expectations and upward pressure on administered electricity prices are...likely to retard the desired disinflation process,” BNP Paribas said.

It added, “Despite building downside risks to growth, it is not until early 2012 when base effect from onion and cotton prices kicks in that WPI inflation should realistically fall back towards more comfortable levels but remain well above the RBI’s comfort zone of 5%-5.5%.”

The RBI has hiked key-policy rates 12 times since March 2010 to drain out excess demand, which many consider could be stoking the inflation.

Corporate India has said that frequent rate hikes, which have led to an increase in the cost of borrowings, are hindering fresh investments and affecting economic growth.

The country’s economic growth was 7.7% in the April-June period, the slowest in six quarters. Growth in industrial production also fell to 21-month low of 3.3% in July.

In the mid-quarterly policy review earlier this month, the RBI said that the Rs3.14 per litre hike in petrol price, announced recently, will further fuel inflation.

It said the current level of high inflation makes it imperative to continue with the anti-inflationary stance and tight monetary policy.

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Rupee fall may inflate India Inc’s foreign loan bill by $2 billion

Corporates have been increasingly tapping overseas loans—mostly in the US currency—to save costs arising out of higher interest rates and liquidity constraints in the domestic market in the recent months, but the falling value of rupee seems to have negated the benefits

New Delhi: The falling value of rupee may impact hard the profitability of the Indian companies, which have tapped overseas loans, and their bottomlines are likely to take a hit of over $two billion this year, reports PTI.

Corporates have been increasingly tapping overseas loans—mostly in the US currency—to save costs arising out of higher interest rates and liquidity constraints in the domestic market in the recent months, but the falling value of rupee seems to have negated the benefits, experts believe.

The rupee has depreciated by over 12% to close to 50-per-dollar mark currently from its near 44-level against the US currency at the beginning of August.

It was the worst performer among major Asian currencies with a decline of 5% in the past week alone and this downtrend has added to the woes of the companies having gone abroad for their borrowing needs.

Indian companies have borrowed close to $21 billion in foreign currencies through ECB (External Commercial Borrowing) window between January and July this year, as against a total amount of $18 billion in entire 2010.

The entities having raised such overseas loans this year include Reliance Industries, NTPC, Mundra Port and SEZ, Indian Oil, Bharat Aluminium, Vodafone Essar, Air India, GAIL, Adani Power, JSW Steel, Aircel, Tata Tele, Idea Cellular, Suzlon, IDFC, RCom, REC, Indian Railway Finance Corp, M&M and BPCL, as per data available with the Reserve Bank of India (RBI).

In July itself, as many as 100 companies tapped overseas loans totalling over $4 billion. This included Mukesh Ambani-led RIL raising $1.09 billion for refinancing its old loans, Mundra Port ($150 million for ports business) and Indian Oil ($500 million for import of capital goods).

Besides, a number of telecom companies have raised overseas loans in recent months to refinance earlier rupee loans for payment of their third generation (3G) spectrum fees.

The analysts said that liquidity deficit and relatively higher interest rates in domestic market were prompting the Indian companies to tap cheaper dollar loans for funding their domestic business activities, imports, overseas acquisitions and refinancing of existing rupee loans.

However, the situation has turned around with sharp rupee depreciation in past few weeks from a relatively stable trend in earlier months of the year, because of which many of the companies did not even hedge against the currency fluctuation risks, analysts said.

As a result, many of the companies might have to book mark-to-market losses on their books for this year unless the rupee reverses its downward trend, experts said, while adding that the current level of rupee depreciation pegs the estimated hit on their profits at over $2 billion.

Experts are of the opinion that those corporates which did not hedge their forex exposure, will have to bear the brunt of the current volatility in the Indian currency in the form of large forex-related liabilities.

“Most of the corporates, especially the PSU players, had kept their forex exposure unhedged and had expected the rupee to remain stable. But now most of them would see their liabilities shooting up significantly and many of them would be forced to mark-to-market losses on their income statement in the current year,” SMC Global Securities strategist & head of research Jagannadham Thunuguntla said.

Religare Capital Markets’ director and strategist (institutional research) Tirthankar Patnaik said, “A depreciating rupee would mean a hit on the equity of the borrower on account of increased foreign currency liability (part that is not hedged) and higher interest rate payments.”

He said that some companies have a policy of passing this increase liability to equity through profit and loss account (for payment of interest to be done in foreign currencies) which would mean a “hit on the profitability this year”.

“The increasing interest rates globally would only add to the injury,” Mr Thunuguntla said, while adding that 12%-14% depreciation in the rupee would inflate their existing overseas borrowing exposure by about $2 billion.

Ashika Stock Broking Research head (equities) Paras Bothra also said that the rupee depreciation would be negative for the Indian companies with regards to their overseas loan, raised specifically in the US dollar.

Mr Bothra pegged the impact at 5%-10% of the companies’ overseas loans, depending on the exchange rate at the time of their borrowings.

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