Continuing concerns over India's growth outlook, rising credit risks, deteriorating bank asset quality and worsening fiscal pressures suggest that risks remain skewed to the downside over the next six months, says Nomura
India’s manufacturing purchasing managers' indexes (PMI) slipped into the sub-50 contraction zone at 48.5 in August from 50.1 in July – its lowest reading since March 2009. The decline was due to a sharp fall in the output and the new orders sub-indices.
"(India's) growth is going from bad to worse. India's real gross domestic product (GDP) growth fell to 4.4% in second quarter (Q2), and with the average PMI much lower in Q3 (49.3 in July-August versus 50.5 in Q2), it seems domestic demand weakened further in early Q3 as well. Continuing concerns over the growth outlook, rising credit risks, deteriorating bank asset quality and worsening fiscal pressures suggest that risks remain skewed to the downside over the next six months. Thus, we maintain our negative view on India’s economic outlook over next 3-6 months," says Nomura Financial Advisory and Securities (India) Pvt Ltd, in a report.
According to Nomura, India's domestic and external demand has weakened. The new orders sub-index remained in contractionary territory at 47.5 in August from 49.5 in July, even as the new export orders index fell to 49.8 from 52.4. This suggests that both domestic and external demand weakened further in August. According to the survey, orders fell most in the intermediate goods sector, while consumer goods producers recorded a slight fall.
Even the output sub-index contracted for the fourth consecutive month (to 47.5 from 49.8), indicating that weak demand, competition and persistent supply-side pressures are forcing Indian manufacturers to cut production as well as inventories. The finished goods inventory sub-index fell to 48.4 from 50.1, commensurate with weak output. The new orders/inventory ratio fell to 0.98 from 0.99 and has been below 1.0 for three consecutive months, which is indicative of weak future demand, Nomura says.
According to report, however, price pressures have now eased. It said, "The input price sub-index eased to a 57.8 from 60.6, while the output prices sub-index fell to 51.8 from 53.4. With the currency continuing to weaken, the lower pass-through to output prices reflects weak demand and suggests that margins are under pressure."
In a clarification, HDFC Bank told the RBI that since it could not get details from seven complainants out of 12, it could not resolve their grievances. However, one of the complainant left out by HDFC Bank spent Rs36 for over 15 days by making two visits to the Branch and 15 calls to retrieve his eight paisa
In April, Moneylife wrote about how customers of HDFC Bank were being harassed with its new know your customer (KYC) norms. Several people shared their experiences with us. Moneylife followed up with HDFC Bank and the Reserve Bank of India. Taking cognisance of the issue, RBI issued a notice to HDFC Bank seeking clarification. The Bank sent its reply to the RBI, however, stated that it could not get details from seven customers out of 12, including Avinash Murkute and hence, was not able to resolve these customers’ problems.
Mr Murkute says, “It is shocking that the signatory to clarification letter from HDFC Bank (to the Reserve Bank of India- RBI) has mentioned that I have not provided account details. How and why one shall provide his account numbers of closed accounts? One Madhurima Manmohandas of HDFC Bank did write and ordered me in June 2013, to provide my account number within seven days. If it had been a polite request, I would have responded to her in equally polite manner. This demonstrated how serious HDFC was in responding to the RBI. When they (HDFC Bank) cannot read letters by speed post and require 15 days to refund 8 paisa, why should one respond to the order from HDFC Bank?”
Here is the first person account from Mr Murkute about his dealings with HDFC Bank…
I have abandoned and deserted HDFC Bank and included them in the list of defaulter’s as they still owe me Rs36.00 towards cost of recovering 0.8 paisa from the Bank in a case where cheque was deposited of RsXXXXX.08 and credit was given of RsXXXXX.00 only. This was violation banking double entry accounting mechanism and provisions. The Bank and its Kothrud, Pune branch and branch manager took 15 days and two personal visits by me and 15 phone calls to their centre of excellence and state of the art customer (harassment) call centre and equally harassing grievance resolution nodal officers and appellate authority to credit the eight paisa in my account.
