Economy
Indian rural economy to remain subdued in 2015-16: Moody's
Credit rating agency Moody's Investors Service (MIS) on Tuesday said it expects India's rural economy to remain subdued through the fiscal year ending March 2016.
 
It said that this forecast will materialise, particularly, if the risk of below-average monsoon rainfall takes shape.
 
"A sustained soft patch for India's rural economy would weigh on private consumption and non-performing assets in the agricultural sector, a credit negative for the sovereign and banks," said Rahul Ghosh, MIS vice-president and senior research analyst.
 
The analysis was published in the latest edition of Inside India, a quarterly publication of MIS.
 
According to the report, rural income growth in India has been stuck in the mid to low single digits in 2015 to date, well off the 20 percent-plus rates clocked in 2011.
 
The slower rural income growth is partly the result of increased fiscal restraint by the central government, that MIS believes is unlikely to change in the coming quarters.
 
The publication also includes key takeaways from a number of audience polls carried out during the first annual Moody's and ICRA India Credit Conference in Mumbai, that took place in May.
 
According to the poll results, the consensus view on India's economic growth prospects is relatively optimistic, very much in keeping with Moody's baseline scenario of headline economic expansion of 7.5 percent in FY2016.
 
This forecast represents the highest projection amongst G20 economies, and provides a key pillar of support for the Baa3 sovereign rating and positive outlook.
 
"Notwithstanding these growth expectations, our polling results pointed to some disappointment amongst the audience with regard to the pace of reform under the administration of Prime Minister Narendra Modi, and increasing concerns about the risk of policy stagnation," MIS said.
 
Specifically, almost half of the poll respondents identified sluggish reform momentum as the greatest risk to India's macroeconomic story.
 
According to MIS, the multi-party, federal democracy in India underpins a gradual pace of policy implementation. 
 
While many of the policies are positive for India's institutional strength, the direct impact of growth-enhancing reforms is only likely to take full effect over a multi-year horizon.
 
For example, plans to cut the country's corporate tax rate to 25 percent from the existing 30 percent over the next four years will be credit positive for all Indian corporates insofar as it will reduce their tax expenses and increase their competitiveness over the medium term.

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Draft plan for Mumbai Urban Transport Project-4
In a significant development, Railway Minister Suresh Prabhu on Monday asked his ministry officials to prepare a draft plan for Mumbai Urban Transport Project 4.
 
This is in view of the tremendous increase in the number of passengers -- 75 million per day -- handled by the Mumbai suburban railway system.
 
"In future, heavy load is expected on the Mumbai transportation and this would require more suburban services for the people. We might as well start planning MUTP 4 for to cater to this," Prabhu said, asking the Mumbai Rail Vikas Corporation to start work on it.
 
He said this while attending several functions organised by the Central Railway in and around Mumbai during the day.
 
The ambitious MUTP, intended to improve the road and rail transportation network in the Mumbai metropolitan region, is being implemented with World Bank assistance and central and state government contributions.
 
Launched in 2007, MUTP 1 costing Rs.4,526 crore, was completed in 2011 with a series of projects implemented. Currently, the Rs.7,006 crore MUTP 2 is under implementation.
 
The MUTP 3, estimated to cost Rs.52,000 crore was sanctioned in 2011 and is targeted for completion in 2031 with various mega-projects in the pipeline.
 
A Central Railway official said Prabhu's nod for considering MUTP 4 will now be put into motion with the draft plan likely to be prepared within a couple of years, though details of the projects to be included or the proposed financial outlay, are not yet known.
 
Under MUTP 1 and 2 a series of projects were initiated including additional railway lines, new high-speed coaches and rakes (trains), capacity enhancing, road overbridges and foot overbridges, improving railway stations with better access-exit, spreading the suburban rail network to new satellite towns and cities in the Mumbai metropolitan region, etc.

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RIL's KG-D6 gas field development rests on price outlook
The Reliance Industries (RIL)-led consortium partner in the eastern offshore KG-D6 block, Niko Resources of Canada, on Monday said it may defer development of the R-Cluster and other satellite gas fields if the gas price outlook remains uncertain.
 
The consortium, that includes British major BP, has made 19 oil and gas discoveries in the KG-DWN-98/3 block in the offshore Krishna-Godavari basin, while only three gas fields have been brought to production.
 
Development plans for five other discoveries have been approved.
 
"The development of these discoveries is dependent on the future economic viability of the required investments," Niko said in its Annual Information Form for 2014-15.
 
Development was "dependent on the future long-term price outlook for gas sales from these projects and the significant uncertainty in this outlook could mean that the development of these reserves could be deferred," it said.
 
In October last, the Indian government approved a new domestic gas price of $5.61 per unit on net calorific value (NCV) for the period November 1, 2014 to March 31, 2015.
 
This was compared to earlier gas price of $4.2 per unit on NCV basis.
 
While the new price, Niko said, was "significantly lower than anticipated," the rate for April 1, 2015 to September 30, 2015 was even lower at $5.18 on NCV.
 
RIL is the operator of the KG-D6 block with 60 percent interest, Niko has 10 percent, while BP has the remaining 30 percent.
 
Earlier this month, Niko Resources announced it has extended by over three months its search for a buyer of its stake in the KG-D6 gas block to pay off debt.
 
"The board of directors of Niko now believes that it requires more time to determine if the sales process will be successful or, if not, to develop an alternative plan with the assistance of its advisors and stakeholders to achieve the best results for the stakeholders of the company," Niko said in a filing to the Toronto Stock Exchange.
 
It said it has reached an understanding with lenders to extend the search till September 15.
 
Niko had in February announced it intended to sell-off its 10 percent stake in the KG-D6 block to square a $340 million debt. The company had earlier planned to sell off the interest by April 30 but later extended it till May 31.
 
It had earlier blamed a lower-than-expected gas price announced by the Indian government for its decision to sell its stake.
 
"The announced price for the period from November 2014 to March 2015 is a 33 percent increase over the price received previously, but is lower than expected. In addition, there is uncertainty around the long-term natural gas price outlook in India," its chairman Kevin J. Clarke had said.

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