Economy
India's October production growth falls to 22-month low: PMI
 India's manufacturing sector growth waned further and touched a 22-month low in October largely due to a slower increase in new orders, a leading international business survey showed on Monday.
 
Revealing the weakest purchasing activity since December 2013, the Nikkei India Manufacturing Purchasing Managers Index (PMI) recorded an eight-month low in October at 50.7, down from 51.2 in September and from 52.3 in August.
 
According to the PMI report published by financial information services provider Markit, in which a value above 50 in the reading index indicates an overall increase in manufacturing and below 50 an overall decrease, expansion in production and order books were the weakest in their current 24-month growth sequence.
 
"Rates of expansion in both production and order books were the weakest in their current 24-month sequences of growth, with panellists reporting challenging economic conditions and a reluctance among clients to commit to new projects," the report said.
 
"PMI data for October show a further loss of growth momentum across the Indian manufacturing economy, with a slower rise in new business inflows resulting in a weaker expansion of output," said Pollyanna De Lima, economist at Markit and the report's author.
 
Despite the slowdown in new order growth, manufacturers recruited additional workers in October. Employment rose only marginally for the first time since January.
 
"Undeterred by tough economic conditions overall, firms took extra staff in October. This, combined with a further drop in inventories of finished goods, suggests that production growth may rebound in coming months," Lima said.
 
The report said October saw inflationary pressures return to India's manufacturing economy. Average purchase costs rose, though the rate of increase was "slight", the survey said.
 
Part of the additional cost was passed on to clients by raising tariffs.
 
"A return to inflationary pressures, meanwhile, indicates that RBI may pause its loosening cycle for the rest of the year following a 50 basis points cut of the key repo rate in September," Lima said.
 
"Upcoming survey data will show how effective the central bank's effort to revive the economy has been," Reserve Bank of India Governor Raghuram Rajan on September 29 cut the RBI's repo rate, at which it lends to commercial banks, to 6.75 percent making it the third cut in the bank's short-term lending rate this year.
 
The RBI has also lowered its GDP growth forecast for the current fiscal to 7.4 percent, from its earlier projection of 7.6 percent.
 
Under the PMI, the manufacturing sector is divided into 8 broad categories of basic metals, chemicals and plastics, electrical and optical, food and drink, mechanical engineering, textiles and clothing, timber and paper and transport.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Rohtang tunnel excavation, an engineering marvel, set to pick up speed
The excavation of the Rohtang tunnel, one of India's most strategically important infrastructure projects, is likely to pick up speed after missing its February 2015 deadline.
 
Of the 8.8-km horseshoe shaped Rohtang tunnel, an engineering marvel that will ensure all-weather connectivity to landlocked Lahaul Valley from Manali, about 5.2 km has been dug since work commenced in November 2011. Over 600 men and more than a dozen Indian and European engineers have been working day and night to excavate the tunnel, located at altitudes ranging between 3,053 and 3,080 metres on both sides, despite prevailing sub-zero conditions.
 
Engineers finally foresee the end of the loose strata that slowed down its construction for almost three years. A geological surprise in the form of a glacial-fed rivulet that sprung up in 2012 during work in the tunnel below the 3,978-m Rohtang Pass is still posing a challenge because of water seepage and fragile strata. But it has now been largely contained.
 
"We are close to covering the 600-metre highly fragile strata on the south portal (towards Manali) side. As per surveys, a solid rock is coming after 20 metres. The seepage and inflow of the Seri rivulet in the tunnel have been largely controlled," project Chief Engineer Brigadier Manoj Kumar, who is associated with the Border Roads Organisation (BRO), told IANS.
 
The Seri is a tributary of the Beas river and flows down the mountain.
 
Kumar said in an interview that once the hard rock surfaces, the excavation would automatically pick up speed.
 
The project is estimated to be commissioned by 2019, and both ends of the tunnel -- south and north portals -- will meet by July 2017, he added.
 
The Rs.1,495-crore tunnel's foundation stone was laid by Congress president Sonia Gandhi on June 28, 2010, in the picturesque Solang Valley.
 
Official sources told IANS that the delay in tunnel construction will mean a cost overrun of Rs.500-600 crore. The project is being built by the BRO in collaboration with Strabag-Afcons, a 60:40 joint venture between Strabag SE of Austria and India's Afcons Infrastructure Ltd.
 
The north portal of the tunnel that lies towards the Lahaul Valley in Lahaul-Spiti district has already experienced snowfalls.
 
