FM to kick off pre-budget meetings from 11th January

The first meeting would be held with agriculturalists, followed by a series of interactions with sectoral experts, representatives, industry captains and economists over the next ten days to get their feedback and inputs for incorporating them in Budget 2012-13

New Delhi: Amid economic slowdown, finance minister Pranab Mukherjee will hold brainstorming sessions with various stakeholders during his annual pre-budget meetings beginning 11th January, reports PTI.

The first meeting would be held with agriculturalists, followed by a series of interactions with sectoral experts, representatives, industry captains and economists over the next ten days to get their feedback and inputs for incorporating them in Budget 2012-13.

Mr Mukherjee is then slated to meet captains of industry on 13th January, followed by trade union leaders on 16th January.

Mr Mukherjee is expected to elicit views of different interest groups on arresting the economic slowdown and combating the impact of global problems.

The current fiscal has been a difficult year for the country's economy, with growth slipping to 6.9% in the second quarter this fiscal, the lowest in nine quarters.

Besides, industrial output in October saw a sharp de-growth of 5.1% as stock markets remained volatile driven by negative investor sentiment in India and abroad.

Social sector related groups will share ground realities faced by them with Mr Mukherjee on 17th January, followed by a meeting with CEOs of banks and financial institutions on 19th January.

Issues like bank recapitalisation, access to affordable financial services—especially credit and insurance—and interest rates are likely to be discussed in the meeting.

The pre-budget exercise will end with a discussion with economists on 20th January.

A wide range of issues like policy initiatives to fight sluggishness in growth, slump in industrial output and rising fiscal deficit targets are likely to come up for discussion.

Moreover, impending tax reforms like Direct Taxes Code and Goods and Services Tax may also figure in the discussions.

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Volatile markets derail disinvestment plans in 2011

Volatility in the capital markets, mainly driven by global factors, forced the government to repeatedly postpone the public issues by PSUs. In certain cases, the PSUs could not come out with the public offerings because of delay in appointment of independent directors by the government

New Delhi: The government’s disinvestment programme remained on papers with only one public sector undertaking (PSU) hitting the capital market raising only Rs1,145 crore in 2011, as against the target of mopping up Rs40,000 crore during the current fiscal, reports PTI.

During the year, proposals were mooted for disinvestment of several companies, including BHEL, ONGC and SAIL, but none of them saw the light of the day.

Volatility in the capital markets, mainly driven by global factors, forced the government to repeatedly postpone the public issues by PSUs. In certain cases, the PSUs could not come out with the public offerings because of delay in appointment of independent directors by the government.

The department of disinvestment (DoD), which has been mandated to raise Rs40,000 crore, had to think of innovative ways, like buyback of shares by cash rich PSUs to achieve the mammoth target for the current fiscal.

In May, the DoD came out with follow-on public offer (FPO) of Power Finance Corporation (PFC), the only PSU issue which hit the capital market.

The PFC FPO opened on 10th May and closed on 13th May and the issue was subscribed 4.32 times. The company, in which the government diluted 10% stake, gave Rs1,145 crore to the exchequer.

The stake dilution was part of concerted efforts to raise funds to boost government finances.

Anticipating Rs40,000 crore fund mop up through disinvestment, the government had fixed a fiscal deficit target of 4.6% in the current fiscal.

However, with disinvestment target unlikely to be met, the fiscal deficit could exceed the budget estimates.

Besides blue-chip companies like BHEL, ONGC and SAIL, the government had also identified Hindustan Copper (HCL), Rashtriya Ispat Nigam (RINL), National Buildings Construction Corporation (NBCC) and Hindustan Aeronautics (HAL) for disinvestment in the current fiscal.

However, the stake sale had to be put off because of the impact of decline in global markets on Indian bourses. The Indian equity markets benchmark BSE Sensex declined 25% so far in 2011 falling to 15,379.34 points. It was quoting at 20,509 points on 31 December 2010.

Besides, the draft paper for ONGC FPO filed with the Securities and Exchange Board of India (SEBI) was withdrawn for the lack of adequate number of independent directors. The government plans to offload 5% stake that would fetch it around Rs12,000 crore, nearly one-third of the budgeted target.

Besides, plans are on to offload 5% equity in power equipment maker BHEL, which would fetch over Rs4,000 crore and draft papers for which have been filed with the market regulator SEBI.

In view of uncertain market conditions, companies like SAIL and Hindustan Copper (HCL) have deferred fresh equity issue, though the government will go ahead with its proposal to offload stake.

Besides, SAIL FPO has failed to meet deadlines repeatedly since December 2010, due to several reasons, like rising coking coal prices, problems with merchant bankers and adverse market conditions.

The DoD is believed to have identified two dozen cash rich PSUs having a total balance of nearly Rs2 lakh crore for buying back shares.

The companies which have been identified by the government for buyback include SAIL, NMDC, ONGC, NTPC, Coal India, Oil India, MMTC, Neyveli Lignite, NHPC, BHEL and GAIL.

Such companies may be asked to buy back about 5% equity from the shareholders. Under the current regulations, market regulator SEBI allows companies to buy back their own equity from shareholders.

Under the buyback mode, the government can raise money by selling its equity in the company to the concerned PSU itself.

In 2010, the government had raised a record Rs40,000 crore in nine state-owned companies including Coal India, NMDC, NTPC and Rural Electrification Corporation (REC).

The amount was the most raised in a year since the government began the programme of diluting minority stake or privatising vast swathes of public sector companies in 1991-92.

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RBI likely to go for rate cut in Q2 2012: Nomura

“We expect the RBI to start cutting policy rates in Q2 2012, as growth is likely to deteriorate in the next few quarters,” global credit rating and research firm Nomura said

New Delhi: Inflation in India is likely to moderate as per the Reserve Bank of India’s (RBI) projection while the growth is expected to fall, prompting the apex bank to start interest rate cuts from the second quarter (Q2) of 2012, reports PTI quoting global credit rating and research firm Nomura.

“We share the view on the near-term inflation trajectory with the RBI and believe that the rate-hiking cycle is over,” Nomura said in its latest issue of ‘Asia Economic Alert’.

Falling economic growth numbers may also prompt RBI to go for rate cuts, it added.

“We expect the RBI to start cutting policy rates in Q2 2012, as growth is likely to deteriorate in the next few quarters,” Nomura said.

In its mid-quarterly economic review earlier this month, RBI hinted at rate cuts in future. It had increased rates 13 times since March 2010 to tame inflation.

The central bank kept its key policy rates unchanged during the last review. It retained its year-end inflation projection at 7%, while stating that it will make a formal assessment of its inflation projections for 2011-12 in the third quarter review in January.

“From this point on, monetary policy actions are likely to reverse the cycle, responding to the risks to growth,” the RBI had said.

The overall inflation has been above the 9% mark since December last year. However, food inflation fell to a four-year low of 1.81% as on 10th December.

The central bank also said that deceleration in growth is contributing to a decline in inflation momentum, helped by softening food prices.

Economic growth in the July-September quarter slumped to a 6.9% —lowest in over two years, as against 8.8% in the same quarter of the 2010-11 fiscal.

Besides, industrial production entered the negative zone in October and contracted 5.1%.

RBI had also said that there is a downside risk to its projection of 7.6% growth for 2011-12 on account of the global slowdown and domestic issues.

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