Credit Suisse, in its hard hitting analysis says that India’s GDP growth for the March quarter is much below expectations and coalition politicians may put more pressure on the RBI for easing rates
India’s gross domestic product (GDP) growth for the March quarter at 5.3% is well below the market expectations of 6.1% and softer than anything seen during the global financial crisis when GDP growth bottomed at 5.8%. “It is hard to describe India’s March quarter GDP release as anything other than shocking. It will inevitably send shivers down the spines of senior coalition politicians, who will no doubt be heaping pressure on the Reserve Bank of India (RBI) to react and react aggressively,” says Credit Suisse in a report.
Robert Prior-Wandesforde, director, Asian economics at Credit Suisse, said, “We certainly believe the RBI should shift to a greater emphasis on growth, given the fact that economic growth leads inflation and is running well below everybody’s estimate of trend. We also believe it will, with RBI governor D Subbarao able to point to the weakness of the RBI’s preferred measure of core inflation as evidence that underlying price pressures justify further monetary easing.”
With economic growth as weak as it is but headline inflation rates (both WPI and CPI) still troublingly high, the government also faces a dilemma—to raise or not to raise subsidised fuel prices. “Our guess is that some adjustments to subsidised diesel, LPG and kerosene prices remain more likely than not (with petrol prices having already been hiked by about 11% last week) but by less than we previously thought. The move may also be delayed by a month or two,” said Mr Prior-Wandesforde.
According to Credit Suisse, the weakness of growth clearly bodes badly for the public finances but should improve the trade deficit. “Our suspicion is that the latter has been adversely impacted by the initial effects of the currency depreciation, which is to boost import prices and hence the value of imports. Over time, however, the volume effects can be expected to dominate. Indeed this is evident in today’s numbers with real export growth picking up to 18% year-on-year from 6% and import growth slowing sharply to 2% from 27%. We also expect tomorrow’s April trade release to show a substantial improvement,” the report said.
According to data from Thomson Reuters, India’s March quarter growth has been the slowest in the past nine years and well below analysts' forecast of 6.1%. The pervious low was in the fourth quarter of financial year 2002-03. For FY 2011-12 the GDP growth slipped to 6.50% from 8.50% the previous year. The growth for the year fell below the estimated of 6.90%.
”The output breakdown of GDP showed widespread weakness with agricultural growth slowing to just 1.7% (from 2.7%), industrial growth down to 2.2% (from 2.6%) and services at 7.9% (from 8.9%). The last of these represents the biggest difference with the global financial crisis period when services growth remained above 9%. This in turn signals the more domestic nature of the current downturn,” says Prior-Wandesforde.
Chandrajit Banerjee, director general, Confederation of Indian Industries (CII) said that the Q4 GDP figures have reconfirmed CII’s own estimates, which show that the economy is in the throes of a serious slowdown and is performing worse than perception.
“With a huge fiscal deficit and a widening current account deficit, this calls for immediate and bold actions from the government and the RBI in a coordinated manner, which should be exclusively aimed at salvaging the economy. Repo rate and CRR cuts are called for as also measures from the government to kick start the investment cycle, since growth in capital formation has been negative for the last few months,” he said.
IRDA has imposed a record penalty of Rs1.18 crore on ICICI Pru Life for several serious violations including an unbelievable 11346% deviation in commission payable to India Infoline Insurance services in 2010-11
The Insurance Regulatory and Development Authority (IRDA) has imposed a record fine of Rs1.18 crore on ICICI Prudential Life Insurance (ICICI Pru Life), the country’s largest private sector insurer. IRDA, which had conducted onsite inspection of the insurer between November and December 2010 found violations regarding corporate agency guidelines, paying more than the stipulated commission to its distributors (corporate agents, referral agents), not regulating corporate agents and making huge payments to brokers.
The regulator has termed “exceedingly serious violation” with stiff penalty of Rs40 lakh for huge deviation in commission to corporate agents like India Infoline Insurance Services, Nandi Financial Services, Netambit ValueFirst services, Soft Insurance Services, Fullerton India Credit, Yule Investments, Alacrity Financials and Sharekhan Financial Services. What is astonishing is a colossal deviation of 11346% and 1559% in commissions to India Infoline Insurance Services during the year 2010-11 and 2009-10 respectively.
ICICI Pru Life had created multiple code numbers for a single corporate agent and brokers based on the location of the business procured. The insurer had not put in place any mechanism to verify that the solicitation of business was done by a specified person or a qualified person respectively in relation to the number of locations or branches. The total penalty for these violations with respect to corporate agents like Bonanza Finproducts Distributors, Fullerton India Credit, Muthoot Wealth Management Services, Pioneer Assurance Consultants is Rs11 lakh.