Kumar said work on the north portal would be stopped by mid-November because of the onset of heavy snowfall by then. However, work on the south portal towards Dhundi, 25 km from Manali, will continue during winter.
 
"The highest elevation in the tunnel that lies towards the north portal has been dug successfully. On that side, we encountered geological surprises in the shape of hot water springs and emission of toxic gases.
 
"But they were on a smaller stretch. They raised the temperature inside the tunnel," he added.
 
The south portal is prone to flash floods and snow avalanches.
 
To counter them, the Snow and Avalanche Study Establishment (SASA) has designed several avalanche-control structures, including four snow galleries and eight snow bridges. One gallery has been constructed that was hit by a snow avalanche in February.
 
While a snow gallery would allow the avalanche to pass overhead without affecting the traffic inside, a snow bridge prevents the snow mass from rolling down the slope or break its flow.
 
Once ready, the Rohtang tunnel will be a boon for the cold deserts of Lahaul Valley, where over 20,000 people remain cut off from the rest of India in winter owing to the closure of the Rohtang Pass, a major attraction for both domestic and foreign tourists and located 52 km from Manali.
 
Besides reducing road distance by approximately 46 km and saving travel time of about four hours, the tunnel will open up new vistas of trade and tourism and generate jobs for the locals. The tunnel will provide ample room for two-way traffic and is designed to cater to a maximum vehicular speed of 80 km an hour.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Differentiating between banks entails systemic risks: Moody's
Global credit agency Moody's Investors Service on Monday cautioned the Indian government of significant systemic risks to the banking system if it reduces support to banks or differentiate among them.
 
The rating agency also said the Rs.700 billion capital planned to be injected into government banks over the next four years is insufficient.
 
The credit rating agency seeing gradual improvement in the operating environment for Indian banking system changed its outlook on Indian banking system from negative to stable.
 
The stable outlook is based on Moody's assessment of five drivers: Operating Environment (improving); Asset Risk and Capital (stable); Funding and Liquidity (stable); Profitability and Efficiency (stable); and Government Support (stable).
 
In relation to government support, Moody's says the Indian government will continue to provide a high level of support to the banks.
 
For the public sector banks in particular, Moody's expects that the government will not make any changes that could suggest the possibility of reduced support to or differentiation among the banks, because doing so could entail significant systemic risks.
 
"The stable outlook on India's banking system over the next 12-18 months reflects our expectation that the banks' gradually improving operating environment will result in a slower pace of additions to problem loans, leading to more stable impaired loan ratios," Srikanth Vadlamani, Moody's vice president and senior credit officer, was quoted in a statement issued by the firm.
 
Moody's said deteriorating asset quality was the key driver of Moody's negative outlook on India's banking system since November 2011.
 
"However, the recovery in asset quality will be U-shaped rather than V-shaped, because corporate balance sheets remain highly leveraged," adds Vadlamani who authored the report titled Banking System Outlook -- India: Gradual Improvement in Operating Environment Drives Stable Outlook.'
 
The credit rating agency expects India to record a gross domestic product (GDP) growth of around 7.5 percent in 2015 and 2016.
 
Growth has been supported by low inflation and the gradual implementation of structural reforms.
 
According to Moody's, an accommodative monetary policy should support the growth environment.
 
As for asset risk and capital, Moody's says that asset quality will stabilise.
 
In particular, while the banks' stock of non-performing loans may continue to rise, the pace of new impaired loan formation in the current financial year ending 31 March 2016 will be lower than the levels seen in the past four years.
 
Capital levels, however, are low for public sector (PSU) banks.
 
Such banks exhibit common equity Tier I ratios of only six-ten percent and their coverage of non-performing loans with loan-loss reserves averages 55 percent.
 
Terming the Indian government's decision to inject Rs.700 billion into public sector banks over the next four years as a credit positive, Moody's said the amount is short of overall capital needs of the banks.
 
"Ability to access equity capital markets remains key if the public sector banks have to address their capital shortfall," Moody's said.
 
As for funding and liquidity, these factors are credit strengths for Indian banks because retail deposits are their primary source of funding.
 
Most banks comply comfortably with required liquidity coverage ratios, even though only part of their holdings of government securities is categorised as high-quality liquid assets, the rating agency said.
 
Moody's rates 15 banks in India that together account for around 70 percent of system assets. Four are private-sector banks and the remaining 11 are public sector banks.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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