According to the central bank, monetary policy needs to be cautious in the interim, focusing on inflation while using the available space to support growth to the degree it can
Mumbai: Indicating that a cut in interest rate is likely, the Reserve Bank of India (RBI) has said despite high inflation it would take steps to support growth in the half- yearly review of monetary policy on Tuesday, reports PTI.
"Monetary policy needs to be cautious in the interim, focusing on inflation while using the available space to support growth to the degree it can," RBI said in its macroeconomic and monetary development review.
RBI said the Survey of Professional Forecasters has lowered the GDP growth projection to 5.7% from 6.5% for the current fiscal. Average wholesale price based inflation forecast is revised upwards to 7.7% from 7.3%.
It said the global growth prospects, both in advanced and emerging economies, have weakened and the euro zone troubles have affected business confidence and caused deceleration in global trade.
"Risks of spillovers from global financial markets remain. Unconventional monetary policies have transitorily moderated uncertainties, but the underlying stress has not diminished with incomplete deleveraging and unfinished financial sector reforms," RBI said.
It said sustaining the reform initiatives of the government would be the precursor for a turnaround in economic activity.
The government has in the recent past undertaken a host of reform initiatives including hiking diesel prices by over Rs5 a litre and foreign investment norms for retail, pension, insurance, information and broadcasting sector.
RBI said aggregate demand is weakening, led by the investment slowdown. However, persistent high core inflation remains a cause of concern.
In its last policy review, RBI held interest unchanged, though it had lowered CRR by 0.25% to infuse Rs17,000 crore liquidity into the system.
The RBI said the recent spate of reform measures have helped in arresting the downfall in growth, but called for a greater coordination between different government agencies and removal of structural bottlenecks on infrastructure as the key factors for revival.
"It is necessary to remove the pending constraints in the power, coal and road sectors at the earliest ... Fiscal consolidation and removal of impediments to infrastructure investments hold the key to growth revival," RBI said.
It said there would be fiscal slippages during the year, beyond the budgeted 5.1% deficit, and that the final number may not be better than last fiscal's 5.8%.
Earlier in the day Finance Minister P Chidambaram had unveiled a five year roadmap for fiscal consolidation pegging the fiscal deficit for the current fiscal at 5.3% by bringing in tax reforms and expenditure management.
The budgeted fiscal deficit for the current fiscal was 5.1%.
"As macro-risks from inflation and twin deficits recede further, that could yield space down the line for monetary policy to respond more effectively to growth concerns," it said.
The WPI inflation as of September stood at 7.81%, much above the RBI comfort level of 5-6%.
While a majority believes RBI may go in for a cut in the cash reserve ratio (CRR) or the amount of deposits parked with RBI, a few also say a cut in the policy rate (repo) would be a good way of address the issue of sagging growth.
Blaming the high inflation on a wage-price spiral, RBI said, "In the short-run, inflation may turn out to be slightly higher than anticipated ... It is likely to soften from Q4 (January-March period)".
On growth, RBI said, it will fall below its July estimate of 6.5%, but a "modest recovery" can be expected later during the year. Economic growth fell to a nine-year low of 6.5% in 2011-12.
The well G-1-9 in Bay of Bengal has been leaking gas since August-end and all efforts by ONGC to contain the flow have so far been futile and there are fears that the well may start spilling oil too, which may spell environmental disaster
New Delhi: A deepwater well in a Krishna Godavari (KG) basin block operated by state-run Oil and Natural Gas Corp (ONGC) has been leaking gas for two months and there are now fears of environment damage due to the uncontrolled flow, reports PTI.
The well G-1-9 in Bay of Bengal has been leaking gas since August-end and all efforts by ONGC to contain the flow have so far been futile.
"This is a very old, drilled some eight or 10 years back. It wasn't producing till now and we had plans to put in on production sometime next year along with other gas finds in the area," a company official said.
However, an uncontrolled flow of gas started from the well around 30th August.
After attempting in-house solutions, the company is now looking at outside specalists to cap the well. There are fears that the well may start spilling oil too, which may spell environmental disaster.
"We have no idea how much gas (mostly methane) might have spilled but I suppose it must be at least one lakh cubic meters per day," the official said.
ONGC is developing G-1 field along with neighbouring GS-15. Both the fields are marginal or small finds. G-1-9 well was part of this development through which ONGC had planned to produce 2.7 million standard cubic meters of gas and 9,400 barrels of associated oil daily.
The official said The company has sought help of Coast Guard and Navy as well as neighbouring operators like Reliance Industries-BP combine and Cairn India to control the gas leak.
ONGC had in the integrated development of G-1 and GS-15 targeted to produce 0.982 million tonnes of oil and 5.92 billion cubic meters of gas by 2020-21.
The project at the time of conception in 2003 was to cost Rs429.82 crore but the cost was subsequently revised to Rs1,262.93 crore in 2004 and then to Rs2,218.01 crore in 2010.
The company had planned to being production from the fields by April-May but the gas spill may result in delays, he said adding drilling on GS-15 field was completed last August.
The project had time and cost overrun as the contactor (Clough Ltd of Australia) defaulted in work. ONGC terminated the contract in June 2006.
Of the two, G1 is a deepwater field and is located 20 km away from the shore. GS15 is a shallow water field. G1 was the first deepwater field to be developed by ONGC.
Higher depreciation, increased finance cost and higher salaries led to a drastic drop in the bottomline of Yuken India, a parts and ancillary manufacturer
Yuken India, a parts and ancillary manufacturing company, has reported abysmal results for the quarter ended 30 September 2012. Its net profit plummeted by 82% year-on-year (y-o-y), to Rs41 lakh. However, its net sales declined marginally, by 5% y-o-y, from Rs40.61 crore recorded on 30 September 2011, to Rs38.70 crore for the current September quarter. The culprits were higher depreciation, interest costs and higher salaries. The stock tanked by 10.98% on Bombay Stock Exchange (BSE) and ended the day at Rs150.40.
An analysis of Moneylife database on the company shed some light on the reason for poor performance. In fact, this is the first time in four years that sales have actually declined. Until then, it had been growing steadily and consistently. Global economic troubles meant that the export market was challenging, with demand falling. However, what is worrying the company is its operating parameters. Its operating profit plummeted by a whopping 47%, which is way below its three-quarter y-o-y average of -13%. Higher salaries meant retention of talent in tougher times. It suffered badly only in the last two quarters, whereas before that it was growing steadily. However, the biggest blow was the net profit, which declined by 82%. This was due to higher depreciation and finance cost, which increased by around 66% and 50%, respectively. Despite this, the company has a decent return on equity (ROE) of 18%. Its valuation is on the lower end, with market capitalization at over five times operating profit.
The company has a tie-up with Yuken Kogyo Company (YKC), based out of Japan, which holds 40% of the joint-venture while Indian promoters—Benefic Investments and Finance, along with the Rangachar family—hold around 12.54%. This shareholding pattern has been the same for a long time, indicating total commitment to the business. In the past 34 years, YIL has achieved the fastest growth rate in the oil hydraulics segment in India. Most manufacturers of original equipment have accepted YIL as their preferred partners for hydraulics.
Yuken India manufactures pumps and valves for major industrial segments including steel plants and steel mills, machine tool manufacturers, plastic machinery manufacturers, defence, automobile manufacturers, hydraulic presses, drill rig manufacturers, power projects and the cement industry.