Growth moderating more than expected in 2011-12: RBI

“Growth in 2011-12 is moderating more than what was expected earlier. The business climate has weakened. The slack in investment and net external demand may keep the pace of recovery slow in 2012-13,” the RBI said

Mumbai: Amid concerns over gross domestic product (GDP) expansion, a survey of professional forecasters by the Reserve Bank of India (RBI) has projected that growth will slow down to 7% in FY11-12 and will pick up only marginally at 7.3% next fiscal, reports PTI.

The downward revision of the projection to 7% is startling, as a similar survey three months back had pegged the median forecast for growth at 7.6% in FY11-12 and at 7.7% in FY12-13.

“Growth in 2011-12 is moderating more than what was expected earlier. The business climate has weakened. The slack in investment and net external demand may keep the pace of recovery slow in 2012-13,” a statement from the RBI said.

The RBI pointed out that the manufacturing sector’s reliance on global demand, investment uncertainty and high interest rates were denting the growth.

Volatility in the exchange rates, which affects fund flows and company bottomlines, is a challenge as the country enter the next fiscal, the RBI said, noting there were some positives in the resolution of structural issues faced by the economy.

On inflation, which has been above the comfort level—prompting prompted 13 consecutive rate hikes by the Reserve Bank from March 2010 till October last year—the survey said average Wholesale Price Index (WPI) inflation for the whole fiscal will be 8.8%.

The RBI has given a guidance that WPI inflation, which stood at 7.5% in December 2011, will cool down to 7% by March 2012.

In its Macroeconomic and Monetary Policy Developments report released ahead of the policy review on Tuesday, the RBI said the sentiment of the industry also remains weak.

“Weakening demand, increased global uncertainties, lower availability of credit and higher input costs are seen to be the significant factors affecting the overall business sentiment,” it said.


RBI pitches for reforms to contain fiscal deficit

Unless fiscal reforms are expedited, the Centre could miss the rolling target of fiscal deficit at 4.1% of the GDP for 2012-13 as set out in 2011-12 Budget, the RBI said in a macro-economic review of the economy

Mumbai: The Reserve Bank of India (RBI) on Monday pitched for expediting economic reforms including reduction of subsidy and implementation of the Direct Taxes Code (DTC) and Goods and Services Tax (GST) to contain the fiscal deficit which is expected to exceed the Budget estimate, reports PTI.

“Prospectively, improvement in fiscal situation in 2012-13 is not only contingent upon the growth performance but also on the progress in implementation of tax and expenditure reforms,” RBI said in a macro-economic review of the economy ahead of third quarter review of monetary policy.

Unless fiscal reforms are expedited, the Centre could miss the rolling target of fiscal deficit at 4.1% of the gross domestic product (GDP) for 2012-13 as set out in 2011-12 Budget, it said.

On the expenditure front, it said, the government needs to move towards deregulation of pricing of diesel for controlling its expenditure on petroleum subsidies.

It also said, “A delay in enactment of the DTC Bill (presently under consideration of the Standing Committee on Finance) may affect its scheduled introduction from 1 April 2012”.

It is expected that DTC system would improve compliance levels as rates of corporation tax and surcharge are reduced and tax base is widened, it said.

In respect of GST, it said, while the Bill to amend the Constitution for introducing this tax was tabled in March 2011, the draft GST legislation requires consensus on a number of issues involving both the Centre as well as state governments.

RBI also noted that the larger fiscal spending could further affect growth in the economy amidst a widening current account deficit.

There is need for cutting government’s consumption expenditure and stepping up its capital spending in order to lift both the current and future growth. This will help the economy to get back to higher potential growth that it had realised in the pre-crisis period, it said.

It is estimated that the higher expenditure on petroleum subsidy could drive up the fiscal deficit by around 0.8 percentage points of GDP for 2011-12, RBI said.

The government pegged the fiscal deficit target at 4.6% for the current fiscal.

The government will face additional pressures on account of food subsidies when the proposed Food Security Bill is enacted and implemented, it said, adding, the government needs to control its expenditure on petroleum subsidies.

Subsidies and the resultant higher fiscal deficit may help in keeping inflation suppressed in near term, but over time the impact of higher subsidy induced deficit would exert pressure on the inflation path, it said.

The RBI report said decline of growth to below potential is expected to ease pressures on aggregate demand and thereby have a softening impact on generalised inflation.

Apart from this, declining international commodity prices has also emerged as a favourable factor, it said.

However, the pass-through of rupee depreciation and expansionary fiscal policy have emerged as major risks, offsetting the favourable impact from the lower demand pressures and commodity prices, RBI said.

The suppressed inflation from energy prices further complicates policy options as revisions in these prices could be inevitable, it added.

Wage inflation is still high in rural areas and real wages increased, though at a slower pace than previous year, it said.

Overall, the emerging trend in inflation so far is broadly in line with the projected path towards 7% by March 2012. The risks to softening of inflationary pressures, however, remain, it said.




5 years ago

Indians should not take deregulation of petro products as increased prices.. Taxes can also be reduced to provide deregulated petro products at a reasonable price to consumer. With our refining capacity soon going to be double of our petro products consumption, fierce competition between private and public refiners and marketing companies and every possibility of import of petro products at reasonable prices if taxation are reasonable deregulation of prices will increase the quality, quantity and cost in favor of consumers. So deregulation of all petro products is the urgent need of the hour and same should be done more by reduction in taxation rather than by increase in prices. Govt must know that railway is dead in India and total transport is done only by motor fuels so any increase in their prices will lead to runaway inflation. I don't understand that why govt is not increasing prices of and deregulating lpg and diesel though solar is their infinite free substitute and induction is cheaper than subsidized lpg . I don’t understand why Indians are not using solar and induction. My one 4 pot box type solar cooker saves 3 cylinders of lpg each year free of cooking fuel cost . We all want to sale this poorest nation to richest oil exporting countries. Please think about our mother India.

L&T revenue up 23 %

Larsen & Toubro’s  profit  after  tax  for  the  December 2011 quarter  from  normal  operations  stood  at Rs992 crore, recording an increase of 22% over the corresponding quarter of the previous year

Larsen & Toubro recorded gross revenue of Rs14,155 crore for the quarter ended 31 December 2011, registering a growth of 23 % year-on-year (y-o-y).

Order inflow for the quarter at Rs17,129 crore grew by 28% y-o-y, taking the company’s order Book    to Rs14,5768 crore as on 31 December 2011.  With its proven track record, the company was able to secure fresh orders from infrastructure, building and factories, power transmission and distribution, and minerals and metals sectors despite a subdued investment sentiment prevailing during the quarter.

Recurring  profit  after  tax     (PAT)  for  the  quarter  from  normal  operations  stood  at Rs992 crore, recording an increase of 22 % over the corresponding quarter of the previous year.

The quarter witnessed project deferments, aggressive competition, slow reform process and sharp rupee depreciation. The recent increase in IIP numbers and easing of inflationary pressures, however, reflect some positive developments.

The company is leveraging on its leadership position to fully exploit the available domestic opportunities.  Emerging prospects in the hydrocarbon and infrastructure sectors in preferred overseas markets mainly in the Middle East and South East Asian countries are also being targeted. The company is optimistic about its success in these markets in the near to medium term.

Larsen &Toubro settled at Rs1,277.70 per share on the Bombay Stock Exchange,  0.3% up from the previous close.


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