ICICI Pru Life was remunerating the referral partners in the name of infrastructure support. The insurer was paying exclusive infrastructure fee (upfront) and costs towards space for insurance specialists, insurance corner space, advertising, etc. There have been violations in 20 instances and hence a penalty of Rs40 lakh.
Penalty of Rs20 lakh was imposed for huge deviation in commission to insurance brokers like Anand Rathi Insurance brokers, Bajaj Capital Insurance broking, Standard Composite Insurance brokers, Artha Insurance broking, KM Dastur Reinsurance broker and Edelweiss Insurance brokers. The highest deviation was for Standard Composite Insurance brokers of 402% in 2009-10. It was followed by Bajaj Capital Insurance broking with 152% deviation in commissions for the same year.
The insurer has entered into various agreements/MOUs with its group companies like ICICI Bank, ICICI Housing Finance Co, ICICI Securities, etc. for utilizing their network for marketing, advertisement and other services. These agreements are incomplete as they do not contain the detailed scope of services and the basis of payments for the said services. All these companies are also acting as “Corporate Agents/Referral partners” of the Insurer and are receiving due commission/referral fee. By this action, the insurer has violated clause 21 of Corporate Agency Guidelines. The insurer’s submission that these expenses are for various services like banking services, web promotional space, office space for employees of the insurer, other joint sales campaigns, etc, do not relate to garnering or procuring business, is not tenable and are in violation of the Insurance Act and Regulations cited. Heavy payments are paid towards marketing or logistic support and non-competing fee which are specifically against the provisions of the Act.
SpiceJet, the first carrier in India to get an approval for importing ATF, would start taking delivery of the first shipment from early July
Mumbai: India's third largest carrier by market share, Spicejet on Thursday said it hopes to take delivery of the first shipment of directly imported aviation turbine fuel (ATF) by early July.
"We will be the first carrier to import ATF directly, as we hope to take the delivery of the first shipment early July," Spicejet Chief Executive Neil Mills told PTI in a post-earnings concall today.
On 18th April, the director general of foreign trade, apex government authority on exports and imports, had allowed Spicejet to import aviation fuel directly, making it the first airline to get such an approval.
Early February, the government had allowed airlines to import fuel directly as part of its steps to help the bleeding airlines, which are set to close FY12 with nearly $2 billion in losses.
Mills further said the airline hopes to save considerably in fuel costs with this direct import. While Spicejet saw its fuel bills shooting up 55% in the last quarter of the past fiscal, for the full fiscal of 2012, it was still higher at 64% for the Chennai-based carrier.
On with whom the company has tied up for ATF transport, logistics and storage facilities, Mills refused to reveal the name, citing confidentiality with the partner but said they have tied up with a private company.
While refusing to give guidance for the first quarter of the current fiscal, Mills said he was "hopeful of a strong recovery this quarter" as there has been a steep fall in crude prices, from $116 barrel in the Q1 of 2012 Brent crude is trading at $106-107 to a barrel now.
"Coupled with fall in crude prices and direct import of ATF will help us save big time in fuel cost," he added.
Yesterday, Spicejet reported a four-fold jump in Q4 losses at Rs249 crore, despite a 46% increase in sales to over Rs1,100 crore. The Kalanithi Maran-run carrier had reported a loss of Rs59 crore a year-ago.
On the possible impact of the steep 346% hike in airport charges in Delhi from 1st May on its bottomlines, Mills said, last fiscal the airline paid Rs20 crore in fees to the Delhi airport operator, and added that there will be an impact on the airline's expenses with this development.
On whether the airline will completely pass on the fees hike to the passengers, Mills said, already the tickets are sold much below cost and he is forced to pass on the hike to passengers. But, he did not quantify the increase.
For the full year, the company's net loss stood at Rs605 crore against a net profit of Rs101 crore in the prior year, while income rose to Rs3,998 crore from Rs2,938 crore.
While net sales of Spicejet soared 46% to over Rs 1,100 crore in Q4 of last fiscal against Rs760 crore year ago, average passenger yields too rose 18%.
The losses are glaring as the airline saw its passenger traffic growing a healthy 24%, outperforming the industry growth of around 16%. Load factor also rose to 81% from 74.4% during the same period, which helped it ramp up its market share to 17.1% in the year, from 13.6% in March 2011.