Morgan Stanley calls on India to accelerate policy reforms

Morgan Stanley sees India’s GDP growth at 7.3% this fiscal and 7.4% in the following year, but warns that the Eurozone crisis can impact the country’s exports

Singapore: The Indian government must accelerate implementation of major policy reforms to attract investments and keep up with projected economic growth, reports PTI quoting Morgan Stanley Asia’s managing director Chetan Ahya.

India should undertake strengthening of its institutional capacity to allocate critical national resources such as land and minerals to public and private corporate sector in a transparent manner for rapid industrialisation, Mr Ahya told reporters at the two-day Morgan Stanley Asia Pacific Summit that started here today.

Mr Ahya pointed out that India’s two-pronged strategy needed strengthening of institutional capacity to manage transparent awarding of major infrastructure projects under public-private route.

India should also build a comprehensive plan for energy security along with a systematic programme for energy pricing reforms, Mr Ahya said while stressing on the need for initiating aggressive fiscal consolidation.

He said the country should allow foreign direct investment in multi-brand retail distribution, insurance and other areas to build a sustainable source of capital inflows.

Mr Ahya called on India not to delay any further the 25-30 planned infrastructure projects as quick executions of these investment-oriented developments would bring in the much needed foreign investments and capitals.

He noted India’s good initiatives including the awarding of national highway contracts and reducing the environmental approval delays for coal mining.

However, Mr Ahya cautioned that clear signs of Indian economic slowdown have emerged in the last three to four months, even though the economy had till March this year maintained relatively strong growth.

Morgan Stanley sees India’s gross domestic product (GDP) growth at 7.3% this fiscal and 7.4% in the following year, but warns that the Eurozone crisis can impact the country’s exports.

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Credit offtake falls below 19% in 12 months to 4th November

According to experts, while borrowings by the industry and services sectors have been affected by high interest rates, the festive season has led sustained demand in the personal loans segment

Mumbai: Non-food credit offtake from banks grew by 18.5% to over Rs43.11 lakh crore in the 12 months to 4th November, in spite of high interest rate regime in the economy, reports PTI.

According to the Reserve Bank of India (RBI) data, credit offtake during the period stood at Rs43.11 lakh crore, as against Rs36.36 lakh crore during the 12 months to 5 November 2010.

However, this is the first time since August that the year-on-year credit growth has fallen below the 19% mark.

Meanwhile, deposits have risen to over Rs58.12 lakh crore as of 4th November this year, as against Rs49.57 lakh crore as of 5 November 2010.

According to experts, while borrowings by the industry and services sectors have been affected by high interest rates, the festive season has led sustained demand in the personal loans segment.

In its first quarterly monetary policy review for FY11-12 in July, the RBI had said that credit growth was likely to slow down as a result of its rate hikes.

The RBI said credit growth would be around 17%-18% this fiscal, as against the earlier projection of 19%, while deposit growth has been pegged at 17%.

During FY2010-11, bank credit offtake increased by 21.5%, while deposits grew by only 15.5%.

Corporate India has complained that frequent rate hikes have resulted in slowing down of investment and industrial growth.

Industrial growth slowed to a two-year low of 1.9% in September. The country’s economic growth also slowed to 7.7% in the April-June period, the lowest rate in six quarters.

The RBI has raised key policy rates by 350 basis points through 13 hikes since March 2010 to curb inflation, which has been above the 9% mark since December last year. The rate of price rise stood at 9.73% in October.

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Rupee ends at 50.74/75 vs dollar; touches 51-level

The political outlook remained unclear in struggling Italy and Greece as they attempt to push through austerity measures needed to get bailout funds and win market confidence. The market is concerned over the fear that the European debt crisis will engulf top-rated members such as France

Mumbai: The Indian rupee touched 51-level after a gap of 32 months before ending seven paise lower at 50.74/75 against the American currency on persistent dollar demand from banks and importers in view of the strong dollar overseas, reports PTI.

The rupee resumed lower at 50.90/91 per dollar at the Interbank Foreign Exchange (forex) market, as against previous closing level of 50.67/68 per dollar and dropped further to a 32-month low to 51.01 per dollar, before ending at 50.74/75 per dollar.

The rupee had last touched 51.20 per dollar on 31 March 2009.

The domestic currency moved in a range of 50.61 per dollar and 51.01 per dollar during the day.

Sustained dollar demand from banks and importers on the back of higher dollar in the overseas market mainly affected the rupee value against the dollar, a forex dealer said.

The US dollar gained and the euro slumped yesterday in the New York market, as borrowing costs for Italy, Spain and core members of the euro zone continued to rise, undercutting investors' interest in riskier assets.

The Indian benchmark Sensex ended lower by 107 points or 0.63%.

Meanwhile, finance minister Pranab Mukherjee today said the Reserve Bank of India (RBI) is monitoring the situation and will intervene in the forex market “as and when necessary”.

“As RBI has already mentioned, it is watching the situation. As and when it is necessary, they will intervene” Mr Mukherjee told reporters on the sidelines of CAG event.

The dollar index was up by over 0.03% against a basket of currencies while global crude oil was trading above $99 a barrel in European market today.

The political outlook remained unclear in struggling Italy and Greece as they attempt to push through austerity measures needed to get bailout funds and win market confidence. The market is concerned over the fear that the European debt crisis will engulf top-rated members such as France.

Most emerging Asian currencies have suffered from the Eurozone’s debt crisis, especially with Italian borrowing costs jumping above 7%, a level seen as unsustainable.

Abhishek Goenka, CEO, India Forex Advisors said, “The rupee has been the worst performer among emerging Asian currencies so far this year, having lost 12.2% against the dollar.”

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