I have closed all my four accounts including demat account way back in 2009 and I have obtained closure confirmation letter of each account. For closure of demat account, they made me oscillate from one office to another like Bank, Branch, HDFC Securities and so on. What was given in writing by HDFC Bank’s corporate office was not acceptable to branches. What is more interesting that even the vice president of HDFC Bank for depository operations, named R Venugopalan (my record reference No.339/HDFC/ Depository Date: May 26, 2009) doesn't read and respond to written communications.
Many times, they refused to print entries in my passbook on flimsy grounds. At times, they insisted that new account should be opened through agents only.
In spite of my number 9********9 is included in do-not-disturb (DND) list, HDFC keeps calling me several times for opening demat account, deposit account, car loans, home loans Every time protest was lodged with HDFC’s corporate office and every time they replied that this will not happen again but (the calls) still continuing. Every time they advise me register separately with each office and each branch of HDFC. This is in violation of national DND which HDFC never respected.
Once HDFC Bank gave me a double credit of Rs160 due to human error. I was quick to point this to them, and then they adjusted this additional credit of Rs160 by debiting from my account. HDFC Bank should learn this sense of urgency and honesty and its training managers should try to impart to its senior management so that ground realities can improve.
In the year 2009, I could have eaten six Vada pavs and HDFC Bank have deprived of my six vada pavs ( Rs36.00) and the chief managing director of the Bank should be made to understood this agony. If RBI would like a written complaint and / or more information, they can take this as feedback for the same. Everybody gets a chance to be equal.
The overall coal inventory has now fallen to 57mt, most of which lying near pit-heads and some stored in remote coalfields not accessed by railways. To top this mess, Coal India want to reduce this inventory by 10mt this year
In a couple of weeks from now, the Annual General Meeting of Coal India Ltd (CIL) is scheduled to take place in Kolkata. What would S Narasing Rao, chairman and managing director of CIL who runs the world's largest coal company, say to his shareholders?
Would he like to say that in the last quarter (April-June), the production growth was a measly 0.4% as against the target of 6.6%?
Or would he say that the off-take of coal by power generators actually has fallen due to idling of capacity (by producers like NTPC and others), who did not generate power from their 5,000MW plant all because of lack of demand?
Of course, if the national power grid was linked to the Southern Grid (which is likely by next year), this would not have happened. NTPC would not have lost their production capacity, Coal India would not have had to stockpile and store the coal and the much-needed power sold to the starving Southern industries.
The overall coal inventory has now fallen to 57 million tonnes (mt), most of which lying near pit-heads and some stored in remote coalfields not accessed by railways. To top this mess, they (CIL) want to reduce this inventory by 10mt this year.
In the interim, Coal India has no option but to reduce production, though the Ministry of Finance has been asking Coal Ministry, why the production is lower?
In the past, the grievance was that rakes were not available in time to evacuate coal, which was piling up at pitheads. In fact, at one time, not long ago, the power generators were encouraged to pick up the coal from production sites so as to maintain their power production.
Many coalfields under the Coal India management have various problems relating to completion of environmental formalities, and these are best seen on the web site of the main producing units of CIL.
In the meantime, Coal India, flush with enormous cash reserves of over Rs17,520 crore are looking at overseas investments to acquire mining properties, notably in Australia, Indonesia and far off Columbia, for both thermal and coking coal.
The indigenous production of coal is estimated to reach 482mt in 2013-14 as against 452mt achieved in 2012-13. In 2012-13, expensive imported coal (137mt) came into the country, fuel supply agreement (FSAs) were signed, and with and some more to go and CIL had a busy year.
To get more information on CIL's activities, attempts were made to get through to compliance officer Viswanathan at Coal India at Kolkata, but were unsuccessful, as one of the two email addresses did not work (message bounced) and the other elicited no response!
International prices of coal have fallen due to lack of Chinese demand, and it may be worthwhile to get the high caloric value thermal coal for stock piling, at the cost of losing marginal interest and incurring storage costs at this time. We must bear in mind that the situation in Syria may create a war-like condition in the west Asia region, resulting in an oil blockade, leading to an embargo! What happens then? Why can't we be on our toes?
(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce. He was also associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US.)