According to the 'India Economic Outlook' by global research firm Nomura, slower agriculture output, increased margin pressure from rising cost to manufacturers, adverse base effects and lagged effects of policy tightening will restrain growth to 8% in 2011
New Delhi: The tight monetary policy of the Reserve Bank of India (RBI) and declining capital goods output is expected to moderate India's economic growth rate to 8% in 2011 from 8.6% in the previous year, reports PTI quoting global research firm Nomura.
"In 2011, slower agriculture output, increased margin pressure from rising cost to manufacturers, adverse base effects and lagged effects of policy tightening should restrain growth to 8% Y-o-Y," Nomura economist Sonal Varma said in the report, 'India Economic Outlook'.
In view of rising inflation, the RBI has hiked key policy rates eight times since March 2010. The report said industrial activity during 2011 has suffered on account of rising raw material costs, among other things.
In its mid-quarterly policy review last week, the RBI hiked repo (lending) and reverse repo (borrowing) rates by 25 basis points each to 6.75% and 5.75%, respectively.
"Industrial activity has suffered because of rising raw material costs, higher wages and sluggish investment, restraining demand for capital goods production," Nomura said.
India's industrial output growth in January slowed to 3.7%, compared to 16.8% in the year-ago period, dragged down by the poor performance of the manufacturing sector, particularly capital goods.
The capital goods sector contracted by 18.6% during the month against a robust growth of 57.9% in January 2010.
Nomura said it expects the growth momentum to be higher on account of robust consumption demand (including from the rural sector), resurgence of exports and a pick-up in credit growth.
"Overall, having experienced a sharp recovery in 2010, we expect the economy to enter a period of consolidation," it said.
The projections by Nomura are in line with that of global rating agency Standard & Poor's, which said growth would moderate to 8%-8.5% in 2011 from 8.6% in the previous year.
On inflation, Nomura said the March-end figure would remain a tad above the RBI projected level of 8%. The overall inflation in February was 8.31%.
"We expect headline wholesale price index (WPI) inflation to average 8.1% YoY in 2011, on high food, oil and other commodity prices...
Inflation is likely to remain above the RBI's comfort zone, prompting another 50 basis points of rate hikes," it said.
The report said overall inflation pressure would remain intense due to rising business input costs, among other factors.
Heavy industries minister Praful Patel's remarks come within a month of corporate affairs minister Murli Deora favouring CSR spends of 2% of net profits in the new Companies Bill
Mumbai: Another member of the Union Cabinet today batted in favour of making CSR (corporate social responsibility) spends mandatory for private companies with Union heavy industries minister Praful Patel saying it is necessary for the upliftment of the people, reports PTI.
"I think the corporate sector cannot avoid the responsibility of bringing about change in our country and should support initiatives not only of the government but also outside the government," Mr Patel told reporters here.
"It is not the government's responsibility alone which can ensure change in our country...corporate sector (should also help)," Mr Patel said, after inaugurating the National CSR Hub at the Tata Institute of Social Sciences here.
Mr Patel's remarks come within a month of corporate affairs minister Murli Deora favouring CSR spends of 2% of net profits in the new Companies Bill. Mr Deora's comments were met with sharp criticism from India Inc, with many calling it as "retrograde".
Speaking to reporters today, Mr Patel said the very purpose of mandating companies-both private and government-owned-is to deliver the benefits of overall economic progress which the country has made, to the backward people.
He added that the Department of Public Enterprises under his ministry will be working "proactively" and will see to it that the state-owned companies meet their CSR targets.
Meanwhile, when asked if loss-making public sector carrier Air India should be declared as a sick company, the former civil aviation minister said, "Let the ministry of civil aviation send a proposal before I can give you any comments."
The government is considering amendment of the Banking Regulation Act to expand the powers of the RBI to enable so that it can seek information from entities involved in the insurance and asset management business, in addition to banks. The Bill is likely to be tabled in the Monsoon Session of Parliament
New Delhi: Corporates looking to enter the banking business will have wait for some more time, as the government is considering amendment of the Banking Regulation Act and Banking Laws Act before finalising the guidelines for giving new licenses, reports PTI.
The final guidelines on the new banking licences would be released only after the necessary amendments to the Banking Regulation Act and Banking Laws Act are cleared by Parliament, official sources said.
However, the draft guideline for the new banking licences would be out by the end of this month for public comments, sources added.
Sources added that empowering the Reserve Bank of India (RBI) is essential for obtaining information about the other businesses of the corporate houses seeking banking licences in order to protect depositors' interests.
The government, sources said, is considering amendment of the Banking Regulation Act to expand the powers of the RBI to enable so that it can seek information from entities involved in the insurance and asset management business, in addition to banks.
Sources said this is relevant, as the risks of companies involved in businesses like insurance and asset management may sneak into the banks' account books by virtue of the same parentage, sources said.
The Banking Regulation Amendment Bill is likely to be tabled in the Monsoon Session of Parliament.
At present, insurance companies are regulated by the Insurance Regulatory and Development Authority (IRDA) and the asset management business comes under the purview of the Securities and Exchange Board of India (SEBI).
After clearance of the Bill, the RBI would have the power to call for information and assess information, sources said, adding these powers are required if the private entities are allowed to enter into the banking space to protect the interest of depositors.
As per the current practice, India follows a subsidiary model where the non-banking businesses of a bank, like insurance and asset management, are subsidiaries. By virtue of this, risks attached to these businesses can impact the banking entity.
The apex bank had brought out a discussion paper in August 2010, on giving out new banking licenses to business houses and non-banking finance companies, besides regulations for the same to foster competition.
The RBI also sought to know "whether industrial and business houses could be allowed to promote banks."
Various entities like Reliance Capital, Indiabulls, Religare, IFCI and Aditya Birla Financial Services are said to be mulling an entry into the banking space.
India presently has 27 public sector banks, seven new private sector banks, 15 old private sector banks, 31 foreign banks, 86 regional rural banks, 4 local area banks, 1,721 urban cooperative banks, 31 state cooperative banks and 371 district central cooperative banks.